Wastage analysis

1. Wastage Analysis
 In human services, turnover, or employee withdrawal behavior,
has become a serious personnel problem.
- Turnover creates
a. considerable costs for the organization,
b. decreases productivity,
c. disrupts worker relationships,
d. can increase waste and accidents.
- Thus turnover must be considered during human resource
planning especially in regard to supply forecasting.

2.  It is an element of labour turnover.
 It is severance from the organization, which includes
voluntary retirement, normal retirement, resignations,
deaths and dismissals.
 It decreases with the increase of length of service
 It also decreases with increased skill exercise and
age.

3.  Organizations must expect a certain amount of turnover,
but they must also be able to calculate and evaluate their
turnover rate.
 To calculate turnover rates, administrators must first define
a "turnover." Discharges, retirements, and deaths may be
areas that create problems in the definition.
 Once a definition is determined, however, data collection
and calculation of turnover rates is relatively
straightforward:
Count the number of turnovers and then compare that
number with the total number of employees. From this, a
percentage rate is determined.

4.  Turnover rates depend on employees’ demographic, social
and economic characteristics, as well as on labor market
conditions. Usually, exit rates are higher (Taylor 2005):
− the lower the age of an employee,
− the shorter the span of work in a particular company,
− the lower the employee skills and responsibility,
−the lower the unemployment rate in the economy

5. Evaluation of turnover- ways to conduct turnover
analysis-
1. Comparison studies are among the simplest.
Administrators may want to compare the turnover rate in
their organizations with that of other organizations, with
data presented by government agencies or trade
organizations, or with organizational objectives.

6. 2. Internal turnover comparisons often involve the dividing
of employees who have left by a variety of factors:
a. department,
b. supervisor,
c. performance level,
d. length of employment,
e. career path (external hire or internal hire/promotion).
The division of employees in this way can provide insight
into the causes of turnover.

7. 3. Qualitative information to supplement the analysis
can be obtained by –
a. job satisfaction surveys
b. exit interviews.
Ultimately, solutions or preventative strategies can be
sought.

8. Methods of Wastage Analysis
1. Labor Turnover Index:- It indicates the number of leavers
as percentage to average number of employees.
Number of employees leaving 100
Average number of employees employed

9. 2. Stability Index :
number with more than 1 year service now 100
total employed 1 year ago

10. Cohort analysis
 Cohort A group of people sharing a common temporal
demographic experience who are observed through time.
For example, the birth cohort of 1900 is the people born in that
year. There are also marriage cohorts, school class cohorts, and
so forth.
 Cohort Analysis - Reverse of Turnover Analysis, also known as
Survivor Analysis and used to calculate retention rate
 Manpower Cohort is a Group of staff who are more or less
Homogenous and who joined the organisation at the same time.

11. COHORT ANALYSIS :
 The theory behind this method was developed by K.F. Lane
and J.E. Andruo
Eg.
No. of employee engaged in the beginning of a year = 500
No. of employee leavers for different length of service as
1st Year = 50
2nd Year = 45
3rd Year = 40
4th Year = 35
5th Year = 30

12. Survivor Analysis = No. of emp. remaining at a given time 100
No. of emp. engaged at the start

13. Census Analysis
 Cohort analysis was good only for small homogeneous group.
Census analysis can eliminate this problem, taking into
account a cross-section of the organization.
 Census analysis involves taking a snapshot of different cohort
at a point in time and combining them to estimate survival by
length of service.

14.  Census analysis requires three sets of data –
a. number of employees at the beginning of the census.
b. number of employees at the end of the census.
c. number of leavers during the census period.

15. Length of service as
on 01-01-2018 in yrs
No. of employees
as on 01-01-2018
Employee separated
during 2018
No of employees
as on 31-12-2018
Turnover
rate
Survival
rate
0-1 20 6 14 0.3 0.7
2-3 20 4 16 0.2 0.8
3-4 25 5 20 0.2 0.8
4-5 10 3 7 0.3 0.7
5-6 18 3 15 0.16 0.83
6-7 24 4 20 0.16 0.83
7-8 10 2 8 0.2 0.8
8-9 15 3 12 0.2 0.8
9-10 8 1 7 0.12 0.87
Total 150 31 119 0.206 0.793

16. Attrition Analysis
 Attrition is the reduction in the number of employees through
resignation, retirement and death.
 Attrition analysis contributes to the details generated by HR
managers on employees leaving the company.
Types of attrition –
a. Voluntary
b. Non-voluntary

17. Why attrition happens ?
External Factors
Emp. Skills
Emp. Behaviour
Job fit
 Employee Turnover
Internal Factors
Recognition
T&D
Communication
Compensation

18. Benefits of Attrition Analysis:
 It brings to fore the cause of employee disengagement.
 Enables HR managers develop long-term strategies to reduce attrition.
 Competitive measures to enhance company brand image.
 Develops and shapes drills that benefit both the management and the
employees.
 Enhanced work culture

19. Attrition Rate
 The rate of attrition or the inverse retention rate is the most
commonly used metric while trying to analyze attrition.
Attrition rate = No. of attritions / average no. of employees * 100

20. Example-
Suppose a telecommunications company had 150 employees
as of April 1, 2015. During that month, 20 employees
voluntarily left the company. Also, the company hired 25 new
employees. Calculate the monthly attrition rate.
Calculate its attrition rate for the second quarter of 2015. This
would be April, May and June 2015.The beginning number of
employees on April 1, 2015 was 150. Over the course of the
quarter, 30 people left and 40 new employees were hired.

21. Suppose the telecommunications company in the above
example had a total of 62 attrition for the year. They
typically hire 20 percent more employees for the last
quarter of the year for their busy season. The average no of
employees for every last 3 quarters is 155.
Calculate the annual attrition rate.