A vacant position can cost a company significantly in terms of lower productivity, missed opportunities and lower quality of goods and services.

In general, the costs of a vacancy can be broken down into three categories: direct costs, indirect costs, and increased risk. Below is an explanation of each category.

Direct Costs

Direct cost is the most quantifiable type of cost because it includes the actual losses in revenue, quality and efficiency as a result of being understaffed.

If the vacant position was held previously by a top-performing employee, the vacancy results in a noticeable and imbalanced tradeoff between lower labor costs and higher revenues. While there is value to be had from lower labor cost, it is greatly outweighed by losses tied to lower production, efficiency and the higher demand for resources.

When there is a vacant position, that position is unable to generate a useful output. This leads to other employees having to put in extra time and effort, in addition to more stressful workloads. If productivity falls, it can also mean underutilized company assets and delays that can have knock-on impacts.

Finally, there are costs associated with having to fill the open position. These costs include those associated with posting job advertisements and the amount of labor invested in the hiring process.

Indirect Costs

Indirect costs are the costs associated with leaving a position vacant that are typically more difficult to quantify. These can include the costs to company culture and the company brand.

Employees working in an understaffed situation tend to act as a stopgap, stretching themselves to prevent any loss of efficiency. While this remedy may work for a little while, it is not an ideal long-term solution. In the meantime, those on understaffed teams are more likely to develop higher levels of stress and frustration. In acute situations, everyone involved becomes disgruntled, highly critical and concerned about the long-term outlook. This can, in turn, cause more vacancies.

A vacancy can also trigger damage to the company brand. As production times extend, communication breaks down or products stagnate, consumers take notice. As consumers take notice, it becomes more difficult to reverse the damage. This brand damage can lead to a loss of market segment, and in a competitive market, the loss will be rapidly be converted by rival competition.

Increased Risk

The longer a position remains open, the more probable lasting damage to the company can occur. Prospective employees, clients, customers and rivals are all more likely to sense an issue within the business.

There is also a high risk for accidents and missteps, as employees stretch themselves to cover for an understaffed workforce. These accidents can cause serious injury, physical damage or monetary damage.

We Can Help Your Company Address Vacancies Quickly and Effectively

At Jarvi Group, we specialize in helping our clients resolve their staffing quickly with custom talent acquisition solutions. Please contact us today to find out how we can help your organization avoid the negative effects of a long-term vacancy.

Jarvi Group

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1350 Scribner Ave NW
Grand Rapids, MI 49504

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