MRI Beach | Management Recruiters of Ambler-Philadelphia

THE COST OF AN UNFILLED OPENING

MRI — Tue, 01 Jun 2010 14:34:10 +0000

How much is that open position costing you?

There are numerous costs associated with an unfilled position in any company. Many of these costs are difficult to quantify, but nonetheless are very real, and can be very costly.

Consider the following:

CALCULATING THE COST OF A VACANT “COV” POSITION:

A LIST OF THE POSSIBLE “COV” FACTORS

By Dr. John Sullivan

If an airline bought a new 747, and then let it sit for two months on the runway because they didn’t have a pilot, what would the cost be to the airline? In other words what is the cost of a vacant position?

Many firms calculate the cost of a hire, and some go so far as to calculate the cost of a bad hire (which have been estimated to be as much as three (3) times the persons annual salary), but few have taken the time to calculate the cost of a vacant position. These costs can be significant: anywhere from $7,000 dollars per day to $50,000 per day for an engineering position. Key leadership positions may cost as much as a million dollars per week. Couple these amounts with the fact that the length of many vacancies often exceeds 100 days, and you are talking about some serious financial impacts ($7,000 X 100 days = $700k).

ASSUMPTIONS ABOUT VACANCIES

:* Delaying product development and time to market in a fast changing industry means:

1. Lower margins, (as much as 10%)

2. A loss of first entry dominance

3. A loss of PR

4. Potential loss of market share (up to 30%)

* Great ideas and products come from people, not from equipment, buildings or capital. If you don’t have great people . . . you won’t have great products. And without great products you won’t have a great company.

* If the vacancies are a result of slow recruiting process, it is important to also realize that a failure to fill vacancies rapidly will probably also mean that all of the top candidates will be gone by the time you make a hiring decision. So you will likely re-fill your vacancies with lower quality hires (especially because the best are usually the first to quit)

* Vacancies in a single team can have an impact on many other teams (because of interdependencies), which can cascade throughout the entire company.

COST OF A VACANCY CHECKLIST:

THE BUSINESS IMPACTS OF A VACANCY

When you have a vacant position, one or more of the following things may happen. Guesstimate the dollar costs of each bullet point that fits your situation:

1. PRODUCT DEVELOPMENT AND PRODUCTIVITY

* Time To Market (TTM) is dramatically impacted by the entire production chain. Because departmental schedules and plans are closely interwoven, any disruption in one department may adversely affect all others.

* In industries that are seasonal (i.e. toys) this disruption may be even more costly. Vacancies in key skill positions may mean that products and projects may need to be dropped altogether.

2. TEAM IMPACTS

* Team product development may be dramatically impacted by the disruption caused by the lost productivity, lost experience, leadership, idea generation and skills of the “vacated” person.

* If a team environment exists, a disruption in team cohesiveness may occur. This can result in a longer TTM (Time To Market) and a loss of focus that can also impact TTM.

* Vacancies may affect the idea generation of others because co-workers are frustrated or overworked.

* Vacancies may cause overworked employees (because they have to fill in) to tire, which may cause increased accidents.

* Vacancies may cause overworked employees to tire, which may adversely affect product quality through increased error rates.

* Excessive vacancies may lead to increase “whining,” grievances and even union activity.

* If the team leader is the “vacancy” then “time to productivity” is likely to be even more negatively impacted.

* A vacancy may make a manager reluctant to terminate poor performing employees. Vacancies coupled with poor performers can cripple the team.

3. INDIVIDUAL EMPLOYEE IMPACTS

* A vacancy means that a current employee must do the work of the vacant position. This can cause a cascade effect causing others to have to fill in for their position, resulting in many “rusty” people doing unfamiliar jobs and decreasing productivity.

* Vacancies may frustrate other employees, causing them to lower their productivity.

* Vacancies may frustrate other employees, causing them to quit at higher rate than they normally would.

* Vacancies may cause the team to miss its goals, thereby reducing the possibility of individual and team incentives, which may further reduce productivity.

* Increased stress on overworked current employees (caused by having to fill in) may cause increased absenteeism and tardiness.

* Vacancies may hold up vacation time for current employees which may lead to increased stress or frustration.

* Understaffed departments will not be able to send current employees to training and conferences, which may lead to increased stress, decreased worker knowledge or frustration.

* If temps or “fill-ins” must be hired, they usually have a higher error rate that the average employee and they are unlikely to generate many new ideas.

* Superstar employees often resent being asked to fill in when lesser employees positions are vacant, which may cause them to quit also.

4. INCREASED MANAGEMENT TIME AND EFFORT:

* Teams with vacancies require “high maintenance” and more management attention and worry.

* Managers often have to skip their normal management planning and responsibilities in order to fill in for the vacant employee.

* When managers fill in for “vacant” employees that time can’t be spent on the best employees.

* Vacancies in management and team leader positions have a multiplier effect on productivity and the recruitment of others.

* There are opportunity costs for things a manager and co-workers could have done if they didn’t have to carry the extra load of filling in for a vacancy.

* If the vacancies are caused by top management decisions (hiring or budget freezes) it can cause managers to lose hope. This can impact morale and it may lead to a high management turnover rate.

5. CUSTOMER IMPACTS:

* Excessive vacancies may send a message to customers and suppliers that we are getting weak or we don’t care about them. It may cause a period of confusion for suppliers and customers regarding whom they can contact and the stability of the relationship. Errors caused by “vacant” employees may lose sales volume and occasionally customers.

* Any “fill in” as a sales/account rep may provide them an opportunity or excuse to look for other suppliers.

6. COMPETITIVE ADVANTAGE:

* Excessive vacancies may cause management to panic and to “quickly” hire some poor performers.

Once the team is saddled with a large number of poor performers, you may never be able to hire any new top performers.

* Vacancies at the CEO, CFO, CTO, and other top manager positions can adversely impact our financing and the willingness of others to partner/merge with us.

* Vacancies in key positions may send a message to analysts and the stock market that you are getting weak.

* Vacancies may send a message to competitors that you are vulnerable, which can lead to increased competitive pressures.

* A large number of vacancies means we are losing employees, which means weakening our culture.

New employees with new values may change or dilute our values and “corrupt” current employees.

7. IMAGE AND RECRUITING:

* Excessive vacancies sends a message to your competitors you are getting weak. This might encourage them and improve their own confidence so that they become bolder in the product and employee poaching market.

* Vacancies may impact new recruiting because vacancies send a message to future recruits that we are not easily able to recruit replacements.

* Large numbers of vacancies may also send a message to our current employees we are headed down hill.

* High vacancy rates may over-stress our recruiters and recruitment process.

* Vacancies may send a message to outside recruiters that we are vulnerable, which can lead to increased “headhunter” activity.

8. OUT OF POCKET COSTS:

* Having to hire high-cost consultants as “fill in help” could mean higher costs. If hourly employees are involved it probably means additional overtime costs.

* Vacancies can mean the underutilization of plant and equipment.

OTHER MISCELLANEOUS CONCERNS (AND COSTS) THAT MAY ARISE:

* The new hire may be a lower quality (low performance) candidate.

* New hires are unlikely to be immediately productive, thus resulting in increased costs.

* Some “vacating employees” take others with them soon after they leave. A “break in the dike” of one leaving may cause the whole intact team to leave.

* Many new hires don’t work out and must be replaced within 6 months, essentially stretching the length of the vacancy.

* In a tight labor market vacancies in hard to hire jobs may not be replaceable, at any cost.

* In start-ups and small departments, where there is little cross training, the cost may be more dramatic. If you only have ten employees and you lose two, you have a 20% vacancy rate (big deal!).

* Spending the time to avoid vacancies may have a huge ROI especially if your former employees go to a competitor with “your” ideas, causing their revenues to increase as yours go down.

This is an authorized reprint from The Fordyce Letter, P. O. Box 31011, St. Louis

First Friday Preview

MRI — Tue, 01 Jun 2010 12:20:06 +0000

High Unemployment Isn’t Providing a Large Candidate Pool

Not all unemployed are created equal. There are those who recently graduated from school and haven’t held a job yet. There are those who have made horrible mistakes and have been terminated. There are those who have been working hard every day but had to be let go when their company fell on hard times. There are those who have done nothing wrong at all, but find that their positions just aren’t as essential today as they were five years ago.

While unemployment rates remain high, that last category seems to be one whose importance is increasing, especially with hiring beginning to pick up as nearly 300,000 jobs were added in April. As we saw in both the 2000 recession and the most recent one, employers took advantage of the slowdown in business to eliminate obsolete positions, which were unnecessary even before the downturn. The increasing pace of technological advancement is enabling many positions to be replaced by automation that saves companies money.

“When a 9.9 percent unemployment rate is being reported, that just doesn’t reflect what we are seeing both in the volume of professional candidates and in the talent demand from companies,” says Tony McKinnon, president of MRINetwork.
“Over the last six months, companies have increased both their hiring and their speed of hiring, with top candidates remaining on the market for an even shorter period of time.”

In today’s job market, there is a striking dichotomy between the short-term unemployed–those with potentially a better chance of landing a job sooner than later–and what are now considered to be the chronically unemployed, those without a job for more than 27 weeks. In fact, the percentage of workers unemployed for that period of time grew to 46 percent in April, a level never before seen since records started being kept.

Right click here and save to view the full version of the First Friday Preview of June

Interesting article on costs of unfilled positions

MRI — Mon, 17 May 2010 14:44:11 +0000

THE COST OF AN UNFILLED OPENING

How much is that open position costing you?

There are numerous costs associated with an unfilled position in any company. Many of these costs are difficult

to quantify, but nonetheless are very real, and can be very costly.

Consider the following:

CALCULATING THE COST OF A VACANT “COV” POSITION:

A LIST OF THE POSSIBLE “COV” FACTORS

By Dr. John Sullivan

If an airline bought a new 747, and then let it sit for two months on the runway because they didn’t

have a pilot, what would the cost be to the airline? In other words what is the cost of a vacant position?

Many firms calculate the cost of a hire, and some go so far as to calculate the cost of a bad hire (which have

been estimated to be as much as three (3) times the persons annual salary), but few have taken the time to

calculate the cost of a vacant position. These costs can be significant: anywhere from $7,000 dollars per day to

$50,000 per day for an engineering position. Key leadership positions may cost as much as a million dollars per

week. Couple these amounts with the fact that the length of many vacancies often exceeds 100 days, and you

are talking about some serious financial impacts ($7,000 X 100 days = $700k).

ASSUMPTIONS ABOUT VACANCIES

* Delaying product development and time to market in a fast changing industry means:

1. Lower margins, (as much as 10%)

2. A loss of first entry dominance

3. A loss of PR

4. Potential loss of market share (up to 30%)

* Great ideas and products come from people, not from equipment, buildings or capital. If you don’t have great

people . . . you won’t have great products. And without great products you won’t have a great company.

* If the vacancies are a result of slow recruiting process, it is important to also realize that a failure to fill

vacancies rapidly will probably also mean that all of the top candidates will be gone by the time you make a

hiring decision. So you will likely re-fill your vacancies with lower quality hires (especially because the best

are usually the first to quit)

* Vacancies in a single team can have an impact on many other teams (because of interdependencies), which

can cascade throughout the entire company.

COST OF A VACANCY CHECKLIST:

THE BUSINESS IMPACTS OF A VACANCY

When you have a vacant position, one or more of the following things may happen. Guesstimate the dollar

costs of each bullet point that fits your situation:

1. PRODUCT DEVELOPMENT AND PRODUCTIVITY

* Time To Market (TTM) is dramatically impacted by the entire production chain. Because departmental

schedules and plans are closely interwoven, any disruption in one department may adversely affect all others.

* In industries that are seasonal (i.e. toys) this disruption may be even more costly. Vacancies in key skill

positions may mean that products and projects may need to be dropped altogether.

2. TEAM IMPACTS

* Team product development may be dramatically impacted by the disruption caused by the lost productivity,

lost experience, leadership, idea generation and skills of the “vacated” person.

* If a team environment exists, a disruption in team cohesiveness may occur. This can result in a longer TTM

(Time To Market) and a loss of focus that can also impact TTM.

* Vacancies may affect the idea generation of others because co-workers are frustrated or overworked.

* Vacancies may cause overworked employees (because they have to fill in) to tire, which may cause increased

accidents.

* Vacancies may cause overworked employees to tire, which may adversely affect product quality through

increased error rates.

* Excessive vacancies may lead to increase “whining,” grievances and even union activity.

* If the team leader is the “vacancy” then “time to productivity” is likely to be even more negatively impacted.

* A vacancy may make a manager reluctant to terminate poor performing employees. Vacancies coupled with

poor performers can cripple the team.

3. INDIVIDUAL EMPLOYEE IMPACTS

* A vacancy means that a current employee must do the work of the vacant position. This can cause a cascade

effect causing others to have to fill in for their position, resulting in many “rusty” people doing unfamiliar jobs

and decreasing productivity.

* Vacancies may frustrate other employees, causing them to lower their productivity.

* Vacancies may frustrate other employees, causing them to quit at higher rate than they normally would.

* Vacancies may cause the team to miss its goals, thereby reducing the possibility of individual and team

incentives, which may further reduce productivity.

* Increased stress on overworked current employees (caused by having to fill in) may cause increased

absenteeism and tardiness.

* Vacancies may hold up vacation time for current employees which may lead to increased stress or frustration.

* Understaffed departments will not be able to send current employees to training and conferences, which may

lead to increased stress, decreased worker knowledge or frustration.

* If temps or “fill-ins” must be hired, they usually have a higher error rate that the average employee and they

are unlikely to generate many new ideas.

* Superstar employees often resent being asked to fill in when lesser employees positions are vacant, which

may cause them to quit also.

4. INCREASED MANAGEMENT TIME AND EFFORT

* Teams with vacancies require “high maintenance” and more management attention and worry.

* Managers often have to skip their normal management planning and responsibilities in order to fill in for the

vacant employee.

* When managers fill in for “vacant” employees that time can’t be spent on the best employees.

* Vacancies in management and team leader positions have a multiplier effect on productivity and the

recruitment of others.

* There are opportunity costs for things a manager and co-workers could have done if they didn’t have to carry

the extra load of filling in for a vacancy.

* If the vacancies are caused by top management decisions (hiring or budget freezes) it can cause managers to

lose hope. This can impact morale and it may lead to a high management turnover rate.

5. CUSTOMER IMPACTS

* Excessive vacancies may send a message to customers and suppliers that we are getting weak or we don’t care

about them. It may cause a period of confusion for suppliers and customers regarding whom they can contact

and the stability of the relationship. Errors caused by “vacant” employees may lose sales volume and

occasionally customers.

* Any “fill in” as a sales/account rep may provide them an opportunity or excuse to look for other suppliers.

6. COMPETITIVE ADVANTAGE

* Excessive vacancies may cause management to panic and to “quickly” hire some poor performers. Once the

team is saddled with a large number of poor performers, you may never be able to hire any new top

performers.

* Vacancies at the CEO, CFO, CTO, and other top manager positions can adversely impact our financing and

the willingness of others to partner/merge with us.

* Vacancies in key positions may send a message to analysts and the stock market that you are getting weak.

* Vacancies may send a message to competitors that you are vulnerable, which can lead to increased

competitive pressures.

* A large number of vacancies means we are losing employees, which means weakening our culture. New

employees with new values may change or dilute our values and “corrupt” current employees.

7. IMAGE AND RECRUITING

* Excessive vacancies sends a message to your competitors you are getting weak. This might encourage them

and improve their own confidence so that they become bolder in the product and employee poaching market.

* Vacancies may impact new recruiting because vacancies send a message to future recruits that we are not

easily able to recruit replacements.

* Large numbers of vacancies may also send a message to our current employees we are headed down hill.

* High vacancy rates may over-stress our recruiters and recruitment process.

* Vacancies may send a message to outside recruiters that we are vulnerable, which can lead to increased

“headhunter” activity.

8. OUT OF POCKET COSTS

* Having to hire high-cost consultants as “fill in help” could mean higher costs. If hourly employees are

involved it probably means additional overtime costs.

* Vacancies can mean the underutilization of plant and equipment.

OTHER MISCELLANEOUS CONCERNS (AND COSTS) THAT MAY ARISE

* The new hire may be a lower quality (low performance) candidate.

* New hires are unlikely to be immediately productive, thus resulting in increased costs.

* Some “vacating employees” take others with them soon after they leave. A “break in the dike” of one leaving

may cause the whole intact team to leave.

* Many new hires don’t work out and must be replaced within 6 months, essentially stretching the length of the

vacancy.

* In a tight labor market vacancies in hard to hire jobs may not be replaceable, at any cost.

* In start-ups and small departments, where there is little cross training, the cost may be more dramatic. If you

only have ten employees and you lose two, you have a 20% vacancy rate (big deal!).

* Spending the time to avoid vacancies may have a huge ROI especially if your former employees go to a

competitor with “your” ideas, causing their revenues to increase as yours go down.

DR. JOHN SULLIVAN (JohnS@sfsu.edu) is a well-known international speaker, author, and advisor to

Fortune 500 and Silicon Valley firms. He was called the “Michael Jordan of Hiring” by Fast Company

Magazine. Dr. Sullivan is also head of the Human Resources Management Program at San Francisco State

University. We thank Dr. Sullivan for allowing us to share it with our readers.

This is an authorized reprint from The Fordyce Letter, P. O. Box 31011, St. Louis

Employment Report

MRI — Thu, 13 May 2010 10:20:48 +0000

MRINetwork Analysis of Today’s Bureau of Labor Statistics (BLS) Report

Beating expectations averaging a gain of 190,000 jobs, the Labor Department this morning estimated that 290,000 jobs were added in the United States during the month of April. The unemployment rate in the month rose from 9.7 to 9.9 percent, topping estimates. However, the growth is attributable to a large increase in labor market participation. While the U.S. noninstitutional population rose by only 170,000 in April, labor market participation increased by 805,000 edging to within only 3,000 of its size in April 2009.

Since February, there has been a rise in job leavers from 866,000 to 938,000 people. As more workers voluntarily leave their jobs, this indicates both an increase in job market liquidity and growing candidate confidence in the market.

Right click here and save to view the full version of the Employment Report for May

Recent Economic News

MRI — Mon, 26 Apr 2010 14:47:30 +0000

Aside from Franchise Industry news I wanted to relay some very positive “overall” economic news from this past quarter.

~ March - payrolls were up for the 3^rd time since the recession began in late 2007, that’s good news, the unemployment rate is at 9.7%. As we continue on the road to recovery, this will begin to come down.

~ March – housing starts and building permits were higher for the month;

~ February – period home sales rose sharply by 8.2%;

~ April – consumer confidence in April rebounded from a one year low on hopes that an improving economy will continue to create jobs.

THE MARKET AND LEADERSHIP

As of the beginning of March the market has begun trending upward. March 1^st was a follow through day which was the kick-off of the current rally. It is a very broad based rally meaning there are a number of industries participating on the upside.

Interestingly enough, there are a few industries that are standing out, which are the ….

- Retail industry

- Technology industry

- Internet content

With signs that the economy is coming back these are the companies planning to increase spending because they feel better about the economy.

Some of the technology companies are Apple (the Ipad sure helps!), Intel, SanDisk, SalesForce.com, and Cognizant.

The retail industry is seeing signs of the consumer coming back. Stocks such as Decker’s, Guess, Chipotle, McDonalds, Cheese Cake Factory, and Dress Barn have risen as well.

Internet content firms that do the majority of their business online such as Baidu, Amazon, and Priceline have been leaders in their segment.

Even leisure industries that depend heavily on the consumer have been rising — stocks such as Las Vegas Sands and Wynn Resorts.

Let’s hope that whatever “bumps” in the quarters ahead are minimal and the economy continues to get better!

IFA International Expo – Washington, D.C. (4/9/2010)

MRI — Fri, 26 Mar 2010 15:12:14 +0000

I will be attending the IFA International Expo in Washington, D.C. on April 9th, 2010. My firm serves the Franchise niche and I would be more than happy to discuss any critical staffing needs (domestic and international) you may have as well as discuss any other related topic that I can be of assistance with and that would benefit your organization.

If you can’t make the show and would like for me to do some scouting for you, give me a call / email so we can discuss more specifically.

I look forward to seeing “old and new faces” on April 9th, 2010. For information to the show and my site please click here.

LinkedIn discussion; Why Franchisors fail?

MRI — Wed, 17 Mar 2010 14:32:04 +0000

A recent question was posed to the LinkedIn Franchise Networking group, which asked for main reasons the group felt contributed to a franchisors demise? My answer was the following:

“As all before me have indicated, there are several reasons why a franchisor can fail, but I would like to add a spin on this original question; Why do franchisors succeed? Based on my experience I feel that if a franchisor has a legitimate concept / business model, systems / procedures in place, up to date training methods and delivery and proper corp. staff head count to administer and deliver to the franchisee base the over-riding reason a franchisor will succeed is how well they cultivate strong franchisor – franchisee relations. If a franchisor considers their franchisee base as “partners in profit” and everything else is in place the business should grow. This is not to suggest that a franchisor shouldn’t consider their franchisee’s as “customers” as a franchisor needs to value its franchisee’s (customers) business and strive to deliver them new products / training / vendors that will help grow their business. One way to gauge the current franchisor – franchisee relations (from a franchisee’s perspective) is to see how difficult it is to connect with the President of the franchisor. If it is difficult then I think you know where things stand.”

As you can imagine, there were many valid reasons submitted and to see the rest of the group’s thoughts please click here.

Franchisor's Humble Beginnings

MRI — Mon, 15 Mar 2010 19:49:46 +0000

Thank you for visiting MRI Ambler-Philadelphia’s (MRAP) blog. Please come back often to view interesting stories about the Franchising industry as well as general information about the general outlook on employment in the U.S.

There are several large franchise concepts that originated in the U.S, which have grown to become very large corporations along with a large franchise network, but an interesting aspect is that the majority of these large franchisors started from very humble beginnings. Case in point is the pizza “conglomerate”, Donatos.

Click on this link to read about how Donato’s began and grew to be a formable player in the pizza business.