hr metrics

5/23/2018 HR Metrics

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WORKFORCE METRICS DICTIONARYSIX STEPS FOR MEASURING HR INITIATIVE


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2 Key Workforce Metrics and the Impact to Your Bottom Line

Measuring HR InitiativesWhat is the value of your workforce to your organizations bottom line?

This is a question that HR professionals face on a daily basis. Its also the reason why workforce metrics have

become critical tools for businesses.

Developed by the workforce planning and analytics division of Peoplefluent, a leader in talent managementsolutions, this guide provides definitions of key metrics, as well as a step-by-step process and examples for

identifying the net benefits gained from a specific HR initiative.

Section 1identifies nine core HR practice areas, along with the key metrics associated with each. From

absenteeism to recruiting and work-life balance initiatives, HR professionals look closely at these to

determine how to track and measure performance.

Section 2delivers a six-step process that focuses on a specific business problem, such as absenteeism,

and calculates the cost to the organizations bottom line as well as the net benefit of the HR initiative that

addresses this problem.

Through this simple process, HR professionals, workforce planners and other key stakeholders in the

organization can use data to clearly represent the value of HR initiatives to the organizations bottom line.

Key Workforce Metrics and the Impact on the Bottom Line

KEY HR PRACTICE

AREA / INITIATIVERELATED METRICS/KPIS BOTTOM-LINE IMPACT

Absenteeism Absence Rate

Absence Days per Employee

Unscheduled Absence Rate

Unscheduled/Sick Days per Employee

Overtime Expense

Overtime as a % of Total Labor Costs

Employee Performance/Productivity Index

Payment of salary/benefits during absence

Insurance/health care costs

Overtime costs

Cost of replacement workers

Impact on employees morale and on

customer satisfaction

Productivity impact on employees/team/department

Benefits / EducationalReimbursement

Tuition Reimbursement Request Ratio

Promotion Rates


Performance Differential Rate

Retention Rates

Benefit Costs per Employee

Total benefit costs vs. value (sales/revenue/productivity) employee will generate over course

of employment

Correlation between benefit participation &

business results

Correlation between benefit and

turnover intentions

Turnover/Replacement costs(see employee separation)

Development /Management TrainingProgram


Training Expense per Employee

Training Hours per FTE

Training Effectiveness Index

Retention Rate

Cost of development/training program

Correlation between participation &business results (such as retention, sales,

customer service)

Impact on performance/productivity/profitability before & after training program (or

split sample differential)


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KEY HR PRACTICE

AREA / INITIATIVERELATED METRICS/KPIS BOTTOM-LINE IMPACT

Employee Attitudes Employee Satisfaction Rate

Employee Engagement Index/Score

Manager Quality Index/Satisfaction Rate

Voluntary/Preventable Turnover


Correlation between employee attitudes and

turnover intentions

Turnover/Replacement costs as result of

preventable attrition

Correlation between employee attitudes andcustomer satisfaction

Productivity impact on employees/

team/department Impact on employees morale and on


Overall HR Revenue per Employee/FTE

Sales per Employee

Profit per Employee/FTE

Labor Costs as % of Revenues

Units Produced per Employee

Workforce Productivity

Total Revenues

Total Cost of Workforce

Labor Costs

HR Costs

RecruitingHiringSelection

External/Internal Hire Rate

New Hire Performance Rate


Quality of Hire Index Source of Hire

Average Time-to-Fill

Average Cost per Hire

Time-to-Productivity

New Hire Turnover

Total compensation & hiring costs vs. value (sales/revenue/productivity) employee will generate

over course of employment

Performance differential Recruitment costs

Cost of vacant position (lost sales/

revenues/productivity)

Savings from unfilled job



RetentionEmployee Separation

Turnover Rate

Voluntary/Involuntary Turnover Rate

Good/Bad Attrition Rate

High/Low Performer Retention Differential

Staffing Rate Approaching Retirement Eligibility

Retirement Rate

Average Workforce Age

Average Tenure at Termination

Correlation between turnover and profitability

Separation, replacement/hiring and

training costs

Overtime costs

Cost of replacement workers



Productivity impact on employees/team/department

Safety Program Number of documented safety violations

Number of defects/accidents

Incidence Rates

Safety Training Expense per Employee

Workers Comp Cost per Employee

Correlation between safety programparticipation & incidence rates

Cost of safety program

Workers compensation costs

Cost of safety violations/penalties

Work-Life BalanceInitiatives



Unscheduled Absence Rate

Voluntary/Preventable Turnover Rate

Cost of work-life balance initiative

Health care/insurance costs

Turnover/Replacement costs

(see employee separation)

Correlation between benefit participation &

business results Impact on employees morale and on


Productivity Impact


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Determining the Bottom Line Impact of an HR Initiative

STEPS DESCRIPTION

1. Start with the Business Problem Clearly state the business problem. Be as specific as possible.

2. Calculate the Cost of the Problem Calculate the cost of the business problem specified above. Examine bothdirect and indirect cost implications and use conservative estimates or

industry guidelines if exact figures are not available.

3. Identify the Solution to the Problem Identify a solution based on specific company data/analysis or industry research.(When using research findings, keep in mind that the most effective solution may

be different for each organization.)

4. Calculate the Cost of the Solution Calculate how much implementing the solution will cost the organization todayand in the future. Account for indirect and internal costs as well using conservative

estimates.

5. Identify Expected or Actual Result For a new initiative, identify the results you expect to see after 3/6 months, 1/2years, etc. For an existing initiative, track the impact of the solution on the business

problem over the course of the past months/years.

6. Perform Cost/Benefit Analysis As a final step, perform a cost/benefit analysis to analyze the net benefits gainedfrom your initiative. This can use several methodologies, including (but not limitedto):Benefit/Cost RatioReturn on InvestmentNet Present ValuePayback Period

Example #1:Absenteeism/Employee Wellness Program Example

STEPS DESCRIPTION

1. Start with the Business Problem Our organization has an unscheduled absenteeism rate of 5% among our 100-per-son employee population. This means that five employees are absent, unscheduled,

on any given day.

2. Calculate the Cost of the Problem The cost of sick day can be conservatively estimated as the employees salary plus30% benefit costs divided by 260 (# of workdays). Using the actual average salaryof $40,000, this is $52,000/260 or $200/day/person. With 5 people out every

single day, this costs the organization $1,000/day or $260,000/year.

(This is a conservative estimate. Unplanned absences like sick days result not only inthese direct costs but also in higher insurance costs and lost productivity.

Indirectly, they can negatively impact coworkers productivity and morale, which can

affect customer service and other business objectives.)

3. Identify the Solution to the Problem As a solution, the organization has decided to implement a workplacewellness program after researching all available options.

4. Calculate the Cost of the Solution The cost of implementing a workplace wellness program is $30,000/year.

5. Identify Expected or Actual Result Based on industry studies and historical results of this particular wellness program,the organization expects to see a 20% decrease in absenteeism,going from 5% to 4% a year or from 5 absent employees to 4 absent employees on

any given workday (i.e., net benefit of 1 non-absent employee).


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STEPS DESCRIPTION

6. Perform Cost/Benefit Analysis Calculate the Return on Investment using the following formula:

ROI = (Program Benefits Costs) / Costs

[($200 * 260) $30,000] / $30,000 =

$22,000 / $30,000 = 73%

As a benefit, youll save $200/day or $52,000/year vs. the cost of the program at

$30,000 or a net benefit of $22,000/year for the organization. This translates to a

positive ROI of 73%.

Example #2:Turnover/Management Training Initiative

STEPS DESCRIPTION

1. Start with the Business Problem Our organization has an annual voluntary turnover rate of 20% for its computerprogrammers. This means that one in every five programmers, or 10 out of our

50-employee department, leave voluntarily each year.

2. Calculate the Cost of the Problem Industry studies show that the total cost of replacing an employee (includingseparation, replacement, training and indirect costs) can be as much as 150% of

a persons salary. Using an actual average salary of $80,000, this translates to$120,000/programmer or $1.2 million per year ($120,000 * 10 programmers).

3. Identify the Solution to the Problem Based on the past three years employee engagement survey results, you decide toimplement a 3-year management training initiative. Study results showed that inef-fective managers have the most impact on employee

engagement and they are the main cause of voluntary attrition within your organi-

zation. So a combination of management training and one-on-one coaching is thesolution youre implementing.

4. Calculate the Cost of the Solution A series of management training workshops and internal coaching lessons with

individual supervisors will cost the organization $100,000/year.

5. Identify Expected or Actual Result After you implement the solution and monitor the results, you find thatvoluntary turnover decreases from 20% to 18% (Year 1) to 16% (Years 2 and 3). Thismeans that the program saved 1 (Year 1) and 2 (Years 2 and 3) people from leaving

voluntarily.

6. Perform Cost/Benefit Analysis Cost/Benefit Analysis:

After calculating the improvement benefit (150% of the salary of 1 or 2 additional

people who did not leave), you calculate the net improvement benefit.

Dividing the Total Net Improvement Benefit ($200,000) by the Total Cost of the

Training ($400,000) over the course of three years results in a ROI of 50%.

The Net Present Value of these improvements is calculated at $115,300 using a 15%

discount rate.

The payback period of 1.6 years tells us that this program breaks even in about a

year and a half.


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Example #3:HR Initiative

STEPS DESCRIPTION

1. Start with the Business Problem

2. Calculate the Cost of the Problem

3. Identify the Solution to the Problem

4. Calculate the Cost of the Solution

5. Identify Expected or Actual Result

6. Perform Cost/Benefit Analysis


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Peoplefluents workforce analytics solutions give you the wisdom to strategically

address critical business issues.

Learn more at www.peoplefluent.com

About Peoplefluent

Peoplefluent is the leading provider of talent management solutions designed to support

the entire workforce. We provide the mobile enablement, social collaboration, information

visualization and the domain expertise required to empower strategic decision making and

true employee engagement. Our talent management software enables organizations to

unlock each individuals potential by removing the boundaries that limit the performance

and productivity of your workforce. With the most comprehensive talent suite in the

industry including solutions for talent management, workforce compliance and diversity,

contingent workforce management, analytics and workforce planning, Peoplefluent offers a

solution to optimize every step of the talent lifecycle.

Our solutions have helped over 5,100 organizations in 214 countries and territories

successfully achieve their talent aspirations. Today, 80% of the Fortune 100 relies on

Peoplefluent solutions as part of their talent management delivery strategy.

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