Friday, November 20, 2009

Healthy company

The working world is very dynamic. It is very rare to see a company without any staff turnover. Depending on the type of business, the turnover rate may easily reach above 50%, e.g. hotel and service industry. Part of the issue is the long hours in those industry which does not tend to translate into adequate pay for the employees. Despite whatever turnover rate existing, I believe the spread of employee service duration can be used to describe the effectiveness of the company.

I would split the service duration in a company to short (0-5 years), medium (5 to 10 years) and long term (above 10 years). I believe that an effective company the spread of service duration should follow a kind of normal distribution where most of the employees should be in medium service durations.

Young employees of 20s to mid 30s are known to job hop and change job regularly to (1) find a job that suit themselves better; (2) negotiate better working condition. However, some of those 'lucky' youngsters will land in their dream job from day one or near day one. These are the people that would stay in medium to long term. People in medium term would be expected to have master their work and be in good productive part of their life while not being paid excessively. Thus, they are the ones which would be upholding the effectiveness and productivity of the company. Employees serving less than 5 years would be expected to still learn the rope and still climbing in productivity. Unless the company attempt to keep more of this people, the company will experience high turnover for the young employees.

Employees who have served the company for more than 10 years are known to be loyal and die hard fans of the company. They are the stalwart employees. However, their salary is often rather high compared to what they do. After all, you would have few people in the top management (normally people who has served for a long time). The rest would be low or medium level employees. Hence, their work would normally considered of lower value add but yet due to their long service, they are paid quite well.

Therefore, I believe an effective and productive company would be those with employee in medium service duration followed by a short service duration. A company that experiences a hollow medium service duration employee , i.e. lots more oldies and youngsters, may not function as effectively as they should be since the employees are either still (i) learning the rope or (ii) paid overly high compared to their value.

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