November 27, 2006

The price of offshore attrition

Big attrition is not a good thing in any kind of job. In knowledge worker jobs attrition is very significant in the total cost of doing business. Most of the time though we can't really put a dollar figure on it. Let's say 1 out of 4 employee leave a team through out the year, and the ramp up for a job to get to the avg level of the team is 6months(50% of productivity of avg team member, so 3months of non productivity), on a team of 8 people. So conservatively for one person leaving 1.5month since less productive, replace the person (most likely a ghost - no time wasted), 3months no real consistent output, mentor time over the next 6months, 1.5month through out. The ideal output of the team with no attrition is 8people * 12months = 96man/months, with an attrition of 25%, a team loose at a minimum 12man/months or 2 * (1.5+3+1.5). And there is also the fact that the overall knowledge, or avg of the team will be trending down. More junior staff is less depth in the understanding of the system, so less productivity. So next time it's time to calculate the cost of the offshore team don't forget to add your attrition figure for 25% attrition rate, it is a minimum of additional 12.5% to the hourly rate. The best is to get into turn key solutions (project outsourcing) or have good performance indicators to monitor closely to have good leverage with the vendors.

1 comment:

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