The Cost of Unfilled Positions

Step 1
Annual company revenue / number of revenue generating employees = annual revenue generated by employee 

Step 2
Annual revenue generated by employee / 365 days = daily revenue per employee

Step 3
Daily revenue per employee X days position unfilled = revenue lost per day per unfilled job

Step 4
Revenue lost per day X number of open jobs = total revenue lost per day for all open jobs per unfilled job

The calculation is fairly simple, but don’t underestimate the underlying effects, as they can be devastating. A missing team member, whether it being accounting, IT, or human resources means more work has to be assumed by others. The question of how much additional work and how it is affecting your staff is the one you must ask. How is this affecting their productivity, their accuracy, their job satisfaction, and their morale? Overall morale translates to individual morale and both translate to productivity. Are team and individual morale being adversely affected?

These days many positions have performance based incentives tied into their overall compensation. Missed incentives due to having to pick up the slack for lost employees can cause resentment and potentially greater loss of employees that will only compound the problem.

When an employee has to fill in for another non-routine function, then someone else has to fill in for that person with another function or tasks simply don’t get done and everything falls behind. If there is this juggling of responsibilities by internal staff then the result is your employees spending time doing things outside of what they were brought in to do, and probably outside of their area of expertise. This can be costly to the organization, as ultimately the employee’s frustration with the additional work grows and their productivity drops. People are not able to take vacation as easily or focus on advanced training, and again job satisfaction and productivity drop.

Opportunity cost is a major issue. Think about what your managers could be accomplishing if they were not burdened with the increased stress of managing teams and individuals filling in for the open position. Are they being forced to ignore top performers or short-change development of average performers? There are significant morale and revenue side effects tied into this as well!

Another part of opportunity cost is time managers spend in the search process. Managers in accounting, finance or IT are not paid to be HR people or recruiters. The time cost and productivity cost can be enormous if the search process is not handled efficiently. How much time are your managers spending in search functions? How efficient has your hiring process been with regard to time spent by those involved, cost of tools utilized, and the ultimate goal of attracting and hiring the best employee?