BEST PRACTICE: The trick is to adopt a profit-centre approach, quantify targets and deliver results. |
It's time to acknowledge that human resource departments are also profit centres in their own right. ICICI Bank's HR department has been leading the way in delivering key revenue targets. |
"If you look at our entire HR system"" sourcing, training and managing information system"" we should deliver 8 to 10 per cent of the cost budget every year, by running our HR programmes and recruitments in a tight manner," says K. Ramkumar, group chief HR officer, ICICI Bank. |
At the core of this achievement is the forecasting technique used by the HR team, which seeks to achieve accurate results each month. Industry analysts estimate that this could amount to a saving of over Rs 100 crore a year. |
The bank's HR team forecasts attrition by doing three things. In the third week of every month, it holds a forecasting meeting where projections are made for resource needs for the following three months. |
The need for the following month is made in a more concrete manner to take care of immediate requirements and for the other two months it's more of a sizing exercise to forecast need. |
"We take inputs every month on market trends to figure out what kind of candidates other banks and insurance companies are recruiting. We also look at the retail plans, if for instance a Wal-Mart has entered the scene or a Deutsche Bank is getting into retail banking, or if another player is increasing its capacity. These would have an impact in the market," says Ramkumar. |
After this assessment, the bank classifies attrition rates into high, medium and low (above 25 per cent is high, 12 - 25 per cent is medium and below 12 per cent is low). It also classifies attrition into 'critical' and 'non-critical' and by geography. |
"Their bonus is linked to the quality of the forecast. If our team manages an 85 per cent accuracy in their forecast, then it's fine," says Ramkumar. |
The inspiration comes from Dr Eliyahu Goldratt, who held a session with the bank over two years ago. "The principles of production and supply chain management can be put to work for HR. We always keep a nominal constraint of around 5-7 per cent in the supply of human resources, as this forces the system to innovate and deliver its best," says Ramkumar. If the system has 90 per cent capacity, it's a comfortable situation. |
This has worked well, as opposed to benching, as ICICI Bank typically puts its new recruits though a mandatory four-week induction session. "This is almost like a bench for us, but not really, as it gears the people towards their goals and challenges," he says. |
Moreover, if benching had been adopted, a back-of-the-envelope calculation shows that employee costs would amount to Rs 3 to 5 crore a month for just 1,000 people (the bank hires 1,500 people a month). |
This calculation shows that the cost rises to Rs 15 crore for one quarter, or Rs 60 crore for four quarters. |
"Why must we carry this extra cost by benching? It's fairly easy to pick up jobs at the lower level, but more difficult for niche jobs at the middle to senior level. Besides, niche jobs account for only 500 positions, and internally we have an agreement that whenever attrition happens at those levels, we keep our system and training geared and move people up with allied skillsets from within," he says. |
Such measures involving forecasting and working with a deliberate marginal constraint in the system are paying off in monetary terms as well. |
"We are like cost managers in a sense and 20 per cent of our bonus comes from saving on costs," says Ramkumar. That's how the HR departments delivers 8 to 10 per cent of the cost budget every year. |
In an attempt to professionalise the forecasting system, Ramkumar has even hired a former air traffic controller from the Indian Navy. |
He says that if Heathrow Airport sees a flight land every 30 seconds, then surely an organisation should be able to calculate its needs. "The attempt is to be scientific and not run this operation like a quack." |