Surprising Job Vacancy Costs You Can't Afford to Overlook
It may be tempting to leave a vacancy unfilled in order to save money, but there are hidden job vacancy costs that will hurt you in the long run. Many of these hidden costs are substantial in and of themselves, but taken cumulatively, they could be catastrophic.
If you’re looking to calculate the cost of your vacant position or weigh the pros and cons of leaving a CRE position vacant, read on. Don’t run the risk of losing money you can’t reclaim.
A vacant position means payroll savings, right?
When someone in your organization moves on and leaves a vacancy, it might be tempting to leave it unfilled. After all, you have other people in their department who could share these responsibilities. Or perhaps you want to fill the position, b
ut now just isn’t a good time. At least you are saving on payrolls costs at present, right?
But as HR and hiring guru Dr. John Sullivan wrote about, the laser-focus on cost containment can create a blind spot for job vacancy costs that are only noticeable in the long term. This is especially true in sectors like CRE, because the emphasis is so often on cutting overhead. Yet overlooking these costs will inevitably cost your business far more than the payroll savings.
Typically, these job vacancy costs are overlooked because they are indirect, yet more expensive than you think. Trickling down, the liabilities of losing an employee or team member spread throughout your organization in surprisingly detrimental ways. This is why employee retention is so vital – especially in a competitive market.
6 Overlooked Job Vacancy Costs
These job vacancy costs fall primarily into six, specific categories. Each open, unfilled position will usually cost you in most or all six of these areas:
1. Revenue Costs
The most obvious job vacancy costs are of course related to the lost revenue from a position no longer being filled. Depending on the position, there may be associated costs from decreased response time, less innovation, underutilized assets, and inferior productivity that comes from others unfamiliar with the task filling in for the missing team member. A manager-level employee typically generates revenue equal to three to five times the amount of their salary. Leaving a position unfilled that paid only $50,000 annually could cost you $250,000 each year just in lost revenue.
2. Management Costs
Leaving a hole unplugged on a team means more stress and less productivity for team managers:
Managers spend less time managing and more time filling in on less valuable duties.
There is higher job dissatisfaction and turnover in management.
A multiplier effect often results in less productivity teamwide.
3. Personnel Costs
Other personnel receive mixed signals when a position is left vacant. As a result:
There are more sick days and tardiness.
Employees spend more time trying to learn skills related to the vacant position and do not excel at their own.
Quality of work decreases.
There is reduced creativity and innovation.
Frustration and turnover increase.
4. Customer Costs
Often, job vacancy costs surprisingly come in the form of a degraded customer experience. There may be less focus on the clients and customers. In turn, the reputation of your organization suffers. Long-term loss of market share is a common side effect of unfilled positions.
5. Competitive Advantage Costs
Eventually, if left unfilled, open positions communicate to analysts, potential clients, and potential employees that your firm is overvalued, vulnerable, or uncompetitive:
Corporate culture and morale suffer.
Partnership opportunities are lost.
Resources and assets can be overlooked and underused.
6. Team Costs
Job vacancy costs can mean a whole host of disruptions and liabilities at the team level. These equate to silent revenue drains that compound in the long run:
Team cohesion is undermined.
Underperforming team members are often retained or even given additional responsibilities.
The organization loses the ideas and skills provided by the unreplaced team member.
Teams hampered by vacancies often miss incentives and are less engaged and motivated as a result.