MANPOWER
PLANNING AND EMPLOYEE ATTRITION ANALYTICS
A Markov Analysis Attempt
for Attrition-Rate Prediction and Stabilization
WHITE
PAPER
Author: Suvro Raychaudhuri
In a
competitive arena, the advantage is taken by the first-mover – and for an
environment where The Rule-Of-Three predominates, it is not just the first
mover, but the fast -mover who has it all.
Every
organisation, no matter how stable its quality and people processes, is bound
to fall prey to the silent warfare of the fast-movers – which I would prefer to
call Corporate SitzKrieg[1]; and
Hertzberg’s “Satisfiers” are today’s HR nightmare – because nothing seems to
work!
Thus
today, HR as a strategic partner in any organisation has lots to do in terms of
metrics, HR analytics, prediction of trends and quantifying Human Capital
measures.
Since
attrition is one of the main problems for any organisation struggling to retain
its expertise and knowledge base, an analytical approach to the same would also
help in prediction and necessary remedies.
This paper aims to draw on the
recent HR trend of referring to the employee as an “internal customer” and
therefore assumes that manpower attrition is similar to customer switching
problems in case of products, thus has used Markov Analysis as an Operations
Research technique to predict attrition, and therefore form a basis for
manpower planning.
This white paper is aimed at a
greater scope of having more thought provoking ideas in the HR Analytics arena
and within its limited scope here, suggests an OR model as part of manpower
inventory planning in general.
TABLE OF CONTENTS
5. THE VALIDITY OF ATTRITION DATA
1. INTRODUCTION
The Attrition Warfare
One of the greatest strategies of
War had been the strategy of attrition warfare, defined in military terms as “a
strategy of warfare that pursues victory through the cumulative
destruction of the enemy’s material assets by superior firepower.”
Metrics like
body counts and terrain captured measure the progress of battle. On the
opposite end of the spectrum is maneuver warfare. All warfare involves both
maneuver and attrition in some mix. The predominant style depends on a variety
of factors such as the overall situation, the nature of the enemy and most
importantly, on attackers’ capabilities.
Though this
paper deals with attrition with respect to the War for Talent in Corporate
arena, the strategy involved is the same – and even the terminologies quite
similar – if “body count” can be a parameter to measure effectiveness of
attrition warfare, then in corporate recrutiment strategies the similar parameter
would perhaps be “acceptance to offer ratio” (from the attacker’s perspective).
Human Resource
professionals are under increased pressure from a different kind of a Corporate Sitzkrieg – the silent
firepower of attrition which causes no less harm to Human capital assets, as
compared to “the enemy’s material assets” as in the definition above.
The concept of what has been stated
above can be put into a simple model as shown below. (fig1.)
The pressure of competition from the
environment and the evolution of strategy are self-explanatory in the above
figure. The point to note here is the extent of the impact, which involves hitherto
soft issues like culture and people, and this is the origin of strategic human
resource focus, the war for talent and the need to garrison the human resource
capital as one of the strategic parameters.
2. THE
KNOWLEDGE-HARVEST
APQC (American Productivity and
Quality Centre) has made several recommendations to raise awareness of the
problem of knowledge attrition, which include
1.
Identifying
a burning platform or issue related to knowledge loss
2.
Looking
for windows of opportunity through champions who are willing to try out
knowledge retention approaches.
AQPC has categorized three knowledge types that are under attack
through attrition.
This includes
- Cultural knowledge – This includes management
practices, values, respect for hierarchy, and decision flows.
- Historical knowledge – this includes the
organization’s journey from the day it was founded till the present
- Functional knowledge – this includes technical,
operational, process and client information
A more careful look at figure 1
indicates that there seems to be some good amount of convergence with respect
to AQPC’s definition of the three types of knowledge
and the model given in figure 1 – particularly the fact that corporate
attrition warfare is all about gaining (through head-hunting, strategic
recruiting, internal job offers, etc) human assets, who bring along with them
the three kinds of knowledge, and thereby attack the very strategic base of the
organization.
Thus from the attacker’s point of
view, depending on which type of knowledge it needs from the competitor, the
recruitment strategies are also sorted out accordingly. It is evident
therefore, that attrition rate among junior employees (2-4 yrs) would be higher
for the functional knowledge part – associated with technical and operational
processes.
At higher levels, the attrition
warfare would be more for gaining historical knowledge (business portfolio
changes down the years, etc) and cultural knowledge from the competitors.
From the organization’s point of
view, the counter strategy is to predict attrition “zones” which depend on the
criticality or type of knowledge that is at important to the organization, and
thereby evolve plans to counter loss of human assets from those positions.
Once we realize this, the next step
is to come out with concrete plans to prevent attrition, which can only be
forecast using data and trends available. Some of the world’s best practice
organizations have tried capturing data to predict attrition on the long run,
and done that in different ways.
3. WHAT WE
REALLY LOSE
3.1 Attrition and knowledge management – Loss of Historical and Cultural
knowledge
From the attackers’ perspective, one
of the parameters to measure effectiveness of corporate attrition warfare might
be “acceptance to offer” ratios. But from the perspective of the organization
that has to cope up with this ever-growing problem, the problems associated are
larger.
Attrition is a pain area in any
organization that intends to have a knowledge management system in place. In a
famous article[2],
attrition (through normal retirement or through resignations) has been
discussed as one of the pain areas in the field of KM, because vacancy of a
position might be easier to fill in through the proper people-sourcing
approaches, but filling in the knowledge gap is not. This is particularly in
context of a tough economy where the concept of all-size-fits-all is no longer
working, and vacancy of a position by attrition is basically vacancy of a
knowledge-base, and this vacancy in knowledge base cannot be filled in by any person.
This is precisely what is referred
to as tacit knowledge, which most
organisations today are grappling to capture and retain. This closely pertains
to what AQPC referred to as the Cultural
and Historical knowledge, in addition to the Individual or Proprietary
knowledge that goes off without being codified and migratory, and therefore is
never assimilated in the organisation as invisible knowledge. This can be
exemplified better through the typical knowledge-cycle of an organisation as
shown below, originally by Takeuchi and Nonaka:
Migratory knowledge Codified knowledge
EXPLICIT TACIT PROPRIETARY SHARED
The problem can be aptly stated
through examples from the corporate world itself –
Corning, which had been experiencing
knowledge loss through the large scale retirements through 1990’s estimated
that it lost around 2000 years of cumulative years of experience as a result of
a retirement package offered in 1998 – and this exemplifies loss of knowledge
due to planned retirements alone – here we are talking of corporate SitzKrieg, where an employee may walk into the office any
morning to place his resignation letter and walk off with the competitor – not
just creating a vacancy, but taking some of the most vital knowledge quantum
from the company to it’s competitor.
However, organisations even with
established knowledge management practices have not been able to come up with
any substantial measure to check this knowledge loss, and therefore an
indicator of failure in capturing tacit knowledge bases.
3.2 Attrition in Call-Centres - Loss of Functional knowledge
The problem is more acute depending
on the industry and the demographics of the employees too, as in call centres.
Here the knowledge drain is at a different level, and it corresponds more to AQPC’s definition of Functional
knowledge.
Though it is a known fact that high
turnover rates drain the cost effectiveness of call centres, unfortunately
little is being done about it.
In the article “Reducing Call Centre
Turnover”[3],
managers in call-centres normally tend to look only at advertising costs,
interviewing and training costs etc, but overlook the vital costs associated
with attrition.
Merrill Lynch attempted to find out
costs associated with call-centre attrition – which came out to be around $9m
per annum for a company with 1000 employees, and annual revenue of $100m.
This shows that retention alone can
significantly bring up the bottom-line for a call-centre.
Organizations tend to spend huge
sums of money on recruitment, for web-postings, job fairs, ads, employee
referral bonuses, etc, and end up with 50% employees leaving before reaching
any level of proficiency.
Proper testing and screening,
training, introduction of the apprenticeship scheme, aptitude testing (10%),
realistic job previews (8%), structured behavioral interviews (3%) can help
prevent attrition by percentages shown in parenthesis.
According to the Forum Group, 65% of
the external customers leave due to internal reasons alone (45% for poor
service quality, 20% due to lack of attention) – thus internal attrition can
devastate call-centre effectiveness if not tackled properly.
Shown in the table below are the
typical turnover rates of call centres.[4]
|
|
MEDIAN (%) |
AVERAGE (%) |
HIGHEST (%) |
|
Part time inbound |
20 |
33.6 |
300 |
|
Full time inbound |
19 |
26 |
252 |
|
Part time outbound |
15 |
35.5 |
480 |
|
Full time outbound |
10 |
21.3 |
210 |
TABLE1
4. WHAT OTHERS
ARE DOING
Organisations across the world and
operating in different industry segments have tried to find out means to
measure business loss through attrition.
Schlumberger, for example,
understands how important it is to link its knowledge sharing techniques with
its HR processes: the oil industry faces an attrition rate of 44% by 2010.[5]
Pfizer also takes preventive
measures to combat knowledge-drain and promote better knowledge transfer
through its six-step knowledge retention process.
Best practice companies, according
to AQPC, should conduct a thorough audit to determine what knowledge is worth
capturing. Stated in another way, this would also indicate the “critical
positions” in the organization, which can create a substantial problem to the
company incase it is vacated under competitor attack.
The table below shows the practices
that are followed by these organizations to collect data related to attrition:[6]
|
|
Siemens |
Corning |
World Bank |
Northrop
Grumman |
Xerox Connect |
Best Buy |
|
Internal
networks |
Y |
|
Y |
Y |
Y |
Y |
|
Interviews |
|
Y |
Y |
|
|
|
|
Videotaping |
|
Y |
Y |
Y |
|
|
|
SME
directory |
Y |
|
Y |
Y |
Y |
|
|
Repositories |
|
Y |
Y |
Y |
Y |
Y |
|
After
action project milestone reviews |
Y |
|
|
|
Y |
|
|
Mentoring
programme |
Y |
|
|
|
Y |
|
|
Knowledge
maps |
Y |