Ropella 360
EXAMPLE CALCULATION
Level: COO | Salary: $250,000 | Annual Revenue: $40,000,000
Lost Productivity
This reflects the lost decision-making and oversight during the vacancy period.
Calculation: Cost per day = 1/10th of % of Leadership Impact x Annual Revenue/250 Working Days per Year
Revenue Impact
This accounts for the leadership’s influence on overall revenue generation. The percentage can be adjusted based on the role’s impact on strategic decisions, growth initiatives, etc.
Calculation: Cost per day = Annual Revenue x % of Leadership Impact / 250 Working Days per Year
Recruitment Cost
Executive search firms often charge up to 20-35% of the Annual Compensation for an Executive Level role. Includes any other expenses related to finding and onboarding a new leader.
Calculation: (25% search fee + 10% onboarding/admin expenses) x 110% for each month vacant
Strategic Impact
This component is harder to quantify but can be based on the estimated value of delayed or missed high-level initiatives, new partnerships, or major decisions that require the C-suite leader’s involvement.
Calculation: 2Xs Annual Compensation
Morale Impact
A vacant leadership role can negatively affect senior management and overall employee morale, potentially increasing turnover or reducing productivity.
Calculation: .04% of Total Revenue
Operational Costs
Interim leader, diversified workload, additional travel, and admin costs.
Calculation: 5% of Annual Compensation per month
DISCLAIMER: The research and mathematical models used to develop these calculations were completed by the U.S. Dept. Of Labor and supported by research within various publications including: Harvard Business Review, C.E.O. Magazine, Forbes and by the SHRM (to list just a few of the sources we reviewed). It’s fair to admit that vacancy timelines, salary (and total compensation) levels, performance variables of individual contributors, the perceived importance of any individual vacancy, and other factors can affect the accuracy of the calculations. Therefore, averages were used to balance the numbers and make them as credible as possible. The principle point of the calculators is to demonstrate that you can determine a fair estimate of the costs.