HR Insights, Talent Management

Have You Asked How Much Revenue You’re Costing Your Organization?

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Is everyone in your company valuable?

Your CEO will say “Yes” publicly, but privately, we all know the deal — some employees are more valuable than others.

That’s life, and that’s why we all don’t make the same salary. Some skills are more valuable than others.

Do you measure the value of your employees in terms of revenue?

Who are your “true” revenue drivers?

Most companies don’t. Why? It puts too much reality in the face of your employees. It’s like drunk uncle Charlie at Christmas; no one talks about him, but everyone is keenly aware how many he’s had and when it’s time to start cutting him off.

What would happen in your company if you put together an algorithm to measure value in revenue and compensated your employees based on who are the “true” revenue drivers of your company?

That’s a hard question to answer.

You would probably see a number of things. You would see some sales executives making a hell of a lot less, that’s for sure! You would see individuals who had a direct impact to driving revenue be in a much higher influential position within your organization.

You would see HR begin to support areas they are not supporting right now, or not supporting as much as they should. Like? Like, sales training and motivation. Like, a performance management system that didn’t lack accountability and movement out of low performers. Like, compensation models that weren’t designed to keep the masses “satisfied.” That’s just to name a few.

I’ve seen companies begin to look at these numbers. Simply, they’ll take their total revenue divided by head count to really just have some numbers to start playing with when positions are filled in a timely basis.

A sobering way to look at HR

If we can assume, in a perfect world, that “all” employees have an impact on revenue, that means every single day you have an open position within your organization, at every level, you are losing revenue. Talent acquisition/HR is losing the company money because it can’t keep up with turnover or growth.

That’s very simplified, but it’s the reality we face.

Too few Talent and HR Pros don’t view their jobs in that context – “loss of revenue.” They have excuses (reasons) why they can’t fill those positions — and  the list is endless.

When I see organizations with hundreds and thousands of open jobs, I start calculating in my mind the millions of dollars their failed HR shops are costing their companies and stakeholders. It’s a very sobering way to look at the HR function –

(# of Open Positions) * (Days) = Loss of Revenue.

If you can come up with that number, it makes the business case to upgrade your HR shop extremely easy. If you can’t come up with that number, I wonder how many positions you are hiring that don’t drive revenue and are costing your company in unneeded expense?

I wonder how much revenue you are costing your organization, today?

This was originally published on Tim Sackett’s blog, The Tim Sackett Project.

Tim Sackett, MS, SPHR is executive vice president of HRU Technical Resources, a contingent staffing firm in Lansing, MI. Tim has 20 years of HR and talent background split evenly between corporate HR gigs among the Fortune 500 and the HR vendor community – so he gets it from both sides of the desk. A frequent contributor to the talent blog Fistful of Talent, Tim also speaks at many HR conferences and events. Contact him here.
  • Jenna Carter

    Love the insight. We are currently recruiting for a couple of physicians, and we certainly think of those positions as losing money on a daily basis, but I had never applied that thinking to the support positions. It’s a much harder equation and a reality that most board members don’t want to face.

  • Wendell Williams

    The cost of open positions is clear…but that assumes all employees are great producers…What about the cists of the ones who aren’t? …I’ll wager the cost of low performance is consideably more than an open slot…Recruiting will never get better until they think beyond filling an open slot with a warm body.