Knowledge & Insight

The true cost of an unfilled position

Thu 20 September 2018

Every organisation experiences a degree of staff turnover, and the larger the firm, the larger the number of roles that will be unfilled at any one time. Most companies will have contingency plans for maintaining operations when understaffed, but when that vacant position is a senior leadership or board-level role, it’s not so easy for other people to ‘pick up the slack’.

Cost of senior leadership vacancies

‘Cost of vacancy’ is a term well recognized by most MBA students and graduates, and traditionally the cost calculation is based upon annual revenues and total number of employees. But it’s difficult to use such a prescriptive method to estimate the true cost of a senior vacancy. If the previous post-holder took responsibility for managing engagement with major clients or customers, what happens to those valuable relationships? Customers may reasonably expect some short-term disruption when a senior executive leaves, but the longer the role remains unfilled, the greater the probability that those relationships will become degraded, and that’s when an unfilled vacancy begins to harm bottom line. And sure, an interim executive may provide a short-term fix, but there’s no substitute for a manager or director who is wholly committed to the role.

Impact of unfilled managerial positions

Even when you look further down the chain of command, it’s easy to see how the cost of vacancy at senior and mid-management level can have a significant impact on an organisation. An unfilled ‘head of’ role can impact the entire department, and the longer the position remains vacant, the greater the impact on the leaderless team. Communication between employees and senior management becomes disrupted, with potentially harmful effects on delivery of overall strategy. And while team members may be keen to step up and accept additional responsibilities, if they’re already working at or near capacity, that leaves other areas in need of back-filling.

The impact of delaying recruitment

It’s clear to see that delaying the recruitment of business-critical personnel can have serious impact in both the short- and long-term. And the longer the delay, the greater the damage. It can also become more difficult to find high-calibre candidates for a position that has been open for a long time. It’s likely that the marketplace will become aware of the vacancy – this includes both competitors (who may treat the “missing person” as an opportunity to exploit), and potential candidates, who may regard the lack of timely recruitment with suspicion. Why has it been open for so long? Is there uncertainty over the future of the role? Has the organisation tried and failed to fill the role? Ultimately, these sorts of question make recruiting the right person a tougher challenge when the green light to recruit is eventually given.

The solution

While the missing person may appear like a short-term cost saving, it is a false economy. Operational efficiency is degraded, client relationships may be weakened, credibility within the marketplace is likely to be questioned – so as soon as you know a senior position is to become vacant, it’s important to act quickly. And ideally, it’s best to avoid even a short vacancy period, as rapid recruitment can help facilitate seamless transition that ensures neither customers, staff nor operations are adversely impacted. 

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