How much does turnover cost a company? What sort of information would a corporate finance department provide to help answer the question?
The cost of an empty space in an org chart should be equal to:
- Recruiting costs: advertising, recruiters, time spent interviewing
- Hiring costs: HR time for paperwork, etc., new hire training, first several (6?) months of salary
- Productivity costs: uncompleted or deferred work, paid and unpaid overtime
At a minimum, these costs should should be equal to the worker productivity lost by having an unfilled position. That is to say, if there’s $7,000 a month budgeted to fill the position, and less than that is being spent to fill the position, then there’s a problem. Perhaps it’s a good opportunity to realize that the job was over-budgeted or not even needed: if productivity costs haven’t increased and work isn’t being deferred, what was the position’s previous tenant adding? More often, though, I think that the true costs leaving a position unfilled are hidden by the financial reports delivered to management.
I propose the following changes to management-level personel accounting:
- Departmental salary costs should always be accounted at at least the budgeted amount
- It should be straightforward to change the personel budget in the middle of the fiscal year
- The difference between the cash costs of personel and the budgeted costs of personel (at least when caused by understaffing) should be directed to a separate budget to pay for recruiting, hiring, temps to pick up the slack, comp days for remaining staff, etc.
- Corporate policy be amended to explicitly not reward managers for controlling personel costs through understaffing
Maybe I can ask my brother-in-law, who works in corporate finance, to help me think through some of these issues.
