Human Resource (HR) policy plays a vital role in the success of any business. Since HR oversees a wide range of administrative functions, which includes salaries, hiring of employees, benefits and much more. Therefore, human resource department is required to formulate policies that can enable businesses to smoothly operate their functions. A failure in this regard can prove critical for any business.

Here we have listed the effects of poor HR policies on businesses that will describe how seriously it can hurt the functioning, recruitment procedure, management and overall profitability of a company.


Unhappy Employees

Employee motivation and retention is a serious concern for businesses and in particular for those in the customer care business. Poor human resource policies adversely effects customer service staff. A major source of frustration for employees can be a lack of organization chart that describes complete job description of each employee. A lack of it would mean that nobody knows who is responsible for which work. Having clear roles and responsibilities is important for employees. Similarly without specifying any clear policy, a promotion or demotion can further disrupt the business.

It will demotivate the deserving staff and upset the praiseworthy, which in turn decreases their productivity and makes them less engaged in their jobs. Less engaged service staff never meets the expectations of their customers. Thus, planning and policies are required that can help in lifting workplace morale and gets the best out of every staff member.

Dissatisfied Customers

Unhappy employees can never make customers happy because employees treat customers just the way their company treats them. The worst part is that when customers experience a service-related issue they are four times more likely to buy from a competitor brand or business reveals Bain & Co.

Customers who have had bad experiences, will also spread negative word of mouth and this can seriously damage the repute of any company.

High Employee Turnover

High employee turnover can also be a result of poor HR planning. For instance, when people vacate their post voluntarily, human resource staff conducts exit interviews with these members in order to find out their reason behind leaving the job. HR managers, who do not conduct and plan such interviews fail to provide their companies with crucial information that is related to workplace environment, employee morale etc. Lack of such vital information prevents companies from retaining their productive and skilful workers.

 Employee Turnover

Loss of Business

When an experienced employee leaves, the business not only loses a great worker, but it also loses the value which he carries with him and the clients he had built strong relations with over a period of time. The misery just doesn’t end here. Good employees also have extensive knowledge of products, services, processes and systems which makes them even more valuable.

On top of it, they have this unparalleled experience, which enables companies to know what has worked and what has not worked for them in the past. More importantly, good workers have a good influence and friendly relationship with their co-workers so when they leave, it badly impacts the culture too.

Increased Costs

High employee turnover also increases business expense. According to a study by the American Center for Progress, it costs companies roughly one fifth of the employee’s salary to find his or her replacement. First, businesses have to advertise for the vacant post. Then, HR staff has to go through the process of reviewing potential candidates’ resumes, conducting assessment tests and performing other related tasks for hiring.

Recruiting the right personnel for the job is just the first step towards replacing an employee. Companies also need to provide adequate training to the new employee, so he or she can perform their duty diligently. The list of expenses does not end here.

Businesses also have to bear the cost of acquiring new customers, since some of their repeat customers might take their business away with the departure of their favourite service representative. And Bain & Co’s research has reported that acquiring a new customer can cost companies 6 to 7 times more than retaining an existing customer.