Employees aren’t costly. You make them costly!

Employees aren't costly. You make them costly. Building talent to scale up your business - Article series by Deepak Patil

Most owners of small-medium enterprises (SMEs) realize the need of professional employees in order to scale up. Typically, they end up hiring such talent from bigger and more successful competitors or many times even from corporates.

However, post hiring, business owners realize that the new employee is not as productive as they seemed while making a hiring decision. Since many of these professional employees have been brought in from more successful or bigger companies, they have to be paid salaries that are higher than the scales in the organization. Suddenly, the new employee starts seeming costly and hence a burden on the organization.

I think this a very common scenario and experienced at least once by most business owners who are scaling up their businesses. Many times such as scenario would be discounted as a bad employee fit or an employee being paid too much for what they have to offer.

After seeing this scenario at multiple clients and experiencing it myself, I have come to believe the question here shouldn’t be about employee being costly but about their sub-optimum productivity. Ideally, the business owner should ask themselves why could previous organization afford this employee or better yet, why is the productivity of this employee in my organization lower that when he/she was with their previous company?

I have found that there are 4 most common reasons for why productivity of professional employees drops when they are hired by SMEs (typically from bigger / more successful companies).

Reason No 1 – Lack of role clarity: One of the primary reason of reduced productivity is not bringing clarity in day to day functioning of employees. Most SMEs underinvest in this area. Absence of detailed job description and key focus areas limits employee’s understanding of which result areas are important versus which are not.

Reason No 2 – Not creating or nurturing an environment for day-to-day functioning: Many SMEs lack basic infrastructure such as proper sitting arrangements or facilities such as a personal phone and PCs. I have seen organizations lacking even essentials such as toilets. All of these factors affect employee performance especially if they come from a corporate environment. Employees need distraction free work areas and good facilities if they have to deliver.

Reason No 3 – Not being given enough clarity of how the employees will progress into short term, medium term and long term career with the organization: An absence of career advancement options in the organization causes the employees to become unsure about their longer term need. This, sooner than later, starts reflecting in their work.

Reason No 4: Expecting immediate returns with no orientation or training: This point goes hand-in-hand with Reason 1. Many business owners don’t spend enough time in explaining the specifics of the business or giving any orientation. Further, they expect new employees to start delivering results from the onset. Worse still, they keep comparing their own efficiency to that of the new employee or end up doing the work assigned for the new employee. All of this demotivates the employee and shakes their confidence.

While there can be other reasons, I have observed that among SMEs the ones mentioned above are most prevalent.

The best part is that these reasons are completely with-in a typical business owner’s control and it doesn’t take a lot of effort to get them right.

As with many of my clients, I can tell you that tackling these 4 reasons should give a big upwards bump to your employee’s efficiency there by reducing their cost.

So then, how are you planning to reduce cost of your employees?

PS: Please let me know your thoughts on this article by commenting below.

Thanks to Anand Patil for reading the proofs of the article and to Chitaranjan Gupta for his valuable support to this article series.


  • Good to know this…

    Neha SharmaJuly 31, 2013
  • Excellent ! Thank you Mr. Deepak Patil

    Aakash KulkarniJuly 31, 2013
  • Nice one.. all the important points are covered… really helpful..

    Aarti YadavJuly 31, 2013
  • Thanks for sharing you experience this will really help.

    Pooja AgarwalJuly 31, 2013
  • Very Good ! Reasons are applicable for large scale organisation also.

    Dilip ChuriJuly 31, 2013
  • Hi Deepak,

    I was aware of the points highlighted by you however, their reinforcement is extremely pertinent.


    Deepak Prahlad AgarwalJuly 31, 2013
  • good insights into employee/employer relation building.

    paresh shahJuly 31, 2013

    AMOL NAIKAugust 1, 2013
  • Shree Patilji, Very good contents, Really helpful in avoiding these mistakes in years to come. keep writing…

    sunil shikarkhaneAugust 1, 2013

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