“Logic vs Emotion : A Deep Dive into Costs and Consequences”
Based on my experiences as a former employer, I tried to measure the cost of hiring just one unqualified employee for emotional reasons in the business. Profitability in a business is, in fact, the control of costs. The establishment of sentimentality or initiatives driven by emotional reasons in businesses can lead to certain side effects for both the business itself and the business owner. Such situations in these types of businesses are sometimes referred to as the ‘butterfly effect’ because a small emotional decision or change can result in larger and unexpected consequences.
Therefore, especially in small businesses, there are significant disadvantages to hiring an unqualified employee for emotional reasons. Imagine that the cost of this person is a minimum of $5,000 (salary, insurance, phones, and some personal expenses tolerated for this person, such as rent, special and others, etc.)
Now, I will consider the possible reflections of this on the business and the personal accounts of the company owner.
A. INCREASE IN COSTS: If the business owner hires an employee for emotional reasons and pays an unnecessary salary or offers additional benefits to this person, business costs increase. This can adversely affect the profitability of the business and lead to a reduction in personal income.
- Creating a Reserve Fund: This situation prevents establishing a reserve fund for unexpected events or financial difficulties. This can damage the financial stability of your business.
- Stressful Performance Consequences: It results in an additional burden when deducting business expenses. Employees are pushed to work more to compensate, averaging their workload, which raises workplace stress. The cost of this reflects as stress on the performance of other employees.
- Market Research: It prevents conducting market research to better understand your marketing strategies and attract your target audience more effectively.
- Technology and Software Investments: it prevents and re-calculates to use of this money to improve the technology infrastructure within your business or automate certain processes through new software, applications, or hardware.
- Research and Development: You can use this resource to develop new products or services. Innovation can enhance your business’s competitive advantage and advertisement and marketing tools.
- Business Expansion: You can utilize this fund to expand your business, become more efficient and effective, and provide support for financing decisions that are in line with your business’s interests.
B. REDUCTION IN PERSONAL SAVINGS: The business owner may need to cover the increasing business costs from personal savings. This can lead to a deterioration in personal financial status. Therefore, with the $5,000 that has been wasted, you can consider:
- Retirement Investments: You can invest this money in retirement funds or individual retirement accounts. This can help secure your future retirement. For example, you can make two real estate investments with two mortgage payments. You can also consider increasing the amount contributed to a family member’s retirement fund (***spouse, ***child, etc.) or increasing your personal retirement fund contributions.
- Stocks and Bonds: You can grow your capital by investing in stocks or bonds, either through stock market investments or bond investments. These types of investments come with risks, so it’s essential to research thoroughly and assess your risk tolerance. Sometimes, business owners, instead of cutting these unnecessary emotional expenses, redirect the money from retirement funds to other investments, and even pay off their debts.
- Real Estate Investments: You can invest in real estate by purchasing residential or commercial properties or investing in real estate funds. Real estate investments can provide long-term appreciation in value. Example: You can pay two mortgages to have two real estate. Or you can buy the and for retirement or your kid’s future.
- Education Funds: Establishing education funds or contributing to existing education funds can help save for your children’s education expenses.
- Gold and Precious Metals: Consider precious metals like gold as a way to diversify your portfolio and provide protection against inflation. In my experiences, onumuzdeki zaman zarfinda , kisisel tahminimce olusacak bir krizde Gold and Silver , en guvenilir yatirim araclaridir.
- Stocks and Bonds: You can grow your capital by investing in stocks or bonds, either through stock market investments or bond investments. These types of investments come with risks, so it’s essential to research thoroughly and assess your risk tolerance.
C. INCREASE IN DEBT BURDEN: If the business owner borrows money to cover business costs, they may take on a heavier personal debt burden. This can trigger future financial difficulties.
A reduced credit rating or increased credit interest amounts can strain relationships with banks. Personal financial difficulties can adversely affect the business owner’s credit rating, making future financial transactions more challenging.
Even having to borrow from banks to hire new professional staff and think about how to repay this debt. Even to re-think payroll expenses or add new payrolls for necessary employees.
D. PERSONAL STRESS and PRESSURE: Financial problems in the business can bring stress and pressure into the business owner’s personal life. This can adversely affect both business and personal life quality.
To put it bluntly, when you convey this situation to your boss, the response you will get is:
“I’m doing the calculations for everything, don’t worry” OR
“Do you know better than me?”
You will get your answer. This is also an emotional defense. This makes the mistakes even bigger.
Because The boss/manager/owner will even say that He/She is logically emotional in her own way to be right.