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Abdi Walla is the vice president (VP) of sales at an international agricultural wholesale distributor. The organization is preparing for their busiest season, but Abdi is faced with a major problem: the North American regional sales manager, who oversees the organization’s largest market, just announced that she is resigning. In her exit interview, she shared that she had received a competitive offer at an organization that promised more opportunities for career advancement. Abdi was happy for her of course; she was one of his top managers, and he knew she deserved more opportunities for development. However, he couldn’t shake the short-sighted perspective that this was incredibly bad timing for him to lose one of the best members of his team.

Perceiving no other option than to find a replacement as soon as possible, Abdi contacted his human resources (HR) department and began a process that would cost him $80,960 and 172 hours over the next 22 weeks as he advertised the job, screened candidates, conducted interviews, and trained the new hire. This case provides a breakdown of the time and money spent on the hiring process, offering a transparent summary of the true cost of hiring.

Causal Analysis: Reasons for Leaving

When Abdi’s sales manager, Pamela Brown, provided her two-week notice, he was shocked. Pam had not only been a superstar employee, but by all accounts, she had seemed engaged in her work and satisfied with her job. Abdi met with her one-on-one following her exit interview to gather more information on how he as a manager, and the organization could better attract and retain top talent. Brown’s feedback revealed that while the company had a great culture, supported a healthy work-life balance, and provided its employees with competitive benefits and compensation, many mid-level managers did not see opportunities for career advancement. Abdi would have to work with the executives to establish a clearer leadership pipeline to ensure that other managers did not soon follow in Brown’s footsteps. Abdi discussed the matter briefly with HR, who told him that Brown was not alone.

In 2023, nearly 1 in 5 individuals who left their jobs did so because of “career” reasons, such as upward mobility and new development opportunities.¹ In fact, according to the Work Institute’s 2024 Retention Report, career development was the most cited reason by respondents for leaving their jobs in 2023. It has been the top reason cited by employees for leaving their jobs every year since the Work Institute began tracking this data in 2010.²

In the long run, Abdi was determined to address the issue of career development opportunities at his organization. He knew these efforts would pay off because he had recently come across a study by Deloitte, which showed that organizations with a strong learning culture have 30-50% higher retention rates.³  However, in the immediate term, he had a pressing issue to attend to: hiring another regional sales manager as soon as possible.

The Vacancy: Straining the System

A recent LinkedIn Global Recruiting Trends report cited that it could take anywhere from a few days to four months to fill a vacant role.⁴ This meant Abdi’s organization was spot on the average in terms of how long the regional sales manager’s position remained vacant: eight weeks. During that time, Abdi and his team were working night and day — including the occasional weekend — to cover Brown’s workload during their busiest time of year. Despite making up her hours, Abdi still felt they had lost a significant amount of productivity during Brown’s absence, prior to filling her role.

The Hiring Process: Hard and Soft Costs

Not only was the team down in terms of sales productivity, but Abdi and his direct reports also had to commit significant time and energy to working with HR during the hiring process. Abdi recorded the hiring costs for future reference and was shocked by the significance of the totals he added up:

Download the PDF case study for full access to tables, statistics, and references.

Impact Analysis: Lost Productivity

In addition to the time spent on the hiring process, Abdi wanted to quantify the impact of lost productivity. He started by jotting down a few observations:

• He had noticed a trend among previous employees where, following their notice of resignation, they were no longer able to work with the same drive and long-term strategic focus as before. This was, of course, completely understandable, given that they were on their way out, but it meant that Abdi was losing some of his employees even before they were gone.
• During a role’s vacancy, 100% of productivity was lost. Others on Abdi’s team would step in to manage key tasks, however, this reduced their capacity to fulfill their own roles and responsibilities. At the end of each day, an entire role’s worth of work was still foregone, regardless of how the impact was divided.
• Even after a new hire was found, it took them a while to complete the onboarding process and become familiar with the role. On average, Abdi estimated that new employees operated at 25% capacity during the first month of onboarding activities, then 50% and 75% respectively during their second and third month with the company. During this time, new employees were building relationships, getting to know the roles and responsibilities of others on their team, and beginning to lay a foundation for institutional knowledge. They were also completing routine tasks for the first time, which involved a steep learning curve, and becoming familiar with long-term projects, their goals, current status, and important next steps. Only after about 12 weeks, in the fourth month of the employee’s time with the organization, would they begin to operate at full capacity.

Abdi did some calculations based on these estimates and was shocked at the total cost of lost productivity during the hiring process:

Download the PDF case study for full access to tables, statistics, and references.

The True Cost of Hiring

Combining the cost of time spent and productivity lost with the total hard costs of hiring, Abdi was shocked to discover that he was spending almost as much on hiring a new regional sales manager as he would be paying the regional sales manager during their first year of work:

Download the PDF case study for full access to tables, statistics, and references.

Trends in Turnover

Armed with this perspective, Abdi booked a meeting with HR to get more information about the company’s trends in turnover. HR told him that Abdi’s company had not been immune to The Great Resignation that followed the COVID-19 pandemic. During this period, nearly 5% of the organization’s management-level employees quit in pursuit of other job opportunities, and the primary driver of resignations was a lack of development opportunities. Abdi’s company was not alone in this. A 2021 survey by employee management platform provider Lattice found that 43% of people who quit their jobs did so because they felt their career path had been stalled, and 38% of Gen Z workers (born after 1997) indicated they were looking for jobs with greater transparency regarding career path and development.⁵ HR told Abdi that the resignation rate had slowed, but Brown’s departure was one among many that bore the same characteristics of the development opportunities-driven exodus that followed the pandemic.

Taking Action: Preventative Measures

Based on this information, Abdi was more confident than ever that his organization needed to invest in building a talent development program with the goal of establishing strong career pathways for high potential employees. While researching talent development solutions the following week, Abdi stumbled upon SIGMA’s Succession Planning Guide. After downloading the guide, he discovered a comprehensive six-step succession planning process, as well as intentionally designed tools and templates that could be used to build a proven talent development plan. Most importantly, SIGMA offered a Succession Planning Launch that promised to get the entire process done in just two half-day workshops. Abdi booked a call with one of SIGMA’s consultants to discuss the possibility of working together. SIGMA prepared a customized proposal, tailoring the six-step succession planning process to the unique needs of Abdi’s organization. They also provided Abdi with a guide on how to get buy-in from senior management for succession planning. Abdi took this proposal to the CEO and board of the organization, and he was met with nearly unanimous support for the investment.

“Abdi,” one of the board members told him, “I think you’ve just put your finger on one of the most important strategic challenges this organization is facing, and you’ve come with a feasible solution. Well done.”

Invest in Your Future

If you are interested in succession planning with SIGMA, send us an email or book a call with one of our consultants. We would be happy to speak with you about the specific needs of your organization and provide you with customized resources and recommendations.

¹ WorkInstitute. (2024). 2024 Retention Report. Decoding the Emerging Workforce to Accelerate Retention, Engagement, and Profits. WorkInstitute. Retrieved from https://workinstitute.com/retention-reports/.

² WorkInstitute. (2024). 2024 Retention Report. Decoding the Emerging Workforce to Accelerate Retention, Engagement, and Profits. WorkInstitute. Retrieved from https://workinstitute.com/retention-reports/.

³ Becoming irresistible: A new model for employee engagement, Deloitte Insights, 2015.

⁴ LinkedIn. (2017). Global Recruiting Trends 2017. LinkedIn. Retrieved from https://www.slideshare.net/slideshow/linkedin-global-recruiting-trends-report-2017/67674531.

⁵ Mearian, L. (January 6, 2022). No end in sight for the Great Resignation; workers keep quitting for better pay, benefits. Computerworld. Retrieved from https://www.computerworld.com/article/1616665/no-end-in-sight-for-the-great-resignation-workers-keep-quitting-for-better-pay-benefits.html.