Not much time left for re-planning

26 March 2014

There are various studies and numbers flying around, but on a high level there are approximately 30.000 employees working in the SSC industry in Hungary and with the arrival of new companies this number is still increasing, though much slower than a couple of years ago. The approximate 80 companies competing for resources are looking for young people aged 20-30, speaking English and at least one more European language, holding a diploma of economics/Finance or IT. In the meantime, these young people are the most likely to consider taking work opportunities abroad, since they are not settled yet, socially flexible, ready for foreign experience and challenge.  

The willingness of Hungarians to migrate is 20%, with 48% of those under 30 saying they plan to leave the country. It is easy to imagine what the loss of almost half the young population would mean to an already aging society and also to the economy of the country.

If nothing changes, Hungary will soon not be able to supply the necessary resources to Shared Services centers. Those who are already working for the industry will further increase their price by frequent job-hopping, this way increasing the employment cost, on long term risking Hungary’s competitiveness in the region.

Filling open positions would be still relatively easier task for centers in the development phase since they are offering several jobs the same time and are preferred for job-seekers as well, this way land on the top of the Recruitment agencies’ priority list. Other way to land on the top of this preference list is to offer salary above the market average, which at the end of the day would significantly increase the SSC cost and Hungary soon would not be a competitive location for shared services despite of the illustrious position in the 2013 Site Selection Magazine survey (see graph below).

High fluctuation increase the cost of SSC

“The only constant thing at SSC is change” this is an often used slogan at Shared Services. Part of the long term strategic planning is the scope extension, which means transition of new tasks to the center and another factor is the market penetration, which refers to the number of markets services by the center.

Due to the nature of services, the constant change and high performance expectations, fluctuation at Shared Services is quite high (15-20%). SSC employees are often characterised as job-hoppers, who are ready to move to another (mainly SSC) job for a higher position, wider variety of tasks or even small amount of salary increase and the promise of future opportunities.

With the tendency of narrowing offer and extending demand, the fluctuation rate will further increase to 20-25% which will have serious impact on the already high cost of replacement.

Change is costly on its own – effort and resources put into planning and executing of the change and also consequences of a poorly managed change, like low performance, bad mood of people, failed expectations, wasted money and time are all potentially leading to high fluctuation.


“Like it or leave it” - How much replacement costs for your company?

Employers tend to easily react to their employees dissatisfaction by “like it or leave it”, nevertheless this is without considering the real cost of leaving and replacing. It is true that everyone is replaceable, but it does matter how much each replacement cost.

There are some people who prefer stability and would remain loyal to their current employers even if approached by another opportunity. Job content, good colleagues and work environment count for these people and would not risk it for the uncertain. It is increasingly true in the current economical situation.

On the other hand, as stated in the previous point, the other type of employees are easily tempted by a job offer and ready to move for a slight excitement of change.

Let us review the cost of loosing and replacing a team member level employee. With a very conservative calculation the replacement of a team member is 4 times as expensive for the company as the salary cost of the person. So it is worth building your own retention strategy which is differentiating you from others.

How it adds up to 4 times? We must encounter for the recruitment and training cost, the time for handling HR, IT and facilities for the leaving employee and for the new colleague, but the most costly is the non-productivity due to the open position. Beside the tangible there are some intangible factors as the low morale, overload and loss of productivity in the team and knowledge leak.

In summary the bottleneck for growth of the SSC sector is the limited availability of human resources.

BDO SSC Consulting is offering the Improve SSC Resourcing programme which will enable SSCs to pro-actively revise their resourcing strategy and avoid the pitfall of late action causing lack of resources, high cost and paralysed operations.