A Tidal Wave Of Vacation Requests Will Soon Reduce Productivity And Retention

Few managers are prepared for the overload of post-COVID vacation requests to become their #1 operational problem soon

Alert: Expect a high volume of pent-up and overlapping employee vacation requests this summer. Because one survey showed that 92% of Americans didn’t take or postponed a vacation last year due to the pandemic. This built-up demand is guaranteed to overwhelm any existing system for fairly granting employee vacation preferences. And without a well-thought-out plan in this normally low-impact management area. Expect most team managers to be frustrated with the significant damages that a slow or inequitable process for granting vacation requests will cause. Work with the CFOs office to estimate the resulting costs (don’t be surprised when it’s in the millions at large organizations). The loss in productivity, the higher turnover rates, and your disrupted customers from increased team disruption. 

This article covers three basic parts of the vacation assignment problem. The first part outlines the economic damages that will occur if you don’t handle this Tidal Wave of vacation requests precisely, transparently, and fairly. The second and third parts cover recommended action steps and the various “best practice approaches” to consider when deciding on a team-wide or companywide process to prioritize and grant employee vacation requests.

Part I – Understanding The Multiple Economic Impacts From The “2021 Vacation Request Tsunami” 

During the remaining months of 2021, managers must learn to expect numerous unprecedented problems associated with updating your process for fairly granting employee vacation requests. Only 27% of employees have taken a vacation since the pandemic began. Beginning with the start of summer, after a year of frustrating work with no significant breaks, so many vaccinated employees will finally be allowed and eager to travel for vacation. Historically, it has been unusual to encounter any difficulty in this obscure vacation preference management area. Before this year, most employee vacation requests submitted were spread out across the entire year. However, this summer (and fall), not only will a record-making volume of employee vacation requests pour in all at once. But the requests will be overlapping, and each one will have a high sense of urgency and emotion attached to it. The result will be a lot of individual employee frustration if their exact request is not granted. 

Below is a quick outline of the top five economic benefits that organizations routinely receive when their employees take their allocated vacation days, using an objective and transparent preference selection process. 

  • Most organizations voluntarily offer vacation time because of its productivity benefits.  Vacation time off positively affects many important business factors like productivity, meeting timelines, reducing error rates, and improving recruiting and employee retention. In fact, an internal study by Ernst & Young found significant productivity improvement impacts. Where “for every 10 extra hours of vacation time employees took advantage of, their performance ratings from their bosses climbed 8%”. In this case, after the pandemic with its extended period of work with no vacation breaks. After a well-deserved vacation, managers likely also see dramatically lower error and accident rates while simultaneously increasing innovation.
  • Some organizations find that utilizing vacation time is so valuable that they pay employees to take it. A few companies like Evernote and FullContact have instituted a formal practice of paying their employees for using their accrued vacation days (up to $7500 per year).
  • After a long period of stress, vacations should have an extremely high impact on employee retention. The previously mentioned Ernst & Young survey also found “that those who took frequent vacations were less likely to leave the company.” And after exceptionally long periods of high pressure and stress on employees, with no chance of vacation relief (like this pandemic), allowing an employee to take a long post-pandemic vacation may have an even higher than average positive impact on reducing employee turnover. In fact, one recent Prudential survey found that 26% of all workers expect to change jobs when the health crisis has subsided”. And the expected turnover rate among remote workers and managers could be even much higher. 
  • Many organizations now offer unlimited vacation time as a recruiting tool. A growing list of companies, including Netflix, StitchFix, GE, Zynga, and Evernote, have found offering unlimited vacation to be so valuable for recruiting, retention, and productivity. They have all headed policies not to track vacation time, so most employees are essentially allowed to take unlimited vacation. In addition, complaints about your company vacation time and policies that appear on social media sites like glassdoor.com will also hurt your organization’s employer brand image.
  • Any perceived inequality in the process of granting employee vacation preferences will create much negative productivity and recruiting impacts. In addition to the actual damages caused when employees fail to take vacation days. Whenever the organization’s vacation preference granting process is by itself considered to be unfair. Obviously, a feeling of unfairness among employees who feel slighted will likely cause individual employees to be less productive and less engaged. Widespread shared team negativism will likely also negatively impact teamwork, team sharing, and team cohesion. And finally, this discord concerning the vacation granting process itself will also likely have negative impacts on the meeting of team goals. This is especially true in team goal areas like meeting deadlines, scheduling, error rates, meeting customer service targets, and increasing innovation rates.

Part II – The Implementation Steps For The Basic Process

Your first major implementation step should be calculating the business case costs within your organization that occur when you meet (or do not meet) your employee’s vacation preferences. Shifting to a data-driven and dollarized administrative process assures that everyone is making decisions based on objective data that directly support your business case. Next, have HR do a quick sampling of at least a handful of your employees and managers to determine if there are any existing best practices or major issues related to the previously used process for allocating vacation requests. Obviously, it’s essential that you have HR and your managers work together on the next step to set and prioritize your organization’s goals for this year’s vacation preference assignment process. Once those goals are set, determine and prioritize your most important business time periods (where little vacation time is granted). Then, prioritize your most popular time periods for employee vacations (usually in the US Christmas, Thanksgiving, Easter, and Summer). Because during the peak periods, employee requests will often outnumber the available open slots for vacations. And finally, after you complete your vacation assignments, make sure that you have metrics in place so that you can later determine if each of the set goals for the vacation selection process were met.

Part III – The 8 Most Common Goals And Their Aligned Allocation Processes For Fairly Granting Employee Vacation Requests

Once you set the goals for your vacation preference granting process. You should select one of the eight types of vacation selection process that has the best chance of meeting your goals. I have listed the eight available preference granting processes below. They are separated into two broad goal categories (i.e., enhancing productivity and maintaining equity). In the third and final section, I have added eight enhancement factors that may earn any individual vacation request extra points.

Part III (A) – Process choices when enhancing productivity is the primary goal

There are six vacation request selection processes within this goal category: the highest impact and the most highly recommended business impact processes listed first.

  • Give preferences to those working in low-impact jobs – if increasing overall productivity during a peak vacation period is the primary goal. Purposely avoid giving first vacation preferences to those working in jobs with the highest impact on productivity during this vacation period. Instead, grant vacation preferences to employees working in jobs that, when vacant, have little negative impact on productivity or the customers (e.g., grant the preferences to clerks working in long-term planning, but not to your top salespeople). If you do grant vacation preferences to employees in these high-impact jobs during peak periods. Start by meeting the vacation preference of the lowest acceptable performers in each job category.
  • Reward top performers with their first choices – incent future performance by rewarding last year’s top performers with their first preference for a vacation period—use exceeding output goals or exceptional performance appraisal scores to measure top employee performance. However, when possible, whenever the vacation period of the top performer overlaps with your #1 peak business season. Try to minimize the number of times that you give top performers their first vacation choice. Unfortunately, this summer, after the pandemic, many industries will be having their first peak season in a long time. 
  • Reward position level in your hierarchy – assume that the highest position levels in the hierarchy of your entire organization (or your group) should be rewarded based on their level of accepted responsibility. So, assign the first choices for vacations during the most popular vacation periods based on how high the employee ranks in the organization’s hierarchy. It can be assumed that the highest-ranking individuals will automatically take their business responsibilities during peak business periods into account before they request their preferences.
  • Have employees bid for critical vacation dates – to those with an extremely strong preference for their first choice of vacation time. Allow them to submit” bids” to support their claim for first preference. Provide extra bid points for those with unchangeable major events like family weddings, large family reunion vacations, anniversaries, and pre-booked ship cruises. Provide extra points for not getting their first preference over the past two years. Let everyone know that they can enhance their bid by demonstrating how they added value through winning employee awards, employee volunteering, or other factors related to adding value. Have the bids evaluated by neutral parties and without access to the actual names of those making the vacation bid.
  • Assign first choices based on seniority – assume that seniority with the company is an important indicator of the employee’s contribution. So, assign the first choice for a vacation during the most popular vacation time based on the employee’s years of seniority. You can end their preference due to seniority with first-time preference, or you can continue using their seniority for the remaining periods during that year. 
  • Provide top choice preference based on those that apply first – if you want to reward those that apply for their vacation preference first. After announcing to everyone that the earliest requests for vacation times with its first preference. Date stamp all requests for the remainder of the year. And give preference to those that applied first.

Part III (B) – Process choices when equal treatment and the appearance of consistency, transparency, and fairness are your primary goals 

Within this goal category, there are only two processes to choose from: the highest business impact process listed first.

  • Treat everyone equally by holding a drawing – if your goals are to provide complete equal opportunity and the appearance of fairness. Utilize an anonymous drawing of your employees’ names that submitted requests for each separate popular vacation time. A related option is after an initial top choice selection in January for their priority time. They are automatically assigned their second through the fifth choice for the remainder of the vacation periods during that year.
  • Treat everyone equally by assigning first preference following the descending list of employee names – if your goal is to provide equal treatment. Pick a random name based on all vacation eligible employees. Then, provide the first vacation preference to employees based exclusively on following the next name on the employee list until all remaining employees have received their first preference. Once assigned their first preference, automatically assign the #2 preference to the next appearing holiday period and #3 to the subsequent holiday period on the calendar (traditional vacation periods in chronological order – Easter, summer, Thanksgiving, and Christmas).

Part III (C) -When you encounter a tie between two vacation requests. Consider breaking the tie by assigning bonus points to the vacation requests that also meet these bonus factors.

Note: There will be more employee vacation requests within the most highly popular vacation periods than open slots. So, consider adding bonus points to the requests that meet any of these positive booster factors. Within this list of nine positive booster factors, the highest value factors are listed first.

  • Prioritize those working in overstaffed teams – by giving priority points to employees who work in jobs or teams designated as “overstaffed.” Due to already over staffing, there will be a less negative business impact when an employee is on vacation. 
  • Prioritize jobs where there are easily available replacements – give priority points to employees working in jobs where a temporary replacement has in the past been effective and easily/cheaply obtained. 
  • Prioritize off-peak vacation requests – give priority points to those willing to request their vacation time during weeks where there are traditionally few or no other vacation requests. 
  • Prioritize leaders that have recently gone through major business problems – give priority points to any leaders that have recently endured a major business problem or trauma. So, they have time to recuperate and reflect on what they learned in
  • Prioritize those that haven’t had a recent vacation – give priority points to employees either with the largest amount of unused accrued vacation or with the longest length of time since the end of their last vacation or long-term time off. Because of their long gap, this vacation time off will likely result in the highest percentage of positive impact on any employee’s productivity.
  • Prioritize employees that request only a handful of vacation days – give priority points to those willing to only request three or fewer vacation days during any peak period. It will likely be easier to find open slots when so few days in a row are requested.
  • Prioritize joint employee vacations – in the rare cases where two or more employees are vacationing together. Give priority points to company employees that will be bonding during the vacation.
  • Prioritize employees with no immediate work deadlines – not having impending deadlines limits the business impacts from being gone. So, give priority points to employees working on long-term projects with no major imminent deadlines.
  • Prioritize employees with no disciplinary issues –– give priority points to employees with no current disciplinary issues. In other words, do not allow employees with ongoing disciplinary issues to qualify for first vacation preferences. Instead, because the employee’s time will be better spent actively working on their problems, require them to clear up all disciplinary issues before they go off to relax. 

Final Thoughts

Once you select your goals and the closest aligned process for choosing employee vacation preferences, put together a list of the problems and issues that have historically occurred under that process. Next, identify any warning signals for each possible issue so that you will quickly become aware of it as it is occurring. If you have the resources, the final essential step is to ensure that your implemented vacation slot assignment schema actually had its intended positive impacts on increasing productivity, output, teamwork, and sales while measurably reducing stress, conflicts, and error, and accident rates. Finally, act like a businessperson and work with the CFO’s office to quantify (in $) the estimated economic value of these improvements. And then, if the process is not being instituted companywide, spread the word to all other managers so that they too can get the most benefit from their used vacation time and the process that allocates it.

Author’s Note 

  • This article was designed to make you rethink a relatively obscure management area. And if it succeeded, please help others by sharing it widely among your team and network.
  • Next, please join the many thousands that have connected with Dr. Sullivan on LinkedIn. After following core connecting, you can leave and read comments on this article on his page. 
  • And when time permits, review his 1,300 other talent articles and books @ www.DrJohnSullivan.com.

About Dr John Sullivan

Dr John Sullivan is an internationally known HR thought-leader from the Silicon Valley who specializes in providing bold and high business impact; strategic Talent Management solutions to large corporations.

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