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Emerging challenges in Emerging challenges in HRM – Talent Acquisition & HRM – Talent Acquisition &
Employee RetentionEmployee Retention NSB School of Business March 14 2008NSB School of Business March 14 2008
A.Thothathri RamanA.Thothathri RamanConsulting Editor Consulting Editor
Business India Business India www.atraman.comwww.atraman.com
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India is on a fast clip India is on a fast clip Employment is burgeoningEmployment is burgeoning Talent shortage is rampant all roundTalent shortage is rampant all round Capacity growth in our campuses is tardyCapacity growth in our campuses is tardy Largescale unemployablity has reduced capacityLargescale unemployablity has reduced capacity Capacity increases are expensiveCapacity increases are expensive Balancing capacity with quality is a serious Balancing capacity with quality is a serious
challenge challenge
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Everyone has to work together Everyone has to work together HRM should be holisticHRM should be holistic It does not start only when the employee It does not start only when the employee
reaches the job deskreaches the job desk Employee acquisiton is the first step in Employee acquisiton is the first step in
HRMHRM Acquisition/retention two sides of the same Acquisition/retention two sides of the same
coin coin
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What is HRM?What is HRM?
Workforce planning Workforce planning Recruitment Induction and Orientation Recruitment Induction and Orientation Skills management Skills management Training and development Training and development Personnel administration Personnel administration Compensation in wage or salary Compensation in wage or salary Time management Time management Payroll Payroll Employee benefits administration Employee benefits administration Personnel cost planning Personnel cost planning Performance appraisal Performance appraisal
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The costsThe costs
Cost of Acquisition and Cost of Retention are Cost of Acquisition and Cost of Retention are two abstract concepts. They can neither be two abstract concepts. They can neither be calculated nor be compared against each othercalculated nor be compared against each other
There are costs at every stageThere are costs at every stage Real and notionalReal and notional Real costs are those incurred in each of these Real costs are those incurred in each of these
processes and processes and Notional are costs that occur when you don’t Notional are costs that occur when you don’t
get a process rightget a process right The challenge for HRM is to get its act rightThe challenge for HRM is to get its act right
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HRM begins at the campusHRM begins at the campus
Getting a best job fit is a big challengeGetting a best job fit is a big challenge Both the employer and the campus have Both the employer and the campus have
to worth togetherto worth together The process is complex and not much The process is complex and not much
research has been done hereresearch has been done here B-school is like any other businessB-school is like any other business There is input-process and output and There is input-process and output and
every process is about human resource every process is about human resource development development
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Campus HRMCampus HRM
HRM at campus begins with the admission HRM at campus begins with the admission processprocess
There is not much research or standards There is not much research or standards in getting the right talent pool in getting the right talent pool
Getting the best student is first step Getting the best student is first step Research is inadequate here!Research is inadequate here! Top b-schools are there mostly because of Top b-schools are there mostly because of
this equation this equation
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B-school processes should build talentB-school processes should build talent Industry should play significant roleIndustry should play significant role Faculty industry interaction Faculty industry interaction Intellectual capital building processIntellectual capital building process Curriculum updating processCurriculum updating process Outreach programmesOutreach programmes Industry-campus interface should be Industry-campus interface should be
meaningful meaningful
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Placement is the keyPlacement is the key
Both the recruiter and the campus has to Both the recruiter and the campus has to get the placement process rightget the placement process right
Job fit is everythingJob fit is everything Substantial cost saving is possible by Substantial cost saving is possible by
investing in this processinvesting in this process Industry associations need to be involvedIndustry associations need to be involved
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HRM begins with induction HRM begins with induction
Diversified manpower needs complex Diversified manpower needs complex induction processinduction process
Alignment with corporate vision and Alignment with corporate vision and mission is a challengemission is a challenge
Job matching is not very difficult but Job matching is not very difficult but keeping people in their harness is difficultkeeping people in their harness is difficult
High investment needed to understand the High investment needed to understand the talent’s real worth talent’s real worth
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Appraisals, employee satisfaction surveysAppraisals, employee satisfaction surveys Periodic research is part of HRMPeriodic research is part of HRM Internal and external Internal and external Tacit and explicit knowledge of Tacit and explicit knowledge of
employeesemployees Training needs analysisTraining needs analysis Training costs should be significant and Training costs should be significant and
focused focused
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Studies show that the pre-hire screening Studies show that the pre-hire screening for required success competencies for call for required success competencies for call center representatives can reduce first-center representatives can reduce first-year turnover by as much as 50%. year turnover by as much as 50%.
Pre-hire testing for specific required skills, Pre-hire testing for specific required skills, attitudes and behaviors has shown as attitudes and behaviors has shown as many as 75% of initial applicant pool many as 75% of initial applicant pool candidates to be misfits for success candidates to be misfits for success profiles of call center representativeprofiles of call center representative
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Continuous learning key to Continuous learning key to retainmentretainment
Much is known about opportunity cost of Much is known about opportunity cost of retention retention
Exit interviews hold the keyExit interviews hold the key Intensive research needed into motivation, Intensive research needed into motivation,
compensation, career planning, leadership compensation, career planning, leadership development and continous learningdevelopment and continous learning
Corporate varsities, MDPs , executive Corporate varsities, MDPs , executive MBA programmes ,MBAs by BPOsMBA programmes ,MBAs by BPOs
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Retention attributesRetention attributes
compensation compensation PromotionPromotion Special assignmentsSpecial assignments WelfareWelfare self worthself worth ESOP ESOP Learning opportunities Learning opportunities
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The focus of is on raising productivity The focus of is on raising productivity through improved quality, efficiency and through improved quality, efficiency and cost-reduction across their total workforce, cost-reduction across their total workforce, enabling companies to concentrate on enabling companies to concentrate on their core business activities. their core business activities.
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Calculating The Cost Per Hire Recruiters Network The best known method to calculate the Cost Per Hire
(CPH) has been developed by the Employment Management Association (EMA), a special interest group of the Society for Human Resources Management.
Its 1997, EMA did a study that calculated the average CPH for newspaper vs. Internet. Their findings showed the Internet was drastically lower.
CPH with print advertising $3,295 CPH with the Internet $377
The algorithm used to calculate these figures was developed by EMA, in conjunction with the Saratoga Institute.
Formula: CPH = AD + AF +ER + T + Relo + RC + 10% Key:
AD represents your ad costs AF are agency fees ER are employee referral costs T is travel Relo is relocation costs RC represents the fully loaded cost of all recruiter's time 10% is a historically derived figure for all overhead and administrative support.
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00
0
Advertising cost
Agency Fees
Employee Referrals
Travel Expenses
Relocation Expenses
Internal Recruiter Costs(The cost of the recruiters time - 10% is a historically derived figure for all overhead and admin support.)
Total Cost Per Hire
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Calculating Precise Turnover Costs
Separation Processing Costs:
+ cost of exit interviewer's time (60 minutes @ $16 x 135%) $22.00
+ cost of departing employee's time (30 minutes @ $20 x 135%) $14.00
+ cost of administrative functions relating to the departure (2 hours @ $14 x 135%) $38.00
+ cost of separation pay associated with the departure (40 hours @ $20) $800.00
+ cost of unemployment tax related to the departure (assumes account reimbursement of 4 weeks @ $337)
$1348 00$1348 00
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Replacement Hiring Costs:
+ cost of attracting applicants (annual ad budget / number of positions filled) $500.00
+ pre-employment administrative expenses (3 hours @ $24 x 135%) $98.00
+ cost of entrance interviews (5 interviews @ 1 hour x 2 interviewers @ $30 x 135%) $405.00
+ cost of aptitude, skill, drug etc. testing (30 minutes @ $14 x 135% + $16 + $25) $51.00
+ cost of hiring decisions meetings (1 hour x 2 interviewers @ $30 x 135%) $81.00
+ cost of post employment physical exams (assumes performed in house) $50.00
+ post-employment information gathering (records, payroll, etc.) (1 hour @ $14 + 1 hour @ $20 x 135%) $46.00
+ cost of signing bonus (RN's in Denver area currently ranging from $1K - $3K) $1,000.0
0
+ cost of employee finder's fee (Denver area currently ranging from $500 - $1K)
$500$500
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Replacement Hiring Costs:
+ cost of attracting applicants (annual ad budget / number of positions filled) $500.00
+ pre-employment administrative expenses (3 hours @ $24 x 135%) $98.00
+ cost of entrance interviews (5 interviews @ 1 hour x 2 interviewers @ $30 x 135%) $405.00
+ cost of aptitude, skill, drug etc. testing (30 minutes @ $14 x 135% + $16 + $25) $51.00
+ cost of hiring decisions meetings (1 hour x 2 interviewers @ $30 x 135%) $81.00
+ cost of post employment physical exams (assumes performed in house) $50.00
+ post-employment information gathering (records, payroll, etc.) (1 hour @ $14 + 1 hour @ $20 x 135%) $46.00
+ cost of signing bonus (RN's in Denver area currently ranging from $1K - $3K) $1,000.0
0
+ cost of employee finder's fee (Denver area currently ranging from $500 - $1K)
$500 00$500 00
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Training New Hire Costs:
+ cost of information literature (manuals, brochures, policies, etc.) $10.00
+ cost of general orientation (16 hours @ $20 + 16 hours @ $16 x 135%) $778.00
+ cost of job orientation (unit orientation 80 hours @ $20 + 40 hours @ $25 x 135%) $3,510.00
Lost Productivity and Lost Business Costs:
+ cost of additional overtime to cover the vacancy (20 hours @ $30 x 135% x 6 weeks) $4,860.00
+ cost of additional temporary help (20 hours @ $37 x 6 weeks) $4,440.00
- wages and benefits saved due to the vacancy (40 hours @ $20 x 135% x 6 weeks) <$6,480.00
>
+ cost of performance differential while new employee gets up to speed (96 hours @ $20 x 135% x 20%) $519.00
+ cost of low morale-related time wasted due to "water cooler grumbling" (1 hour @ $20 x 135% x 5 days x 6 weeks) $810.00
+ cost of lost customers, sales, profits due to the departure (gross profit loss per patient $3,100 per day x 3.5 days x 25% profit margin) $2,713.00
+ cost of additional employee departures related to the departure (if just one other nurse leaves, the cost is equal to the total of these costs) $16,113.00
Total $32,226.00