For any company, the effective management of human capital is a critical success factor; rated among the top 10 impacts on shareholder value by major consultancies. One of the main concerns in human capital management is workforce churn. Churn can be attributed to regular employee turnover, growth rate changes, rightsizing efforts by corporations to align skill sets with company objectives, and merger situations.
Just look at the facts about workforce churn:
- Every year, forgetting special circumstances, a full 15% of any company´s base of employees turns over due to retirements, moves, skill set upgrades and other life changes. For a company with 50,000 employees, this means that 7,500 new hires are needed annually just to keep up with normal attrition.
- One factor contributing to this high turnover is that the average tenure at a given company has been trending way down in the last decade, from over seven years in 1991 to under three years in 2001. People simply move more often, are less loyal to any one company and are taking control of their career moves.
- In turbulent times, churn increases substantially. In the last few years many companies have seen annual changeover rates of 25% or more, with acquisition and sell-off activity contributing to major workforce changes.
Here are four major areas of activity that help any company address churn with positive results; recruiting for fit, encouraging growth, facilitating transitions and integrating new workforces effectively.
Recruiting For Fit
The first step in managing a high degree of churn is making sure you get the right new employees in the door in the first place. Poor hiring decisions - ones that do not look at how a candidate might fit into the hiring organization and alignment to company goals - will culminate in a churn situation within six to 18 months. Cost estimates for a poor hire can be upwards to 1 ½ times an individual´s annual salary (Saratoga Institute 2001). Much has been written about making good hires, and the industry pundits generally agree that HR and line managers must take a little more time to prepare the hiring organization - understanding what it needs and what type of person will succeed in the position.
Once the criteria are understood, recruiting efforts have to focus on developing a flow of good prospects and applying proper screening methods; screening people in rather than out. Then HR must follow up to provide metrics on how the methods are working and make the appropriate adjustments.
A wealth of technology and services are now on the market to help companies recruit for fit. Web-based hiring management platforms (or applicant tracking systems) are available from 30 or more vendors. These systems usually integrate a corporate career site for employment branding, job posting and management of resume flow. To help recruit for fit, the technology should support screening and profiling tools to narrow down the applicant pool to the right three or four candidates to be interviewed. Screening systems have been around for decades, but few have been properly implemented within a recruiting culture because of cost and complexity. In the last year or two some vendors have moved to integrate simplified screening tools into Web-based hiring platforms and this trend will continue.
Encouraging Growth
Emphasis has to be placed on constant change and growth for employees; otherwise they´re gone quickly. A recent Kepner-Tregoe Survey on Employee Turnover (2000) stated that 56% of managers and employees think about leaving 1-2 times per year. That´s the reality of today´s fast-paced career marketplace and it´s getting faster, not slower. Open, well understood transfer policies, skills inventories, proper performance assessments and good communication; all these practices contribute to fluid growth within a company.
As for recruiting, there are many tools and services on the market to facilitate growth within a company. Skills inventories and performance assessment systems, including 360-degree feedback and more traditional performance review management, provide a baseline for managing career progression. When development requirements, or desires are identified, training programs can be matched to the need. Web-based programs have proliferated because of the convenience and cost factors, and the combination of performance/development assessment with online training can be very effective.
Facilitating Transitions
The situation of having to displace employees shouldn´t be one of hurt, chaos and failing morale. Business changes are a reality, and whether someone is leaving of their own accord to pursue other challenges, or a whole group is being laid-off, this churn is an opportunity for positive change. Change means that someone better suited to the position, someone hungrier and happier, will make a positive contribution to the company. It means that product line adjustments and new business focus will make the company more responsive to customers and better geared to shareholder value.
When managed properly, corporate outplacement programs can facilitate transitions, getting people back to work quickly, improving corporate image and employment branding, preserving morale of the retained employee-base and reducing legal exposure. Some leading edge programs include an online career toolkit for individuals to best use the Web and email campaigns to find their next job.
Integration of New Workforces
Mergers and acquisitions introduce perhaps the greatest set of challenges in the management of workforce churn. The blending of different cultures, product lines and office locations is difficult at best. From the integration of management teams to the publishing of accurate corporate directories, HR must take an active role in facilitating change toward the emergence of a new, stronger company.
Many vendors provide tools and expertise to assist with workforce integration. Career intranets can be a medium to communicate changes, with databases allowing employees to keep up to date profiles and apply to open positions online. Consultants are available who specialize in systems integration for merger situations, and they can help marry disparate HR Information Systems or interface Web-based hiring systems to the popular ERP environments.
The Fortune 2000 and Workforce Churn
Large companies have complex and acute needs when it comes to managing change. The simplification of these challenges is a major need in itself. When recruiting, promoting transfers or terminating employees, HR must deal with a multiplicity of vendors, each providing a niche solution within the overall puzzle. This creates a problem for overburdened managers and an opportunity for vendors.
Workstream recognizes the opportunity for service consolidation and has positioned itself, through acquisitions and organic growth, to be a full service provider across the spectrum of workforce management solutions. Web-based software provides workforce planning, recruiting and reporting capabilities suitable for large companies, with the ease of an ASP service model not requiring IT intervention or new systems installation. Our experienced staff of HR professionals works with customers to plan implementation projects from needs analysis through training and results measurement. Hands-on recruiters and researchers assist with identification of hidden labour markets and effective screening of new hires. Online career network products provide employment branding and increased exposure for open positions. Corporate outplacement professionals design tailored programs for effective displacement of individuals or large groups of employees. All of these services are delivered within a common technology platform and with the consulting expertise necessary to get the job done -- quickly, effectively and inexpensively. Fortune 2000 companies need a full service partner for management of significant workforce churn, and Workstream is here to meet that challenge.
