Executives still have a marked tendency to look at easily measurable costs, such as salaries, rather than indirect costs, such as missed opportunities – even though the latter can be far greater in magnitude.
A new metric posted on the Linked in group ‘Measuring Human Capital’ is aimed at capturing a useful indicator of indirect cost: the cost of a vacancy.
This can be notoriously difficult to measure; it may be fairly clear in the case of a consultant with billable hours, but is less obvious in most other cases. The author of the metric, Jeremy Shapiro, senior vice president Hodes iQ, defines the cost where it is indirect as ‘It eventually has an impact on precursors to top-line revenue (customer satisfaction, innovation, cash flow problems, etc).’
He also highlights the matter of valuing individuals managing long-term accounts. Their time can be difficult to assess as a daily average, as their revenue generation is more ‘chunky’.
‘If employees do not bill at an hourly rate, and they do provide incremental monetary value, then the value they create can happen in “chunks”,’ says Mr Shapiro.
As an example, he says: ‘Jim manages 10 clients. One of them has a need for his company’s services valued at $1,000. The client will wait until Jim is back from his 10-day vacation; the company doesn’t lose revenue. But if the client has to wait 15 days, he says “Forget it, I’ll call Jim’s competitor”.’

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