How Much are Vacancies Costing Your Business

As the title suggests, we want to discuss the costs of vacancies for companies and highlight the unexpected costs that can affect your business.

Before delving into the cost of vacancies to your organization, it is important to consider the data below:

1. Workplace turnover is at an all-time high (19.3% in 2018).

2. The average US job vacancy took 43 days to fill in September 2018.

3. The average cost HR managers say they incur for having extended job vacancies is more than $800,000 annually, according to CareerBuilder research.

4. According to Glassdoor, unfilled jobs in the US tech market alone add up to $20.1 billion.

5. Unfilled jobs for US companies were calculated at $160 billion.

6. Consider the ACA Talent loss of revenue calculator for open sales positions. Note that this calculator does not consider the savings from avoiding salary, benefits, and overhead.

7. A simple revenue loss calculation is the monthly new sales quota for a representative multiplied by 78 (rule 78 considers the repetitive/recurring months for the “12-month carryover” of that revenue). A representative with a quota of $25,000/month and attaining that each month yields $1,950,000 potential lost revenue if that job was open for 12 full months.

Now that you have reviewed the above data, I am confident you will agree that the cost of open positions within your organization can cause a significant loss of revenue and profit and cause adverse conditions for your employees.

Other factors caused by open positions include:

• Extra workload placed on other employees in the function impacted. This can lead to stress on existing employees and result in a decrease in productivity, an increase in morale issues, and a decline in the quality of your products or services.

• Potential to lose key employees and customers if the open positions are for extended periods. Most importantly, the reputation of your company may decline.

Tips for Filling Vacancies and Reducing Costs

While vacancies can cost your business in various ways, there are also strategies you can use to keep costs at a minimum.

1. Speed up the hiring process

After being given the go-ahead to make a new hire, companies need to move quickly to minimize losses. But often, this doesn’t happen as hiring managers are busy with myriad other responsibilities and are slow to progress through the hiring process.

2. Demonstrate the true costs of vacancies

As the actual cost of an unfilled position isn’t immediately apparent, it is easy to get complacent. But every day it’s put off, more money goes down the drain. Bringing these costs into clearer focus for yourself and other team members can motivate you to prioritize growing your business more quickly and efficiently.

3. Develop a sense of urgency

Hiring managers should be able to effectively communicate a sense of urgency when it comes to unfilled positions. Each hour a chair remains empty, customers go uncalled, questions are left unanswered, orders go untaken, and new efficiencies go undiscovered.

Next Steps and Recommendations

As a leadership team, it is essential that all leaders commit to analyzing to determine the cost of vacant jobs for the functions and departments that report to them. This cannot be a one-time exercise, but it must be done monthly at a minimum so that the company can determine the financial loss incurred. (A wise CEO once told his management team, “If you are not keeping score, it is only practice!”). 

Next, there should be a training session with all department heads, including supervisors, managers, and directors. They need to understand the cost of vacant jobs for the company and the impact within their control. Assuming you have a dashboard that tracks each department's financial performance, productivity, and quality, you must implement a ‘cost of open position’ metric. Again, assuming you have already incorporated those metrics into their performance reviews, you must hold them accountable for reducing the number of open jobs and the time to fill them. 

All hiring managers should undergo training on the key specifications, skill sets, and competencies for all the jobs they hire for. Your finance department should analyze hiring costs versus a professional recruiting firm. Many times, good recruiting companies that specialize in your market segment have databases of potential highly qualified candidates you will not be able to find on your own. Tap into the knowledge and expertise of a recruiting firm like Connexis Search Group to fill open positions and minimize costs to your business.