I have been recruiting in the residential building products industry for 14+ years and I have seen many trends come and go. One thing that never changes in hiring is that open positions notoriously cost more than people think they do.
Certainly, there is lost revenue. But, some of the more hidden costs sort of slip under the radar.
What An Open Executive Role Costs
Everyone knows employee turnover is expensive, this is not news! So, you also understand it negatively impacts employee morale, productivity, and your company's revenue. In addition, it requires time and money to recruit and train a new employee.
However, when it comes to the cost of losing a senior executive, the loss is much more painful.
Why do you ask?
An executive is a high potential employee, so the costs are measured differently than say an inside sales person. Open executive roles up to the ante.
The Financial Hit
According to an SHMR study, open executive positions could cost the company more than twice the expected annual salary. Think about what your executives earn. Can you withstand losing double or more of their salary?
Another study conducted by the Center for American Progress (CAP) showed below $30,000 annual salary, turnover costs average 16%. The cost is highest at the executive level – averaging at least 213% of yearly compensation.
So, executive openings are very costly!
The Other Costs
There definitely are financial considerations, but things go much deeper than lost revenue.
It isn't difficult to understand why most companies don't know the real cost of open executive positions. You might have a system for tracking these types of things, but most losses aren't tangible or quantifiable.
Customer dissatisfaction, a drop in business, and lost expertise have no price tag, per se. Executive openings also cost lost reputation, market valuation, future earning potential and reduced stock values.
See what I mean about upping the ante? When you have an executive opening sitting idle for months or even years, you aren't just missing out on what they could bring to the table. Your reputation, company value and customers' opinion of your company can all take a huge hit.
Focus On Retention
Obviously, you can avoid some costs by retaining employees. Focusing on retention is a tremendous way to reduce turnover and keep your employees happy and satisfied.
Spending time developing employee relations and creating great training and growth programs are worthy investments. Make sure your employees know they are valued. Give plenty of opportunities to expand their knowledge and working career paths to follow. Any money you invest in your employees and their retention will be richly rewarded.
Considering the average company uses 12% of its annual pretax income to hire and train new employees, the savings can be staggering. Here is a neat calculator that shows what you could save yearly by plugging your retention leaks.
Sadly, even when you do everything right, you won't keep everyone. Turnover is never 0%.
What To Do About Openings
So, what are you to do when you need to fill an executive role?
First, you evaluate all the ways this opening will cost your company. Next, multiply that out by how long you estimate it will take to fill. Now you have a goal in mind. You want to take all the necessary measures to minimize this cost.
Now, it is important to take action – the sooner the better. Don't let an opening linger and run up a tab you can't come back from. When you realize this loss could run into hundreds of thousands or millions of dollars, every minute counts.
Go through the normal processes of building your ideal hire profile so you know exactly who you want and where to find them. I would seriously consider going down the path to attracting and recruit more than post and pray when you look for executives.
If you truly know the value of this open role and understand you need to get it exactly right, it might be time to consider partnering with an expert at hiring in the residential building materials industry – a recruiter.
When you have high-level openings in your company, don't forget to calculate out all of the ways you are losing out. Financial repercussions are a given but don't forget about your customer and employee satisfaction, reputation, and all the other hard-to-measure losses.