As with any successful business, you likely measure KPIs and know a good ROI when you see one. But are you using that same mentality when it comes to making job offers? With each offer your company makes, your team is investing their time (for which you are paying) and resources (for which you are also paying), attaching even greater costs to each one.

Offers are about so much more than just deciding on salary and picking the right candidate. Each offer is a major investment for your team. Take, for example, that your team can spend up to 115 hours to close a single candidate. That’s one candidate! With the number of offers being made right now in the midst of increasing job vacancies, it’s easy to see how quickly that can add up. Those job vacancies cost money too. Yes, the absence of something can actually cost you quite a bit.  

The High Costs of Job Vacancies

The cost-of-vacancy provides a baseline from which to measure all the applicable costs associated with that open position. This cost is in addition to the decreased productivity, engagement, and team morale that result from a job vacancy.

Want to better understand your company’s cost-of-vacancy? Use a formula based on these five primary calculations:

1. Average Employee Revenue

• (Annual revenue) / (Number of Employees) = Average EE revenue
• (Average EE revenue) / (260 working days/year) = Daily EE revenue

2. Role-Specific Revenue

• (Avg. daily EE revenue) x (Revenue-impact multiplier) = Daily role-specific revenue
• Note: The Revenue-impact multiplier is based on the position involved. So, multiply the daily salary by 1 for a vacant entry-level role; 2 for high-impact roles; and 3 for executive and leadership roles.

3. Revenue lost to Vacant Role

• (Daily role-specific revenue) x (Estimated time-to-fill) = Revenue lost to vacant role
• ‍SHRM estimates the average time to fill as 36 days.

4. Payroll and Benefits Savings

• How much are you saving in payroll and benefits with that position empty?

5. Cost of Vacancy

• (Payroll and benefits savings) - (Revenue lost to vacant role) = Cost-of-vacancy

With many variables that are dependent on the individual employer, employee, and position itself, you can use this calculator to determine your own cost of job vacancy.

Standardization Your Offers is the Solution

The key to offsetting these costs is getting the vacancy filled with a qualified candidate as soon as possible. And the most effective way to do so is to standardize how you make offers.

Just as in any workplace scenario, standardizing your offer process, with pre-defined scopes and optimized methods improves quality and productivity. With improved quality and productivity, you’ll not only decrease your cost per hire, but also your time per hire. In fact, we’ve seen teams increase acceptance rates by 13% and save $17k per candidate. Talk about a good ROI!

There are many benefits associated with establishing a set of rules governing how people should complete tasks and activities. They include having an established process that is scalable, decreasing ambiguity, boosting productivity, increasing morale (employees are more excited and prouder when they can see they are meeting goals), and increasing consistency in quality. Without standardization, it is very challenging to meet any goals of transparency because, well, nothing is clear.

In standardizing your process to make offers, consider how you:

Provide offers

• Are they easy to access?
• Are they all in one place?
• Can they be done online?
• Are they branded by your company?
• Do they clearly outline the offer to be easily understood?

Showcase your company’s values

• Do you clearly communicate your mission and vision?
• Do you shed light on what the company culture is like?
• Is the offer written in a voice and tone that reflects your values?

Structure your compensation

• Do you clearly outline the total compensation package, including salary, equity, benefits, and perks?

Use data to inform decisions

• Do you lean on real-time data to understand compensation as it stands today, rather than outdated survey-based information?
• Do you consider benchmarks across your organization’s levels, your team’s salaries, and your industry’s salaries?

Ultimately, standardized processes result in a leaner, data-driven company. Simply put, you’re never going to create a process around something that doesn’t have a proven track record. Data-driven hiring and HR analytics are essential to this process. You can track everything from pass-through rates to interview time to offer acceptance rates compared to offer decline rates. According to Startup Hiring Trends, “Startups who tracked metrics were 58% more likely to hit their hiring goals. However, only 60% reported tracking their recruiting efforts.”

There are millions of unfilled positions out there today, and each one is costing employers time and money. At the same time, the competition for top talent has never been higher — your best candidate is likely someone else’s best candidate. To keep costs down, consider standardizing your offer process with real-time data to back it up, rendering time your competitive advantage in this candidate-driven market.

Download our guide on reimagining your compensation structure. It’s time to get the best ROI using standardized offer processes – an investment worth making!