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PowerPoint Presentation by Charlie CookThe University of West Alabama
PowerPoint Presentation by Charlie CookThe University of West Alabama
© 2010 South-Western, a part of Cengage LearningAll rights reserved.© 2010 South-Western, a part of Cengage LearningAll rights reserved.
Identify the advantages of integrating human resources planning and strategic planning.
Understand how an organization’s competitive environment influences its strategic planning.
Chapter ObjectivesAfter studying this chapter, you should be able to
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Understand why it is important for an organization to do an internal resource analysis.
Describe the basic tools used for human resources forecasting.
Explain the linkages between competitive strategies and HR.
Understand what is required for a firm to successfully implement a strategy.
Recognize the methods for assessing and measuring the effectiveness of a firm’s strategy.
Chapter Objectives (cont’d)After studying this chapter, you should be able to
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Strategic Planning and Human ResourcesStrategic Planning and Human Resources
••Strategic PlanningStrategic Planning
�� Procedures for making decisions about the Procedures for making decisions about the
organization’s longorganization’s long--term goals and strategiesterm goals and strategies
••Human Resources Planning (HRP)Human Resources Planning (HRP)
�� Process of anticipating and making provision for the Process of anticipating and making provision for the
movement (flow) of people into, within, and out of movement (flow) of people into, within, and out of
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movement (flow) of people into, within, and out of movement (flow) of people into, within, and out of
an organization. an organization.
Strategic Planning and HR PlanningStrategic Planning and HR Planning
••Strategic Human Resources Management (SHRM)Strategic Human Resources Management (SHRM)
�� The pattern of human resources deployments and The pattern of human resources deployments and
activities that enable an organization to achieve its activities that enable an organization to achieve its
strategic goalsstrategic goals
�� Strategy formulationStrategy formulation——providing input as to what is possible providing input as to what is possible given the types and numbers of people available.given the types and numbers of people available.
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given the types and numbers of people available.given the types and numbers of people available.
�� Strategy implementationStrategy implementation——making primary resource making primary resource allocation decisions about structure, processes, and human allocation decisions about structure, processes, and human resources.resources.
Linking Strategic Planning and HRPLinking Strategic Planning and HRP
••Strategic Analysis Strategic Analysis
��What human resources are needed and what are What human resources are needed and what are
available?available?
••Strategic FormulationStrategic Formulation
��What is required and necessary in support of human What is required and necessary in support of human
resources?resources?
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resources?resources?
••Strategic ImplementationStrategic Implementation
�� How will the human resources be allocated?How will the human resources be allocated?
Human Resources Human Resources PlanningPlanning
StrategicStrategicPlanningPlanning
FIGURE
2.1Linking Strategic Planning and Human Resources
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Step One: Mission, Vision, and ValuesStep One: Mission, Vision, and Values
••MissionMission
�� The basic purpose of the organization as well as its The basic purpose of the organization as well as its
scope of operationsscope of operations
••Strategic VisionStrategic Vision
�� A statement about where the company is going and A statement about where the company is going and
what it can become in the future; clarifies the longwhat it can become in the future; clarifies the long--
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what it can become in the future; clarifies the longwhat it can become in the future; clarifies the long--
term direction of the company and its strategic term direction of the company and its strategic
intentintent
••Core ValuesCore Values
�� The strong and enduring beliefs and principles that The strong and enduring beliefs and principles that
the company uses as a foundation for its decisionsthe company uses as a foundation for its decisions
Step Two: Environmental ScanningStep Two: Environmental Scanning
••Environmental ScanningEnvironmental Scanning
�� The systematic monitoring of the major external The systematic monitoring of the major external
forces influencing the organization.forces influencing the organization.
1.1. Economic factors: general, regional, and global conditionsEconomic factors: general, regional, and global conditions
2.2. Industry and competitive trends: new processes, services, Industry and competitive trends: new processes, services, and innovationsand innovations
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and innovationsand innovations
3.3. Technological changes: robotics and office automation Technological changes: robotics and office automation
4.4. Government and legislative issues: laws and administrative Government and legislative issues: laws and administrative rulings rulings
5.5. Social concerns: child care and educational priorities Social concerns: child care and educational priorities
6.6. Demographic and labor market trends: age, composition, Demographic and labor market trends: age, composition, literacy, and immigrationliteracy, and immigration
FIGURE
2.2Five Forces Framework
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Step Three: Internal AnalysisStep Three: Internal Analysis
CultureCulture Capabilities
Internal AnalysisInternal Analysis
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CompositionComposition
Internal AnalysisInternal Analysis
Culture: Auditing Values, Beliefs, and AttitudesCulture: Auditing Values, Beliefs, and Attitudes
••Cultural AuditsCultural Audits
�� Audits of the culture and quality of work life in an Audits of the culture and quality of work life in an
organization.organization.
�� How do employees spend their time? How do employees spend their time?
�� How do they interact with each other? How do they interact with each other?
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�� Are employees empowered?Are employees empowered?
�� What is the predominant leadership style of managers?What is the predominant leadership style of managers?
�� How do employees advance within the organization?How do employees advance within the organization?
Capabilities: People as a Strategic ResourceCapabilities: People as a Strategic Resource
•• Core CapabilitiesCore Capabilities
�� Integrated knowledge sets within an organization Integrated knowledge sets within an organization
that distinguish it from its competitors and deliver that distinguish it from its competitors and deliver
value to customers.value to customers.
•• Sustained competitive advantage through Sustained competitive advantage through
people is achieved if these human resources:people is achieved if these human resources:
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people is achieved if these human resources:people is achieved if these human resources:
1.1. Are valuable.Are valuable.
2.2. Are rare and unavailable to competitors.Are rare and unavailable to competitors.
3.3. Are difficult to imitate.Are difficult to imitate.
4.4. Are organized for teamwork and cooperation.Are organized for teamwork and cooperation.
Composition: The Human Capital ArchitectureComposition: The Human Capital Architecture
••Strategic Knowledge WorkersStrategic Knowledge Workers
�� Employees who have unique skills that are directly Employees who have unique skills that are directly
linked to the company’s strategy.linked to the company’s strategy.
�� Example: R&D scientistsExample: R&D scientists
••Core EmployeesCore Employees
�� Employees with skills to perform a predefined job Employees with skills to perform a predefined job
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�� Employees with skills to perform a predefined job Employees with skills to perform a predefined job
that are quite valuable to a company, but not that are quite valuable to a company, but not
particularly unique or difficult to replace.particularly unique or difficult to replace.
�� Example: salespeopleExample: salespeople
Composition: The Human Capital Architecture Composition: The Human Capital Architecture (cont’d)(cont’d)
••Supporting LaborSupporting Labor
�� Employees whose skills are of less strategic value Employees whose skills are of less strategic value
and generally available in the labor market.and generally available in the labor market.
�� Example: clerical workersExample: clerical workers
••Alliance PartnersAlliance Partners
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••Alliance PartnersAlliance Partners
�� Individuals and groups with unique skills, but those Individuals and groups with unique skills, but those
skills are not directly related to a company’s core skills are not directly related to a company’s core
strategy.strategy.
�� Example: consultantsExample: consultants
FIGURE
2.3Mapping Human Capital
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Forecasting: A Critical Element of PlanningForecasting: A Critical Element of Planning
•• Forecasting involves:Forecasting involves:
a.a. forecasting the demand for laborforecasting the demand for labor
b.b. forecasting the supply of laborforecasting the supply of labor
c.c. balancing supply and demand considerations.balancing supply and demand considerations.
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FIGURE
2.4Model of HR Forecasting
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Forecasting Demand for EmployeesForecasting Demand for Employees
Quantitative MethodsQuantitative MethodsQuantitative MethodsQuantitative Methods
Forecasting DemandForecasting DemandForecasting DemandForecasting Demand
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Qualitative MethodsQualitative MethodsQualitative MethodsQualitative Methods
Forecasting DemandForecasting DemandForecasting DemandForecasting Demand
Quantitative Approach: Trend AnalysisQuantitative Approach: Trend Analysis
••Forecasting labor demand based on an Forecasting labor demand based on an
organizational index such as sales:organizational index such as sales:
1.1. Select a business factor that best predicts human Select a business factor that best predicts human
resources needs.resources needs.
2.2. Plot the business factor in relation to the number of Plot the business factor in relation to the number of
employees to determine the labor productivity ratio.employees to determine the labor productivity ratio.
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employees to determine the labor productivity ratio.employees to determine the labor productivity ratio.
3.3. Compute the productivity ratio for the past five years.Compute the productivity ratio for the past five years.
4.4. Calculate human resources demand by multiplying the Calculate human resources demand by multiplying the
business factor by the productivity ratio.business factor by the productivity ratio.
5.5. Project human resources demand out to the target Project human resources demand out to the target
year(s).year(s).
FIGURE
2.5Example of Trend Analysis of HR Demand
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Qualitative ApproachesQualitative Approaches
••Management ForecastsManagement Forecasts
�� The opinions (judgments) of supervisors, The opinions (judgments) of supervisors,
department managers, experts, or others department managers, experts, or others
knowledgeable about the organization’s future knowledgeable about the organization’s future
employment needs.employment needs.
••Delphi TechniqueDelphi Technique
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••Delphi TechniqueDelphi Technique
�� An attempt to decrease the subjectivity of forecasts An attempt to decrease the subjectivity of forecasts
by soliciting and summarizing the judgments of a by soliciting and summarizing the judgments of a
preselected group of individuals.preselected group of individuals.
�� The final forecast represents a composite group The final forecast represents a composite group
judgment.judgment.
1HR Planning and Strategy Questions to Ask Business Managers
• What are your mission, vision, and values?
• What are your current pressing business issues?
Workforce planning requires that HR leaders periodi cally interview their managers to gauge future workforce needs. Here are some sample questions to ask.
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• What are our organizational strengths?
• Who are our competitors’ organizational strengths? H ow do we compare?
• What core capabilities do we need to win in our mar kets?•
• What are the required knowledge, skills, and abilit ies we need to execute the winning strategy?
• What are the barriers to optimally achieving the st rategy?
• What types of skills and positions will be required or no longer required?
• Which skills should we have internally versus contr act with outside providers?
• What actions need to be taken to align our resource s with strategy priorities?
• What recognition and rewards are needed to attract, motivate, and retain the employees we need?
• How will we know if we are effectively executing ou r workforce plan and staying on track?
Forecasting the Supply of Employees: Forecasting the Supply of Employees: Internal Labor SupplyInternal Labor Supply
••Staffing TablesStaffing Tables
••Markov AnalysisMarkov Analysis
••Skill InventoriesSkill Inventories
••Replacement ChartsReplacement Charts
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••Replacement ChartsReplacement Charts
••Succession PlanningSuccession Planning
Forecasting Internal Labor SupplyForecasting Internal Labor Supply
••Staffing TablesStaffing Tables
�� Graphic representations of all organizational jobs, Graphic representations of all organizational jobs,
along with the numbers of employees currently along with the numbers of employees currently
occupying those jobs and future (monthly or yearly) occupying those jobs and future (monthly or yearly)
employment requirements.employment requirements.
••Markov AnalysisMarkov Analysis
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••Markov AnalysisMarkov Analysis
�� A method for tracking the pattern of employee A method for tracking the pattern of employee
movements through various jobs.movements through various jobs.
FIGURE
2.6Hypothetical Markov Analysis for a Retail Company
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Internal Demand Forecasting ToolsInternal Demand Forecasting Tools
••Skill InventoriesSkill Inventories
�� Files of personnel education, experience, interests, Files of personnel education, experience, interests,
skills, etc., that allow managers to quickly match skills, etc., that allow managers to quickly match
job openings with employee backgrounds.job openings with employee backgrounds.
••Replacement ChartsReplacement Charts
�� Listings of current jobholders and persons who are Listings of current jobholders and persons who are
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�� Listings of current jobholders and persons who are Listings of current jobholders and persons who are
potential replacements if an opening occurs.potential replacements if an opening occurs.
••Succession PlanningSuccession Planning
�� The process of identifying, developing, and tracking The process of identifying, developing, and tracking
key individuals for executive positions.key individuals for executive positions.
FIGURE
2.7An Executive Replacement Chart
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2Succession-Planning Checklist
RATE THE SUCCESS OF YOUR SUCCESSION PLANNING
For each characteristic of a best-practice succession-planning and management program appearing in the left column below, enter a number to the right to indicate how well you believe your organization manages that characteristic.
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manages that characteristic. Ask other decision makers in your organization to complete this form individually, compile the scores, and compare notes.
FIGURE
2.8Assessing a Firm’s Human Capital
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Step Four: Formulating StrategyStep Four: Formulating Strategy
••Strategy FormulationStrategy Formulation
��Moving from simple analysis to devising a coherent Moving from simple analysis to devising a coherent
course of action.course of action.
••SWOT analysis SWOT analysis
�� A comparison of A comparison of strengthsstrengths, , weaknessesweaknesses, ,
opportunitiesopportunities, and , and threatsthreats for strategy formulation for strategy formulation
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opportunitiesopportunities, and , and threatsthreats for strategy formulation for strategy formulation
purposes. purposes.
�� Use the strengths of the organization to capitalize Use the strengths of the organization to capitalize
on opportunities, counteract threats, and alleviate on opportunities, counteract threats, and alleviate
internal weaknesses.internal weaknesses.
FIGURE
2.9An Example of a SWOT Analysis
Valero Energy Corporation (Valero) is one of the largest refiners in North America. Its core activities include refining and marketing of petroleum products. With a combined throughput capacity of approximately 3.3 million bpd, Valero is the 15th largest company on the Fortune 500 list. Valero’s large refining capacity gives it a significant competitive advantage. However, rising material and labor costs could affect the company’s margins.
Strengths Weaknesses
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Strengths Weaknesses
Large refining systemLeader in conversion capacity and feedstock flexibilityStrong revenue growth and capital expenditure
Weak performance in CanadaLitigationsHigh dependence on the United States
Opportunities Threats
Growing diesel demandStrategic refocusRising petrochemical capacity in the Middle East
Material and labor costStringent regulations
Corporate StrategyCorporate Strategy
Growth and DiversificationGrowth and
DiversificationMergers and Acquisitions
Mergers and Acquisitions
Corporate Corporate
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Strategic Alliances and Joint VenturesStrategic Alliances and Joint Ventures
Corporate Strategy
Corporate Strategy
Business StrategyBusiness Strategy
••Value CreationValue Creation
��What the firm adds to a product or service by virtue What the firm adds to a product or service by virtue
of making it; the amount of benefits provided by of making it; the amount of benefits provided by
the product or service once the costs of making it the product or service once the costs of making it
are subtracted (value = benefits are subtracted (value = benefits —— costs).costs).
�� LowLow--cost strategy: competing on productivity and cost strategy: competing on productivity and
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�� LowLow--cost strategy: competing on productivity and cost strategy: competing on productivity and
efficiencyefficiency
�� Keeping costs low to offer an attractive price to customers Keeping costs low to offer an attractive price to customers (relative to competitors).(relative to competitors).
�� Differentiation strategy: compete on added valueDifferentiation strategy: compete on added value
�� Involves providing something unique and distinctive to Involves providing something unique and distinctive to customers that they value.customers that they value.
3Key HR Activities Associated with Merger or Acquisi tion Phases
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3Key HR Activities Associated with Merger or Acquisi tion Phases (cont’d)
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Business Strategy (cont’d)Business Strategy (cont’d)
••Functional Strategy: Ensuring AlignmentFunctional Strategy: Ensuring Alignment
�� External Fit/AlignmentExternal Fit/Alignment
�� Focuses on the connection between the business objectives Focuses on the connection between the business objectives and the major initiatives in HR.and the major initiatives in HR.
�� Internal Fit/AlignmentInternal Fit/Alignment
�� Aligning HR practices with one another to establish a Aligning HR practices with one another to establish a
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Aligning HR practices with one another to establish a Aligning HR practices with one another to establish a configuration that is mutually reinforcing.configuration that is mutually reinforcing.
Step Five: Strategy ImplementationStep Five: Strategy Implementation
••Taking Action: Reconciling Supply and DemandTaking Action: Reconciling Supply and Demand
�� Balancing demand and supply considerationsBalancing demand and supply considerations
�� Forecasting business activities (trends)Forecasting business activities (trends)�� Locating applicantsLocating applicants
�� Organizational downsizing, outsourcing, offshoringOrganizational downsizing, outsourcing, offshoring
Reducing “headcount”Reducing “headcount”
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�� Reducing “headcount”Reducing “headcount”��Making layoff decisionsMaking layoff decisions
�� Seniority or performance?Seniority or performance?�� Labor agreementsLabor agreements
FIGURE
2.10The 7-S Model
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Step Six: Evaluation and AssessmentStep Six: Evaluation and Assessment
••Evaluation and Assessment IssuesEvaluation and Assessment Issues
�� Benchmarking: The process of comparing the Benchmarking: The process of comparing the
organization’s processes and practices with those of organization’s processes and practices with those of
other companiesother companies
�� Human capital metricsHuman capital metrics
�� Assess aspects of the workforceAssess aspects of the workforce
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�� Assess aspects of the workforceAssess aspects of the workforce
�� HR metricsHR metrics
�� Assess the performance of the HR function itselfAssess the performance of the HR function itself
4Ten Measures of Human Capital
1. Your most important issues
2. Human capital value added
3. Human capital ROI
4. Separation cost
5. Voluntary separation rate
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5. Voluntary separation rate
6. Total labor-cost/revenue percentage
7. Total compensation/revenue percentage
8. Training investment factor
9. Time to start
10. Revenue factor
Measuring a Firm’s Strategic AlignmentMeasuring a Firm’s Strategic Alignment
••Strategy Mapping and the Balanced ScorecardStrategy Mapping and the Balanced Scorecard
�� Balanced Scorecard (BSC)Balanced Scorecard (BSC)
�� A measurement framework that helps managers translate A measurement framework that helps managers translate strategic goals into operational objectivesstrategic goals into operational objectives–– financialfinancial–– customercustomer
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–– processesprocesses–– learninglearning
FIGURE
2.11Building the Metrics Model
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FIGURE
2.12Assessing Internal Fit
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5 = Strongly supports the priority, 0= Neutral, –5 = Strongly counterproductive
Ensuring Strategic Flexibility for the FutureEnsuring Strategic Flexibility for the Future
••Organizational CapabilityOrganizational Capability
�� Capacity of the organization to act and change in Capacity of the organization to act and change in
pursuit of sustainable competitive advantage.pursuit of sustainable competitive advantage.
�� Coordination flexibilityCoordination flexibility
�� The ability to rapidly reallocate resources to new or changing The ability to rapidly reallocate resources to new or changing
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The ability to rapidly reallocate resources to new or changing The ability to rapidly reallocate resources to new or changing needs.needs.
�� Resource flexibilityResource flexibility
�� Having human resources who can do many different things in Having human resources who can do many different things in different ways.different ways.
Balanced Scorecard (BSC)
benchmarking
core capabilities
core values
cultural audits
environmental scanning
replacement charts
skill inventories
staffing tables
strategic human resources management (SHRM)
strategic planning
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human capital readiness
human resources planning (HRP)
management forecasts
Markov analysis
mission
organizational capability
strategic planning
strategic vision
succession planning
SWOT analysis
trend analysis
value creation
Employee Turnover RatesEmployee Turnover Rates
••Computing Turnover Rates:Computing Turnover Rates:
�� The U.S. Department of Labor suggests the The U.S. Department of Labor suggests the
following formula for computing turnover rates:following formula for computing turnover rates:
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�� Thus, if there were 25 separations during a month Thus, if there were 25 separations during a month
and the total number of employees at mid month and the total number of employees at mid month
was 500, the turnover rate would be:was 500, the turnover rate would be:
Employee Turnover Rates (cont’d)Employee Turnover Rates (cont’d)
•• Computing Turnover Rates (cont’d):Computing Turnover Rates (cont’d):
�� Another method of computing the turnover rate is one that Another method of computing the turnover rate is one that
reflects only the avoidable separations (S). This rate is reflects only the avoidable separations (S). This rate is
computed by subtracting unavoidable separations (US) from computed by subtracting unavoidable separations (US) from
all separations. The formula for this method is as follows:all separations. The formula for this method is as follows:
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�� where M represents the total number of employees at mid where M represents the total number of employees at mid
month. For example, if there were 25 separations during a month. For example, if there were 25 separations during a
month, 5 of which were US, and the total number of month, 5 of which were US, and the total number of
employees at mid month (M) was 500, the turnover rate employees at mid month (M) was 500, the turnover rate
would be:would be:
Employee Absenteeism RatesEmployee Absenteeism Rates
••Computing Absenteeism RatesComputing Absenteeism Rates
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5Costs Associated with the Turnover of One Computer Programmer
(Turnover costs = Separation costs + Replacement co sts + Training costs)Separation costs1. Exit interview cost for salary and benefits of bo th interviewer and departing employee during the ex it
interview = $30+$30 = $602. Administrative and record-keeping action = $30
Total separation costs = $60 + $30 = $90
Replacement costs1. Advertising for job opening = $2,5002. Preemployment administrative functions and record -keeping action = $100
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2. Preemployment administrative functions and record -keeping action = $1003. Selection interview = $2504. Employment tests = $405. Meetings to discuss candidates (salary and benefi ts of managers while participating in meetings)= $2 50
Total replacement costs = $2,500 + $100 + $250 + $4 0 + $250 = $3,140
Training costs1. Booklets, manuals, and reports = $502. Education = $240/day for new employee’s salary an d benefits x 10 days of workshops, seminars, or
courses = $2,4003. One-to-one coaching = ($240/day/new employee + $2 40/day/staff coach or job expert) x 20 days of one- to-
one coaching = $9,6004. Salary and benefits of new employee until he or s he gets “up to par” = $240/day for salary and benefit s x
20 days = $4,800Training costs = $50 + $2,400 + $9,600 + $4,800 = $ 16,850
Total turnover costs= $90 + $3,140 + $16,850 = $20, 080