This article was updated on July 4, 2018.

Knowing the true cost of vacancy could be the foundation for stronger recruiting and retention strategies. When an employees leaves, it can be tempting to view the vacancy as a short dip in productivity and perhaps even a welcome reduction in expenses. But the true cost of losing an employee can quickly exceed their wages, and leaders need tools that can fully measure those costs and ultimately reduce the time to hire and length of vacancy.

While most organizations know that unfilled positions can hamper profit, few can quantify exactly how much those vacancies cost. It's essential to look at how the loss of labor and talent can impact everything from sales and production to management and recruitment efforts. Quantifying the full costs of a vacancy can help employers optimize their recruitment and retention efforts.

Vacancy Costs Can Exceed Lost Productivity

According to the Society for Human Resource Management (SHRM), the average position takes 42 days to fill at a cost of $4,129. With annual turnover near 19 percent and involuntary turnover at 8 percent, the cost of vacancy can add up to be a significant burden.

Whether it's a boardroom executive or a backroom clerk, an organization can immediately start losing money the moment a person leaves the job. Employers may respond by trying to cover the role by adding to the workloads of others or using a temporary worker to supplement the position. In many lower-level jobs, the business may permanently end the position, assuming that eliminating the wage expense will at least make up for the loss in productivity.

According to consulting firm Ropella, employers need to know the true cost of vacancy before they make workforce planning decisions. In addition to what the employee was earning for the organization, there are also "real costs," Ropella notes. These can amount to a myriad of expenses including lost business opportunities, personnel costs due to added stress levels and customer costs due to a potential loss of sales volume. These costs grow larger the longer the job remains unfilled.

While there may be times when it makes sense to leave a position unfilled, employers need the right data and analytics to evaluate the particular risks and consequences of vacancies before making decisions.

Costs Are Unique to Each Position

As every organization and position is unique, there isn't always a cookie-cutter approach to calculating the total costs of a vacancy. Businesses need to individually assess their operations, productivity and talent to understand the value of a position.

In an article for LinkedIn, Al Siano, president at Business System Technologies Executive Search and Staffing, reports that organizations need to consider factors that are specific to their situation and operations. For instance, in the world of sales where relationships are crucial, a departing salesperson could take their customers with them. Technology workers could present a loss in future business opportunities should they accept a job offer at a competing organization. And in some cases, the loss of a highly specialized worker would completely shut down operations or production.

Finance leaders should, therefore, have thorough discussions with their management teams to identify the relevant data points and create metrics to quantify the impact of that information. This will require collaboration between finance leaders, HR and even affected managers, so don't let disagreements derail the initiative. These dissenting opinions will be vital to inform your strategy and to ensure that you are focusing your attention in the right area at the right time. "In my experience, discussions that follow [disagreements] help to clarify and understand needs, the costs and opportunity for improvement," Siano says.

Good decisions call for good data and lead to proactive measures. At a time when turnover is rising, employers need actionable tools to help them quickly recruit talent and minimize vacancy costs. By leveraging the power of analytics and giving your management teams better visibility into the cost of vacancy, your organization can reduce risk and create a more effective recruiting and retention strategy.

Tags: Midsize Business Research & Insights Recruiting and Hiring Articles Turnover and Retention HR Succession Planning Finance