APTURJA POWER LIMITED: HUMAN RESOURCES ANALYTICS

ItwasApril2020,andKailashKaushik,businessheadatApturjaPowerLimited(APL),wasworried."Why arethesefreshcollegeentrantsleavingus?"KaushikaskedKeshavChaubey,humanresourcesheadatAPL. "Idon'tunderstandatall,"Kaushikcontinued."Voluntaryattritionamongthemisrisingeveryyear."

Nearlyhalfofthe2,000employeeshiredbyAPLinthepasttwoyearshadleft withinayearofjoining.Of the 1,000 new hires each year, APL had reported 545 resignations in fiscal year (FY) 2019, as compared with 455 in FY 2018. Chaubey explained to Kaushik that hiring suitable candidates and acquainting them with the organization required enormous effort and capital, especially in the regulated power sector. Both senior officials at APL realized that it was high time they prevented these rising first-year attritionlevels.

Chaubey believed that candidates hired for a particular function were expected to stay in that role for a minimum of two to three years. He was of the view that students from elite engineering and management institutions often had unrealistic expectations, since most of them had no prior work experience. Chaubey had been with APL for nearly 21 years and had witnessed the shifting demands of new recruits, who appeared to increasingly prioritize work-life balance and reduced monotony over earning a stable income, whichcontrastedwiththeprioritiesofemployeesfromtheearliergeneration.However,Chaubeyhadnever before observed such high rates of attrition among new hires atAPL.

Chaubey recalled what an employee in the Production Department had said about his decision to resign: "Sir,Ireallylikedwhatwasofferedtome,butIwantedtodefinemycareer,myway.Ihadmyownideas, but I have been put under burdensome targets here. I can't just do the mundane work of managing labour and operating machines." However, the employee's ambivalent statement did not reflect his performance at APL over the last 12 months. His direct manager had rated him as an extraordinary performer who connected well with technicians and labourers, handled shifts independently, and achieved all production targets. Chaubey contemplated whether the employee's statement was an anomalous opinion or whether it was representative of the developing expectations of newemployees.

Didthisemployee'sstatementindicateapotentialprobleminthehumanresources(HR)practicesthatAPL maintained? Chaubey wanted to identify reliable indicators so that he could tackle the situation and prescribe an appropriate action plan to reduce new-hire turnover and thereby strengthen APL's human capital. He wanted to justify his experience and presence at APL by delivering a suitable HRstrategy.

At this moment, Chaubey recollected his rendezvous with Rishabh Sharma, a recent master of business administration graduate, who had been with the plant for about a year. Since Sharma brought a fresh perspectiveandrelatedwellwithhiscontemporarynewemployees.Chaubeyinvitedhimtoanalysereliable indicators so that he could tackle the situation and prescribe an appropriate action plan to reduce new-hire turnover and thereby strengthen APL's humancapital.

COMPANY DESCRIPTION: APL

APLwasthepowerdistributionbusinesssubsidiaryoftheIndianconglomerateApturjaGroup.Itoperated under a unified board and management, with its head office in New Delhi. With an aggregate capacity of 8,880 megawatts (MW), the company had a turnover of US$2.27 billion¹ in FY 2019 (see Exhibit2).

Asof2020,APLhadfivefunctionalpowerplants.Althoughtheseweredistributedacrossthecountry,they followed standard operating procedures. The company operated six 250 MW supercritical boilers and five 330 MW subcritical boilers at Korba, Chhattisgarh; six 330 MW units at Mundra, Gujarat; six 250 MW units at Raigarh, Chhattisgarh; five 250 MW units at Singrauli, Madhya Pradesh; and five 200 MW units at Kawai, Rajasthan (see Exhibit2).

India's electricity sector was highly regulated;itwasmonitoredby theCentral ElectricityRegulatory Commission (CERC)toensure thatnoprofiteeringoccurred. Power purchaseagreements (PPAs) madeup themajorityofelectricitysalesinthemarket.²Indiahadasinglenationalgrid,bywhichpowercouldbetransferredfrom oneregiontoanother accordingtodemand andgeneration.APLhad long-termPPAs with thestate governmentsof Gujarat, Chhattisgarh, Rajasthan,Madhya Pradesh, and Odisha, covering about 8,500MW.

Generation tariffs played a pivotal role in scouting for potential buyers to sign PPAs. The various costs to berecoveredthroughtariffsincludedcapacitycosts(andrelatedcapitalcosts);interestonequity,debt,and workingcapital;depreciation;operationalandmaintenanceexpenses;andenergychargesconsistingoffuel charges. Return on equity was fixed at 15.5 per cent by CERC regulations, creating competition among generators to cut their respective generation costs and hence reduce theirtariffs.

ORGANIZATIONAL VALUES

APL's corporate goal was to create lasting value for its stakeholdersincluding its power consumers, employees, and shareholders, through processes that focused on consistent generation and delivery of regular power to national customers, including power distribution companies and open accessconsumers.³ APL's strength rested in its unwavering focus on optimal production, its seamless training resources, and the continuous support that employees received from seniormanagement.

APL hadmaintainedanintegrated approach sinceitsinception.Theorganization focusedonoptimizing operations,withreliablepowergenerationatthecoreofAPL'sperformance.ItsProductionDepartmentattracted themaximumnumberofbonusesandrecognitionacrossallthedepartments,furtherincentivizingemployeestoachieve productiontargets.

¹ All currency amounts are in US dollars unless otherwise indicated.

²DiscussionPaperonMarketBasedEconomicDispatchofElectricity:Re-designingofDay-aheadMarket(DAM)inIndia,No RA-14026(11)/3/2018-CERC, Prepared by Staff of Central Electricity Regulatory Commission, December, 2018http://www.cercind.gov.in/2018/draft_reg/DP31.pdf, Introduction (1.2), Page5.

³ Open access customers procured power directly from power generation units, whereas traditional consumers availed their power from commercial power distribution companies, which acted as aggregators in the supply chain.

Theorganizationhadevolvedrapidlysinceitsinceptionin1968.AsperCERCregulations,powerdispatch in the transmission grid was scheduled according to the energy charges quoted by the generator, creating cost competitiveness among the power producers.⁴ APL developed an agile culture to address this competitiveness in the power sector. In order for APL to compete, management strove to keep the organization increasingly cost-effective, agile, and efficient. With rising agility, APL provided a competitive milieu for professionals to hone their skills in power engineering, operations, and project management. This setting was particularly suited to professionals who found this target-driven culture, competitiveness, and team performanceencouraging.

HR STRATEGY

Staffing

Every year, APL hired new graduates through several channels. Over the past few years, 1,000 new employees had been recruited annually, which aligned with the company's strategic aim of expanding operations and capacity. The recruits were distributed equally across APL's five units. The HR head believed that although campus recruitments yielded high-quality hires, four additional specialized hiring methods were also required: (1) remote recruitment from campuses that APL did not visit; (2) recruitment from employee and union wards; (3) internal promotions from non-executive grades; and (4) recruitment through LinkedIn. As such, APL had five channels for recruitment, with each channel accounting for 20 per cent of employee recruitments.

APL defined a list of strategically important campuses around the nation. These campuses were identified onthebasisofreputationandlevelofengagementwiththeorganization.Campusesmaintainedengagement byframingresearchonpracticalproblemsinAPL'spowerplants,sendingstudentsfortechnicalexcursions, and inviting APL's presence in their conferences and guest lectures. On average, APL recruited at 18 campuses each year, with each campus visit costing the company approximately$1,000.

After filling 20 per cent of available posts through campus recruitment, the next 20 per cent of vacancies were filled using online job portals. In particular, graduates from campuses that APL did not visit were targeted. This mode of recruitment was cheaper for APL, costing roughly $100 for each recruitment year and $20 per candidate in administrative costs.

Thenext20percentofpostswerefilledbycandidateswhohadbeenreferredbyexistingemployees,based onsomeproofofmeritorbloodrelation.Thismode,knownastheAPLWardProgram,whichwasoffered to employees who had completed at least 10 years of employment with APL, cost APL $20 perhire.

Agency hiring took care of candidates with referrals from labour unions. APL had committed to recruit 20 percentofpostingsfromlabourwardstonon-executiveroles.ThismodecostAPLlessthan$150peryear.

The remaining 20 per cent of candidates were hired through LinkedIn based on their profiles and their interestintheorganization.Thesewerehighlyselectiveroles,mappingkeyskillstorelevantpositions.This mode carried scouting costs of about $200 over each recruitment cycle, as well as $20 per candidate in administrative costs.

⁴ Extension of Pilot on Security Constrained Economic Dispatch (SCED) of InterState Generating Stations (ISGS) Pan India, CENTRAL ELECTRICITY REGULATORY COMMISSION, NEW DELHI, Petition No. 08/SM/2019 (Suo-Motu), September

2019,http://cercind.gov.in/2019/orders/08-SM-2019.pdf, 2(b), Page 2.

Compensation

APLmaintaineda rateof compensation significantly higher than thatof itsmajorcompetitorsin thepower sector.As such,it wasone of themost sought-after employerson thecampuses from whichitrecruited. Compensation rateswerepredefined accordingto thepositions offered.Forexample, assistant managersat thelowest executive level(a role offeredtoengineering graduates)wereoffered an annual packageof $10,500.

Such compensation attracted the best talent to compete for jobs at APL. In turn, APL enjoyed huge brand value among young people competing for employment across the full range of its hiring channels.

Training

From the moment new employees began the onboarding process, APL heavily invested in raising the potential of the organization's workforce. APL organized a unique orientation program that provided the new employee with a signing bonus, accommodation for a week at a five-star hotel, personalized onboarding, travel reimbursement, custom trips to nearby tourist destinations, and engagement sessions with key personnel. APL spent about $1,400 in associated costs on each new employee. The company provided each new employee with training relevant to the department that the employee had joined and to the employee's responsibility and performance.

Apartfromaninitialsixmonthsoftraining,whichinvolvedacquaintingtheemployeewiththepowerproduction systemsandorienting themto bestpractices followedat APL,the companyalso offered selective role-specific trainingona variety oftopics, which included,butwerenot limited to,managementinformation systems modules,Six Sigma, qualityimprovement, customerrelationship management, and leanproduction.Training efficiencywascloselymonitored,basedonevaluationoftheemployeefollowingeachtrainingsession.

Work Organization

APLdivideditsworkforceinto14departments(seeExhibit3).Eachdepartmenthaddefinedstrategiesand goalsforeachquarter.Althougheachdepartmentfunctionedindependently,allworkfunctionswereclosely related, deriving value for the organization in a coherentway.

Power production lay at the heart of operations at APL. The company focused on optimizing production through cost-cutting initiatives and the adoption of lean technologies. All other departments sought to maximize their contribution toward achieving this long-term goal.

APL continued to monitor staff performance throughout the duration of staff employment. Most managers found employees' performance to be satisfactory; however, in some cases managers struggled to ensure employees were sufficiently productive. To promote optimal growth among its employees, APL proposed a promotion or a raise in salary, or both, for every individual, based on the individual's contribution to the department, dedication, and performance in the fiscal year under consideration.

APL assigned notice periods to employees according to the role that the employee was hired for. APL highlighted its zero-day notice period for trainee management and middle management roles to emphasize its commitment to keeping employees, and to ensure that those who wished to pursue other opportunities, could do so at will. APL was known as an employer that valued ambitious staff who had the urge to give their best; in return, APL expected the best treatment. However, APL required a longer notice period for certain roles and positions, including personnel in essential services, such as core power generation, and key positions in top management, where it remained very important to maintain staffing numbers. To strengthenitshumancapital,APLhadmaintainedanaverageof200newhireseachfiscalyearacrosseach plant location for the past fewyears.

The organization had developed a township in the vicinity of each power plant and therein offered a broad range of amenities, such as residential quarters, supermarkets, and recreation centres, which in turn employed and were inhabited by the local community. APL was accustomed to organizing engaging extramural activities among its employees, labour unions, skilled technicians, and township dwellers.⁵ These activities included occasional cricket matches, safety drills, departmental trips, the celebration ofall national festivals, and the organization of skits and role-plays throughout theyear.

THE PROBLEM

Chaubeyhadnoclueastowhatwasgoingwrongwiththenewhires.Therehadbeennosignificantchange to hiring practices over the past decades, especially with regard to recent graduates. In the past five years, Chaubeyhadcheckedwithstaffmultipletimesabouttheiraccommodationsandfoodprovisions,andthese were reported as being optimal. Chaubey was also driven to ascertain the effectiveness of his recruitment activity. Rather than rely on his own instincts, Chaubey decided to take a data-driven approach to address thechallengeofhighlevelsofturnoverwithinthefirstyearofemployment.Hewantedtoidentifyindicators that would aid in forming a strategy that could address the currentcrisis.

Chaubey invited Sharma to identify indicators based on data (see Student Spreadsheet, product no. 7B21C001) and additional information provided (see Exhibit 4) in order to prescribe a suitable strategy to addresstheissue.ThistaskwasthefirstdirectassignmentthatChaubeyhadofferedSharmasincethelatter had joined the company. Sharma wanted to make the most out of this opportunity to have his talent recognized. He had attended a course on HR analytics during his management studies and was excited to analyzethenumbersandframeaprescriptivestrategy.Bydoingso,hewouldcreatevaluebothforhimself within the organization as well as for the organizationitself.

EXHIBIT 1: APTURJA POWER LIMITED'S PROFIT AND LOSS ACCOUNTS, 2015-2019 (IN US$ MILLION) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 INCOME Revenue from Operations 1,210.13 1,361.68 2,043.07 2,268.97 2,274.24 Other Operating Revenues 0.00 0.00 48.23 54.28 35.87 Total Operating Revenues 1,210.13 1,361.68 2,091.30 2,323.24 2,310.11 Other Income 342.54 417.77 153.92 334.09 387.59 Total Revenue 1,552.67 1,779.45 2,245.22 2,657.33 2,697.70 EXPENSES Purchase of Stock-in-Trade 283.24 88.58 113.47 186.50 306.58 Cost of Fuel 388.17 444.86 561.31 664.33 674.43 Changes in Inventories of FG, WIP, and Stock-in Trade 0.00 28.14 0.00 0.00 0.00 Employee Benefit Expenses 17.07 19.01 45.34 62.70 59.34 Finance Costs 430.09 535.62 843.23 797.20 750.11 Depreciation and Amortization 136.31 Expenses 152.02 293.07 368.29 366.11 Other Expenses 37.61 35.37 350.26 394.78 345.71 Total Expenses 1,292.49 1,303.60 2,206.67 2,473.80 2,502.29 Profit/Loss before Exceptional, Extraordinary Items, and Tax 260.18 475.85 38.55 183.53 195.41 Note: FY = fiscal year: FG = finished goods WIP = work in process Source: Created by the authors.EXHIBIT 2: APTURJA POWER LIMITED'S FUNCTIONAL POWER PLANTS ACROSS INDIA Total Distance from Distance from Location No. of Units Unit Capacity Nearest Urban Nearest (MW) Capacity (MW) Area (in km) Airport (in km) 250 1,500 Korba 330 1,650 200 275 Mundra 330 1,980 45 60 Raigarh 250 1,500 110 135 Singrauli 250 1,250 50 75 Kawai 200 1,000 300 375 Note: MW = megawatts; km = kilometres, Source: Created by the authors.EXHIBIT 3: DEPARTMENTS AT APTURJA POWER LIMITED Administration Quality Assurance Finance Research and Development Human Resources Safety Information Technology Sales and Promotion Legal Supply Chain Management Production Strategy Projects and Engineering Warehouse Source: Created by the authors. EXHIBIT 4: ADDITIONAL INFORMATION ABOUT NEW HIRES IN THE FIRST YEAR OF EMPLOYMENT Performance rate: A performance rating was given by the immediate manager based on mapping the employee's key result areas. The performance rate depicted the number of employees with a performance rating above 70 per cent in a particular FY. In FY 2018, of 1,000 employees in their first year of employment, 764 had a performance rating above 70 per cent. In FY 2019, this number grew to 778. Training efficiency rate: Training efficiency was based on evaluation of the employee after each training session. This evaluation was mostly written; however, in crucial trainings, such as boiler operations, the trainer evaluated the employee based on performance with the equipment for 30 days. The training efficiency rate depicted the number of employees with training efficiency above 70 per cent in a particular fiscal year. In FY 2018, out of 1,000 employees, 808 had a training efficiency rating above 70 per cent. In FY 2019, this number grew to 812. Retention rate: The retention rate indicated the number of employees who were retained after their first year of joining the company. In FY 2018, out of 1,000 employees, 455 resigned within the first year. In FY 2019, this number grew to 545. Note: FY = fiscal year. Source: Created by the authors