HR Metric Spotlight: Cost of Vacancy

A repost of Cost of Vacancy….

I’ve been spending a lot of time lately on teaching people how to create HR-related return on investment documents, and this topic always comes up.

Cost of Vacancy is pretty cool statistic, but usually, business leaders a presented with a cost of vacancy that they would not believe. It doesn’t line up with their (deep) knowledge of the business. HR turns out to be the team that, “doesn’t get our business” again, and we get a black eye.

The deck I’ve made here is meant to be a starting point in developing a believable cost of vacancy.  Let me know what you think!

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Jeremy Shapiro is an executive in HR at a leading financial services firm, working on talent analytics. Formerly a Senior Vice President of the Hodes iQ Talent Management Suite at Bernard Hodes Group and is a co-author of the HR metrics book Ultimate Performance. Jeremy has coached hundreds of companies in recruiting and HR technology solutions across industries and sizes. Jeremy is a frequent speaker and author on HR technology topics and HR Business Intelligence topics, such as SHRM, IHRIM, the Human Capital Institute, HR.com and more. He is a frequent contributor to articles and whitepapers on HR Business Intelligence. Jeremy holds a Masters of Science in Information Systems from NYU and a B.A in Economics from Rutgers University. Specific topics of research include HR metrics, talent management technology, and next generation recruiting technologies.

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4 comments on “HR Metric Spotlight: Cost of Vacancy
  1. Very nice deck. I think there is an opportunity to add a “capacity” component to the equation. Businesses can be growing, declining, cyclical etc. To illustrate: position A performs tests on people who come in and pay for the testing. Profit is derived from the differential and a vacant position might a) be “chunky” because some or all of the tests could be rescheduled, or b) someone else could work longer hours or, c) profit is directly impacted because the “plant” is at 100% capacity and total tests will decrease proportionately or d) rate of growth (short or long term) is impacted because of increasing demand not being handled (or decreasing demand that reduced productivity).

    The growth scenario could project a MUCH larger impact on the cost per vacancy in a competitive market. Just a thought since the formula could then have a “fudge factor” that relates to capacity i.e. we are operating at (.8) capacity during the 2 months of vacancy or, we are in the midst of increasing our capacity by 50% (1.5) during this period. While the person performing the testing could not do 1.5 times the work, the loss of their productivity and availability of overtime etc. impacts market penetration long term.

    (R[revenue] X D[days])/C[chunky compensation]) X F[capacity fudge]

    This could be listed as Chunky Fudge Factor Vacancy Formula.

  2. measuringtalent says:

    Thanks for this Gerry, I think new flavors of “chunky” and fugde will need to make it into the deck…

    If we go further, I think in person discussion @ Thomas Sweets is a logical step 🙂

  3. Gijs Bos says:

    interesting concept.
    Recommendations:
    – the difference between cost and benefits isn’t entire clear from the presentation.
    – Turn the presentation into a recruitment ROI where you include impact of (additional) recruitment effort as well. Like this one can make decisions with the tool.

    Still, great start!

    • measuringtalent says:

      Thanks Gijs. You’re right – this deck doesn’t try to link cost/benefit in a formal ROI – it’s only one variable in the benefit section of an ROI.

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Talent metrics and human capital analytics galore.                                                                        

Upcoming Presentations
Cornell ILR, Metrics that Matter: How HR Analytics Impact the Bottom Line, June 3-4, 2014 or November 13-14, New York, NY

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