International Polymers is aMinnEAPoliscorporation (the original centre for researchand development) with subsidiaries in a number of countries, including theUnited Kingdom.Its ‘value targets’ are to:
● achieveoutstanding financial performance;
● achievecustomer satisfaction via innovation;
● bea role mODel in the community;
● bethe best speciality chemical company to work for.
TheUKcompany (Polymers UK LTD) hasbeen in existence for tHRee years. The company was established as the base forthe European marketing and manufacturing activities of the parent company. Ithas taken over responsibility for the further development of the three productswith which it is concerned: Mycellene (liquid crystal technology), Oledine(electrically conductive polymers) and Therlastene (thermoplastic elastomers).
PolymersUKis located in Southwell and has just over 650 staff – R&D, manufacturing,marketing and administrative. An intensive recruitment campAIgn has beenconducted over the three years in the highly competitive local and nationallabour market by the Head of HR and his assistant. It has been possible – aftera great deal of effort – to attract high-quality graduates (mainly materialSSCientists), marketing specialists, and production managers and team leaders, thanksto the reputation of the company and the opportunities it provides to pursue aworthwhile career.
The Head of HR resigned six months ago, asdid his assistant. The replacement Head of HR was alerted to a number ofrecruitment problems and engaged an experienced recruitment manager, who wasasked to investigate the problems and recommend solutions. It was emphasizedthat a persuasive business case should be made for any proposals.
The recruitment manager found that manufacturing staff(mainly technicians) and other professional and administrative staff had beenrecruited with some difficulty because of the
competitive nature of the labour market –the time taken to fill vacancies had increased from 10 to 12 days over the lastyear. The time to fill vacancies for research, technical, managerial andprofessional staff had increased even more over the same period – from 9 to 12weeks. There were too many unfilled vacancies.
An analysis of labour turnover during theprevious 12 months established the following rates, which she compared with thelatest figures from the annual survey of recruitment, retention and turnoverconducted by the CIPD:
These figures revealed a significantincrease in turnover and an unfavourable comparison with the most recentnational figures in each case except one. Anecdotal evidence obtained frommanagers indicated that the problems of retention and the increasing time takento fill vacancies were beginning to cause serious problems for the business.
The recruitment manager took a long hardlook at the arrangements for recruitment. Her findings were that:
● Themain source of recruits for staff other than graduates and manual/craft workershad been agencies; the rest was through advertisements and some onlinerecruitment; manual workers had been recruited through advertisements and jobcentres.
● Graduateshad been recruited directly from a small number of universities with goodmaterials science departments – however, their survival rates were poor, with only30 per cent of those recruited in the first two years remaining.
● Acompetency framework and role profiles had been developed for scientific andtechnical posts as the basis for structured interviews by HR.
● Linemanagers made the final CHOice but had been given no training in interviewingtechniques;
● Therewas no formal induction programme.● Therewas no systematic approach to exit interviews.
● Ratesof pay appeared to be competitive.
● Somemanagement and team leader training had been given by an outside provider onleadership skills but there was no evidence that it had been followed up andtherefore how effective it had been.
Faced with these results of her analysisthe recruitment manager spent some time thinking about what she should put intoher report. Clearly, there had to be proposals on how to deal with turnover andthe time to fill vacancies. It was equally obvious that the business case forany actions would be enhanced if she could convey to management some idea ofhow much labour turnover was costing the company and therefore how much couldbe saved by reducing it.
1. Listthe information required to produce an estimate of the cost of labour turnover,identifying what was already available and what more would be needed.
2. Outlinethe recommendations you would make.
3. Summarizeyour business case.
Note that the cost of labour turnover asestimated by the CIPD in its 2007 survey of recruitment, retention and turnoverwas £7,750 per head in 2006. This will vary enormously between differentorganizations and for different categories of employees, and an attempt shouldbe made to calculate a figure for Polymers UK.
J Douglas Phillips, in a 1990 article on‘The price tag of turnover’ (PersonnelJournal, December, pp 58–61), analysed research on the cost of labourturnover conducted by Rutgers University in an environmental specialitychemical company, a company in the packaged food industry and atelecommunications company. They each produced similar results. The headingsused for costing purpose and the percentage of the total cost applied to eachheading were:
1. Inefficiencyof incoming employees – 32 per cent.
2. Inefficiencyof co-workers closely associated with incoming employees – 20 per cent.
3. Inefficiencyof departing employees – 3 per cent.
4. Inefficiencyof co-workers closely associated with departing employees – 1 per cent.
5. Inefficiencyof position BEIng filled while vacant – 33 per cent.
6. Out-of-pocketprocessing costs (advertising, agency fees, etc) – 6 per cent.
7. HRDepartment processing costs (time spent processing applications) – 1 per cent.
8. Non-HRemployee processing costs – 4 per cent.
9. Relocationcosts – 0.
It was also found that:
● turnovercosts for managers and staff were about 1.2 to 2.0 (averaging 1.5) times theannual salary of the position in question;
● turnovercosts for manual workers were about .75 times the pay of the position inquestion;
● ‘visiblecosts’ of recruitment, etc accounted for only 10 to 15 per cent of total costs;
● onaverage, 12.5 months were required for executives to be comfortable in a newposition;
● onaverage, 13.5 months were required for a new employee to achieve maximumefficiency.
These figures may well be regarded asunduly high, perhaps because of the special nature of theUSfirmssurveyed. The methodology used to calculate them could be questioned, althougha reading of the article suggests that it was reasonably robust. The figurescould certainly not be quoted as evidence in theUnited Kingdombut they do indicatethat there are considerable costs invoLVed and even that, perhaps, the CIPDfigures could underestimate them in some cases. It may not be possible toproduce realistic costs for each of the headings but they do indicate the linesalong which enquiries could be made and therefore the information required.
So far as the recommendations areconcerned, Phillips suggested that the principal headings could be:
● improveincoming efficiency;
● reducethe length of time positions are vacant;
● avoidor at least minimize the use of agencies.
The recommendations must be based onfurther information about the actual or potential causes of turnover – fromexit interviews, opinion surveys and even approaching some recent leavers inthe absence of exit interview data. (The writer did this in a study of thereasons for high graduate turnover in an aerospace firm and got a surprisingly goodlevel of response and valuable information, in this case, that their knowledgeand qualifications were not being used, leadership was poor and they did nothave the resources to do a good job and enjoy what they were doing.)