MSHR 6610 Week 8 Turnover Cost Analysis Example

Turnover Counted in Lost Productive Weeks: A Cost Analysis for a Utility Contact Center That Follows One Departure From Notice to Full Speed and Prices Overtime, Hiring Ahead and an Overflow Vendor on One Scale

Student Name

Walden University

MSHR 6610: Aligning Human Resources with Business Operations

Instructor Name

Month Day, Year

Turnover Counted in Lost Productive Weeks: A Cost Analysis for a Utility Contact Center That Follows One Departure From Notice to Full Speed and Prices Overtime, Hiring Ahead and an Overflow Vendor on One Scale

Why Count in Weeks

Northfork Power & Light's contact center reports annual agent turnover as a percentage, about 28 percent last year. That figure tells the operations director little about next month. This analysis converts turnover into productive weeks lost, the unit in which she schedules. It follows one departure from the moment an agent gives notice until the replacement works at full speed, adds up the weeks of productive capacity lost, multiplies by the year's departures and then prices three ways of covering the loss. Cascio and Boudreau (2011) argue that turnover costs are best understood by tracing the specific activities and lost productivity a departure causes, rather than by applying a general percentage of salary.

One Departure, Followed

Each departure of a certified agent removes about 13 weeks of productive capacity, roughly a quarter of a year. Last year 37 agents left, of whom about 30 were certified. Thirty departures at 13.2 weeks each come to about 400 productive weeks, the equivalent of about eight full-time agents missing all year.

Table 1

Productive Weeks Lost to One Departure of a Certified Agent

Composite utility. Durations and productivity levels are illustrative.

Where the Loss Lands

The loss is not spread evenly. Evening agents leave at a higher rate than daytime agents, about 38 percent a year against 22 percent, and most vacancies are posted for evening shifts. The eight agents' worth of missing capacity therefore falls mostly in the hours after five in the evening, where the coverage memo found the recurring shortfall. Hom et al. (2017) note that turnover concentrates where job demands and schedules are hardest, which matches this pattern.

Three Ways to Cover the Loss

Hiring ahead is the least expensive option and the only one that adds certified capacity. It uses certification seats that the constraint brief showed are scarce, but the pipeline currently runs well below capacity, so the seats exist. Overtime costs more and, used at this scale, would push tired agents toward leaving, adding to the loss it is meant to cover. The vendor costs most and cannot handle the billing calls that make up much of the evening load.

Table 2

Annual Cost of Covering About 400 Lost Productive Weeks

Composite utility. Costs illustrative: overtime paid at 1.5 times a $27.50 wage, added positions at a loaded cost of about $28.50 an hour for 2,080 hours, vendor at about $54 an hour.

Recommendation

The analysis recommends hiring ahead: adding about eight positions to the planned headcount and filling them through full certification cohorts, so that certified replacements are ready when agents leave. Overtime should be kept for short-term gaps, as in the coverage memo, and the vendor held as a reserve for storms.

What the Analysis Does Not Count

The weeks-lost figure is also sensitive to the vacancy period. If recruiting ran on the training calendar, as the constraint brief proposed, the five-week vacancy would shrink to about two, cutting the loss per departure from about 13 weeks to about 10 and the annual loss by roughly 90 productive weeks, the equivalent of nearly two full-time agents, at almost no cost. That makes faster, calendar-driven recruiting the cheapest single improvement available, and it should start regardless of which coverage option is chosen. The figures leave out several costs: recruiting and onboarding expenses, supervisors' time with new agents, errors by new agents and the effect of long waits on customers. Including them would make turnover more expensive and strengthen the case for reducing it, not only covering it. Boudreau and Ramstad (2007) argue that HR spending earns its keep through the business results that matter most to the operation; here those are evening service and resolving billing calls.

References

Boudreau, J. W., & Ramstad, P. M. (2007). Beyond HR: The new science of human capital. Harvard Business School Press.

Cascio, W. F., & Boudreau, J. W. (2011). Investing in people: Financial impact of human resource initiatives (2nd ed.). FT Press.

Hom, P. W., Lee, T. W., Shaw, J. D., & Hausknecht, J. P. (2017). One hundred years of employee turnover theory and research. Journal of Applied Psychology, 102(3), 530-545. https://doi.org/10.1037/apl0000103