HR Metrics: Things That IT Recruiters Need To Be Careful About
While the west struggles with high unemployment rates, certain sectors in India are in a growth phase. IT/ITES is one of those high growth industries. In the financial year 2010-2011, IT industry recorded a 19% growth to revenues over $19billion. The largest Indian IT company, Tata Consultancy Services alone employs over 200,000 people (as on 30 June 2011). The industry has witnessed high attrition rates in the recent past. Thus, the IT companies hire for both replacement of manpower and growth as well. Hiring, attrition and replacement hiring raises not just the cost on Talent Acquisition, but also on continuity of operations and training. In order to minimize the turnaround time for hiring candidates, recruiters need to understand, monitor and work on certain metrics.
Anticipating Requirement Caused By Attrition
Attrition is a major issue for all IT companies. Each year, IT companies face losses because of operational issues caused by attrition. Though, the companies have policies in place to prevent high impact on operations like service agreements and notice period, there is always a pressure on talent acquisition to fill the gap at the earliest. Therefore to stay a step ahead, talent acquisition department needs to anticipate hiring requirement due to attrition. They not only need to understand overall attrition, but also the below mentioned aspects:
- Fresher Attrition: In most of the organizations, fresher or entry level recruits have a service agreement for certain duration before which if they chose to leave the organization, they need to fulfil certain conditions. So generally the attrition at entry level is lower compared to overall numbers. However, entry level recruitment is entirely different from that of experienced professionals, hence, the organizations need to carefully plan on the hiring numbers. Since most of the entry level hiring is done on campus, flexibility of any time hiring is low.
- Critical Resource Attrition: Critical resource attrition is high impact attrition since it is not only difficult to find good candidates but also difficult to meet their expectations. Certain high skilled roles require exhaustive training and certifications, which is often time and effort consuming. The replacement not only takes longer time to be identified but also takes considerable time to get trained.
- Infant Attrition: Infant attrition is not only an issue for the organization, but also as a direct efficiency measure of talent acquisition itself. It is the percentage of new hires that leave within one year.
- Major Causes of Attrition: Most of the organizations have a well-defined exit process which aims at understanding why people leave. Despite a well structured process it is often difficult to draw clear picture because people often do not like to disclose why they wish to leave the organization. However, some of the common reasons for attrition in IT industry are as follows:
- Compensation
- Role
- Location Preference
- On Site (Overseas)
- HR Policies affecting the career (Promotion, probation, performance appraisals, organizational culture, etc)
- Work related issues (Shifts, overtime, project facilities)
- Personal (Health, family, etc)
Understanding the major reasons of attrition, the talent acquisition department can not only anticipate requirement but can also raise the efficiency of recruitment by understanding reasons for infant attrition. For example, if compensation is a major issue, they can look at working on compensation structure or amount to satisfy the new hire better.
Calculation of Recruitment Turn Around Time
Organization has as much time to hire and train a new employee as the notice period served by an employee who has resigned. Hence, it is important to understand the recruitment turn around time to define the notice period.
Generally, the time taken to recruit largely depends on two factors:
- Skill availability: There are certain skills which are rare in the market. These are termed as Niche skills. Generally time to identify and recruit a candidate with Niche Skill is longer
- Notice period in other Organizations: After an organization offers a candidate with a job opportunity, the candidate needs to serve the notice period before leaving the company. This is a main factor because of which, there is a lag between an employee leaving and replacement joining the organization.
Other reasons include training of new hires and internal processes and procedures for recruitment. Often the time to hire is high because of processes and procedures like documentation and background verification.
The time impact can be understood as below:
Illustration 1: Time Impact on Organization due to Recruitment Turn Around Time
The illustration shows the time impact on organization due to time taken by a candidate to join after the existing employee resigns and leaves. The organizations may also calculate the cost impact by multiplying the average billing rate per employee to the average time impact and adding to it cost per hire (Total Recruits/Total Costs incurred by Talent Acquisition in a year) and Training costs.
The time impact can be minimized by anticipating requirements, which can have the three scenarios as illustrated below:
As per illustration 4, anticipation needs to be accurate or early hiring may also lead to overhead costs. The overhead costs are generally easier to contain by delaying the joining of offered candidates, however, that also reduces the probability of joining.
Thus, by carefully understanding the metrics related to recruitment, the Talent Acquisition can contribute to the organization better. The aim of the Talent Acquisition is to minimize time impact on the organization by anticipating requirements due to growth and attrition.
This article has been authored by Kanika Bansal and Varun Arora from LBSIM
