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- 1. Calculating A Realistic Cost of Vacancy<br />Jeremy Shapiro, SVP Hodes iQ<br />Posted @ my blog http://measuringtalent.wordpress.com<br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 2. How much does it cost an organization when a seat is left empty?<br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 3. How much does a single cost you?<br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 4. How much does a single cost you?<br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 5. How much does a single cost you?<br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 6. How much does a single cost you?<br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 7. How much does a single cost you?<br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 8. All we are saying is this:<br />If employees generally do not bill at an hourly rate, and they do provide incremental monetary value, then the value they create can happen in “chunks”.<br />Ok ,I’ll bite, what is “Chunky” Cost? <br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 9. A “Chunky” Example: Jim<br />Jim manages 10 clients. One of those clients has a need for his company’s services valued at $1,000.<br />The client will wait until Jim is back from his 10 day vacation in Cabo to talk with Jim about the need.<br />Company doesn’t lose the revenue.<br />But, if the client has to wait 15 days, he says, “forget it, I’ll call Jim’s competitor.”<br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 10. We can use that to create a realistic totalcost of vacancy inside most organizations.<br />What’s our criteria for realistic?<br />Make this skeptical, grumpy finance guy comfortable with the analysis.<br />Now that We’ve Defined “Chunky” Cost<br />Stop showing me average revenue per employee and telling me it’s cost of vacancy!!<br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 11. For Cost of Vacancy Purposes, Let’s Assume<br />That salary represents the value an organization places on the roles of their staff.<br />It’s almost always the largest cost component of an organization, we must be adding value somewhere. <br />I’m never going to Hawaii again.<br />I am worth 10x my salary, of course.<br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 12. The Formula We Will Use<br />We will calculate it step by step in a few slides.<br />Calculating Total Cost of Vacancy <br />(Revenue per employee per day) * (Total days a job was left vacant)<br />(# days to compensate for “Chunky” work)<br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 13. Defining Variables<br />Calculating Total Cost of Vacancy <br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 14. Step 1: Create a “Naïve” Revenue Per Employee Average<br />Calculating Total Cost of Vacancy <br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 15. Step 2: Create an average Revenue Per Employee Per workday<br />Calculating Total Cost of Vacancy <br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 16. Step 3: Decide on how many days on average the organization does not suffer from a financial impact from someone being out. This is the “chunky” work. <br />Example. Time “chunks” are5 days<br />This is an average used in a financial model.<br />Don’t get too caught up in individual performance or different departments.<br />This will be used for sensitivity to the business. Your gut is actually helpful here. What will your financial person acknowledge as reasonable?<br />We’ll call this variable “Sensitivity” so that we don’t get smirks in our meeting, ok?<br />Calculating Total Cost of Vacancy <br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 17. Step 4: What are the total days of vacancy?<br />Example: 1,000 days vacancy<br />Step 5: Calculate Total days of vacancy / Sensitivity<br />Example: 1,000 days / 5 days sensitive = 200 adjusted vacancy days<br />Calculating Total Cost of Vacancy <br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 18. Step 6: Calculate adjusted cost of vacancy<br /> Adjusted vacancy days * Revenue per employee/day<br /> Example:<br />200 vacancy days * $634 rev per employee per day = $126,800<br />Calculating Total Cost of Vacancy <br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 19. Want to see an example spreadsheet? I’ve posted an example here for you to look at:<br />http://spreadsheets.google.com/pub?key=tzXzfCER_s-rv2V540ZLhCw&output=html<br />Calculating Total Cost of Vacancy <br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 20. Your turn!<br />Have you tried this technique? Post a note below or at measuringtalent.wordpress.com and tell everyone what you learned?<br />Calculating Total Cost of Vacancy <br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />
- 21. Thanks!<br />Jeremy Shapiro, SVP, Hodes iQ, jshapiro@hodesiq.com<br />Blog: http://measuringtalent.wordpress.com<br />LinkedIn: http://www.linkedin.com/in/jeremyashapiro<br />Web: http://www.hodesiq.com<br />Twitter: hrmetricsguy<br />Author: Jeremy Shapiro, SVP, Hodes iQ. Readers are welcome to reproduce slides with credit given to author.<br />

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