analysing HR performance

• Every business experiences the departure of employees.

  • Retirement / Maternity / Death / Long-term Illness

  • Unsuitability

  • Changes in strategy (e.g. closure of locations)
• Labour Turnover

  the percentage of the workforce that leave a business within a given period
• labour turnovers formula

  (no. of employees leaving during period/average number employed during period) x100
• factors can influence labour turnover

  • Type of business

  • Pay and other rewards

  • Working conditions

  • Opportunities for promotion

  • Competitor actions

  • Standard of recruitment

  • Quality of communication in business

  • Economic conditions

  • Employee loyalty
• labour turnover has the potential to add significantly to business costs

  • Higher recruitment & training

  • Cost of temporary or cover staff

  • Increased pressure on remaining staff

  • Disruption to production / productivity

  • Harder to maintain required standards of quality and customer service
• improve or minimise labour turnover

  -Effective recruitment and training

  • Provide (more) competitive pay and other incentives

  • Job enrichment and empowerment

  • Reward staff loyalty
• Labour Productivity

  • Labour costs are usually a significant part of total costs

  • Business efficiency and profitability are closely linked to productive use of labour

  • In order to remain competitive, a business needs to keep its unit costs down
• Key factors that influence the level of labour productivity

  • Extent and quality of fixed assets (e.g. equipment, IT systems)

  • Skills, ability and motivation of the workforce

  • Methods of production organisation

  • Extent to which the workforce is trained and supported (e.g. working environment)

  • External factors
• Labour productivity formula

  output per period/no. employees at work
• improving labour productivity

  • Measure performance and set targets

  • Streamline production processes

  • Invest in capital equipment (automation + computerisation) • Invest in employee training

  • Improve working conditions
• issues when trying to raise labour productivity

  • Potential “trade-off” with quality – higher output must still be of the right quality

  • Potential for employee resistance – depending on the methods used (e.g. introduction of new technology)

  • Employees may demand higher pay for their improved productivity
• Absenteeism


  Absenteeism
• How can absenteeism be a significant operational issue in business

  • A significant business cost

  • Key to understand reasons

  • Often predictable
• Absenteeism formula

  (no. staff absent during period/no. employed during period) x100
• alternative formula that focuses on the number of working days lost

  (no. days taken off for authorised absence/ total days worked by workforce over the period) x100
• key to tackling absenteeism

  • Understand the causes

  • Set targets and monitor trends

  • Have a clear sickness & absence policy

  • Provide rewards for good attendance

  • Consider the wider issues of employee motivation
• Employee Costs as a Percentage of Turnover

  • Calculating revenue per employee is one way of assessing how effectively a business is using its labour resources

  • The calculation is particularly useful in labour intensive industries where labour is a key part of adding value through production

  • Two popular calculations – Revenue per employee – Employee costs / Revenue
• Revenues per Employee (£)

  Important to compare with key competitors

  Should be high for where labour resources add lots of value

  Should rise if labour intensive processes are automated

  Relatively low figure compared with competition might suggest poor added value or selling prices too low
• Employee Costs / Revenues %

  Important indicator of efficiency and labour productivity

  important to compare with closest competitors and look at trend over several years

  Relatively high figure might indicate poor labour productivity and/or employees paid too much

  Increased automation should lower the percentage