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20 July 2018

The True Cost of an Empty Seat

Neil Dickins

Neil Dickins

Director / Owner

In 1999, a weak link existed in the UK technology industry’s internal supply chain: there…

Any hiring manager faced with the task of filling an open vacancy will have been confronted by the cost of recruitment. If using a recruitment agency, fees will be in the thousands, which for many businesses can feel like a significant overhead. However the far greater (although less immediately obvious) financial impact arises from NOT filling that vacancy, due to the effects on employee happiness, product or service delivery, client satisfaction and reputation. And using a specialist recruitment agency is usually the fastest way to fill a role when dealing with niche skill sets.

At IC Resources we know just how detrimental empty seats can be to a business, because we help clients solve exactly this problem. And our clients certainly don’t mind paying our fees because the saving they make is far greater than what they pay us. If you need convincing, we’re a good case study: even though we’re a recruitment company, we have always nurtured close partnerships with carefully selected ‘recruitment to recruitment’ agencies to fuel our own growth.

The technology skills shortage in the UK and Europe is biting ever harder over the past 4-5 years; yet still we find that the true cost of an empty seat still remains unseen by managers across the industry.

So, how much does it cost?

A study by The Boston Consulting Group revealed that recruiting is the most important HR function when it comes to return on investment. Companies that excelled in their recruitment strategy experienced 3.5 times more revenue growth than those that didn’t. In the technology industry, recruitment is one of the biggest bottlenecks felt by managers – the digital skills gap is estimated to cost the UK economy £63 billion annually. But what about the cost of an individual vacancy? For a salesperson it may be easier to estimate – the number attributed to their quota or target.

I once conducted an informal survey when presenting to a group of industry managers. Asking the simple question of: “What is the value to your organisation of a good mid-level (say 8 years’ experience) engineer or software developer?” The answers ranged from £100,000 to £1,000,000, with an average of around £350,000. All of this comes to the same conclusion: the impact on the business arising from an unfilled vacancy is far greater than any agency recruitment cost.

5 ways an empty seat will negatively impact your business (and ultimately cost you money).

The specific effect of an ‘empty seat’ of course depends on the type of business and type of seat that is empty. But here are some common ways it can influence your bottom line.

1. Low Morale and Staff Satisfaction
The most obvious and immediate effect of an open vacancy is felt by the team who are stretching themselves to cover the excess workload. Dealing with the shortfall in an understaffed team is highly detrimental to motivation, personal satisfaction and stress levels. The quality of work and productivity is likely to drop too. Ultimately this can lead to burnout and employee churn, thus exacerbating the original problem!

2. Reduced Client Satisfaction
Being short staffed won’t just negatively affect your employees. It can have an impact on your customers too. Teams that are overstretched end up missing client commitments or deadlines, or reducing the quality of service. Paying special attention to clients (going above and beyond for them) may get neglected in the face of delivering core business.

3. Missed Design Slots / Damaged Reputation
Having a productive and satisfied team where all necessary skills are employed will enable the business to deliver innovative and valuable products for clients. Businesses who are failing to fill highly specialist technical roles will invariably lose out to better-resourced competitors who are hitting deadlines, winning design slots and have time to focus on next generation products.

4. Inhibited Growth
If the business is in expansion mode, then leaving vacancies unfilled will impede revenue goals, since hiring more talented people is the single most important thing you can do to drive growth. For some roles, the revenue impact is clearly measurable, for example in a sales role. But missing crucial members of the delivery team is equally costly – who knows which missed new SME relationship would have been the golden one?

5. Poor Decision Making
Finally, being short staffed makes the business more vulnerable to error, it could mean less time for quality assurance, due diligence and forward planning to manage risk. Having staff that are overstretched or teams that are covering certain skillsets beyond their expertise will lead to mistakes and lower quality across all elements of the business.

Solving the Problem: How can you minimise the number of empty seats?

1. Invest in Recruitment
We’ve witnessed first-hand the strides our clients can take when we provide them with top candidates, quickly (see case study). By choosing a quality recruitment partner that is embedded in your industry, you will not only save valuable time (which you can use to focus on your core job) but time to hire will be significantly reduced, meaning less time with a vacancy. We typically fill highly specialist roles in 4-6 weeks when our clients have spent months struggling to get the right candidate in.

2. Smart Succession Planning
Smart HR departments can minimise the number of seats empty at any one time by predicting when vacancies might arise with plenty of time to recruit a replacement. Some attrition is predictable: retirement, promotion, team expansion, new projects, seasonal fluctuation. Plan ahead!

3. Focus on Creating a Great Environment to Retain Staff
Vacancies arise for many reasons, and you won’t be able to control them all. However you can reduce the number of ‘churn’ vacancies by creating a great working environment. Consider the following: a good structure for career progression, training and development, competitive salaries, flexible working, a good office environment and employee perks.

Deciding who to hire is a key business decision, one that is worth spending time and care over and it is always worth waiting for someone who will fit into the company culture. However choosing to leave vacancies unfilled and/or waiting for a ‘unicorn’ candidate is never a smart choice. The financial impact, often hidden, will run into the 10s and easily 100s of thousands, especially when you consider the positive impact of a good employee over the course of their career. So while you may have to spend a little money on recruitment fees, the cost saving and the positive impact of a good employee in the long term far outweighs the upfront cost.

Case Study

Our very first client, back in October 1999, was the CEO of a start-up who called us out of the blue one Thursday morning. He ‘had just closed a round of funding but only had one employee’. When he sold the company for £65million 4 years later, the company numbered circa 100 people – we had placed 68 of them, primarily highly specialist IC design, electronics and customer support engineers. Now that’s a nice return on your recruitment investment!

Found out about what IC Resources can do for your business here.

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