This document discusses different methods for measuring workforce effectiveness: 1) Staff turnover measures the percentage of staff who leave during a period and high turnover can increase costs and lower productivity. 2) Labour productivity measures output per employee and keeping productivity high is important for competitiveness and profitability. 3) Absenteeism measures the percentage of staff absent from work and managing absence levels can reduce business costs significantly.

1. Measuring Workforce Effectiveness

2. Main Measures of Employee Effectiveness
Percentage of staff who
Staff Turnover leave during a period
Labour Output per Employee
Productivity
Percentage of staff who
Absenteeism are absent from work

3. What this topic is about
• Methods of measuring
workforce effectiveness
• Calculation and
interpretation
• Measures to improve
workforce effectiveness

4. Staff
Turnover

5. Employee Retention
• All businesses lose staff
– Retirement / Maternity / Death / Long-term Illness
– Unsuitability
– Changes in strategy (e.g. closure of locations)
• Staff turnover needs to be managed if the
business is to succeed
• Employee retention = the ability of a
business to convince its employees to
remain with business

6. What is Labour Turnover?
The percentage of the
workforce (employees)
that leave a business
within a given period
(usually a year)

7. Labour Turnover Formula
Labour turnover is calculated using this formula:
Number of employees leaving during period
X 100
Average number employed during period

8. Labour Turnover Example
Surridge Porridge is a manufacturer of breakfast cereals. In 2008 it
employed an average of 80 staff. During 2008, the business
recruited 12 staff to replace 15 who left.
Labour turnover =
Number of employees leaving (15)
X 100
Average number employed (80)
= 18.75%

9. Problems of High Staff Turnover
• Higher costs
– Increased recruitment & training costs
• Increased pressure on remaining staff
• Disruption to production / productivity
• Harder to maintain required standards of
quality and customer service

10. Factors that Affect Staff Turnover (1)
• Type of business
– Some businesses have seasonal staff turnover (e.g.
holiday parks)
– Some businesses employ many temporary staff (e.g.
hotels)
• Pay and other rewards
• Working conditions
• Opportunities for promotion
• Competitor actions
• Standard of recruitment

11. Factors that Affect Staff Turnover (2)
• Quality of communication in business
• Economic conditions
– Downturn often leads to lower staff turnover
– Buoyant economy – staff more likely to leave
• Labour mobility
– How transferable are staff skills
– What other jobs are available?
• Employee loyalty

12. Ways to Improve Staff Turnover
• Effective recruitment and training
– Recruit the right staff
– Do all you can to keep the best staff (role for training &
other motivation tools)
• Provide competitive pay and other incentives
– Competitive pay levels & non-financial benefits
• Job enrichment
• Reward staff loyalty
– Service awards, extra holiday etc

13. Labour
Productivity

14. Why Labour Productivity Matters
• Labour costs are usually a
significant part of total costs
• Business efficiency and
profitability closely linked to
productive use of labour
• In order to remain
competitive, a business needs
to keep its unit costs down

15. Factors influencing labour productivity
• Extent and quality of fixed assets (e.g.
equipment, IT systems)
• Skills, ability and motivation of the
workforce
• Methods of production organisation
• External factors (e.g. reliability of
suppliers)

16. Labour Productivity Formula
Labour productivity is calculated using this formula:
Output per period (units)
Number of employees at work
The answer from the formula is usually expressed in
terms of output per employee
e.g. 1,000 units per employee

17. Labour Productivity Example (1)
Marcouse Plastics makes 5,000 widgets each month. Total
monthly labour hours are 1,250. What is labour productivity
(hours per unit)?
Labour productivity =
Labour hours per month (1,250)
Units produced per month (5,000)
= 0.25hrs / unit

18. Ways to Improve Labour Productivity
• Measure performance and set targets
• Streamline production processes
• Invest in capital equipment (automation +
computerisation)
• Invest in employee training
• Make the workplace conducive to
productive effort

19. Absenteeism

20. Absenteeism Formula (1)
Absenteeism calculated using this formula:
Number of staff absent during period
X 100
Number employed during period

21. Absenteeism Formula (2)
An alternative formula uses the total number of days
worked over a period (usually a year)
Number days taken off for
unauthorised absence (during period)
X 100
Total days worked by workforce over
the period

22. Comments on Absenteeism (1)
• A significant business cost
– Sickness absence costs UK businesses around £600
for each worker per year (BusinessLink)
• Key to understand reasons (genuine / not)
– Genuine sickness, bereavement, bullying, stress
– Some employees simply “playing the system”
• Often predictable
– Monday / Friday or End of Shift Pattern
– Main holidays

23. 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

24. Absenteeism Example
Anderton Alarms employs 20 staff and makes ready-meal pies for
supermarkets. In 2008, the total available working days were
4000. Unauthorised absence for 2008 was recorded at 560 days
Absenteeism =
Days Absent (560)
X 100
Total potential working days (4000)
= 14.0%

25. Measuring Workforce Effectiveness