HAL Associates is a strategy consulting firm that divides its consultants into three classes: Associates, Managers, and Partners. The firm has been stable in size for the last 30 years, ignoring growth opportunities in the 90s, but also not suffering from a need to downsize in the recession at the beginning of the 21st century. Specifically, there have been – and are expected to be – 200 Associates, 60 Managers, and 20 Partners.
The work environment at HAL is rather competitive. After four years of working as an Associate, a consultant goes “either up or out”; that is, becomes a Manager or is dismissed from the company. Similarly, after working as a Manager for six years, a Manager either becomes a Partner or is dismissed. The company recruits MBAs as Associates; no hires are made at the Manager or Partner level.
1. How many new MBA graduates does HAL have to hire every year?
2. What is the probability (in %) that a new hire at HAL will become a Manager (as opposed to being dismissed after 4 years of working as an Associate)?
3. Every year 2 Managers are promoted to Partner level. How many years on average does a Partner stay in the company?