HR Metrics

37,136 views

Published on

Most HR Measurement Initiatives Aspire to Align HR and Corporate Strategy and to
Enable Managers to Make Better Workforce-Related Decisions.
But most organizations are capturing thousands of pieces of data about their workforce, and it can be hard to focus on what really matters. Here is the focus 5 metircs of HR measurement that will help you to make better decision of worforce-related matter.

Published in: Business, Technology

HR Metrics

  1. 1. Five Fi e HR Metrics That Matter June 12, 2007
  2. 2. Agenda • Welcome & Introduction • The HR Measurement Journey • Five Metrics that Matter – Average Headcount – Age Staffing Breakdown – Average Workforce Tenure – Termination Rate – Employee Engagement Index • Reference Information and Learning Opportunities • Questions
  3. 3. Today’s Presenters Paige Menge Brian Kelly The Infohrm Group The Infohrm Group
  4. 4. The Infohrm Group • Global leader in on-demand workforce reporting, analytics & planning solutions • Three primary offices: Brisbane, AU; Washington, DC; London, UK • Founded in 1982 • Original partner in CLC Metrics Program; acquired Corporate Executive Board’s interest in 2006; ongoing research relationship • Focus on public & private sector – Goldman Sachs, EMC, Charles Schwab, ING, Time Warner, Aetna, MetLife, The Hartford, Starbucks, Lowe’s
  5. 5. Infohrm’s Core Capabilities: A Partnership Model Our Capabilities • Business Information Our Expertise • Business Intelligence • Business Reporting Services • Business Impact • Workforce Reporting Services • Workforce Planning g • Business & Employee Surveying • Human Capital Management ROI Flexible Solutions •Bi Business & Workforce A l ti l S i W kf Analytical Services • Programs • Metrics & Benchmarking • Tools • Strategic HR Consulting • Consulting • Professional Development
  6. 6. Representative Client List
  7. 7. The HR Measurement Journey
  8. 8. Vision of “Human Capital” Measurement Most HR Measurement Initiatives Aspire to Align HR and Corporate Strategy and to Enable Managers to Make Better Workforce-Related Decisions Primary Goals of HR Measurement y Percentage of Survey Respondents Citing Each Item as One of the Top Three Goals of HR 70% Measurement Efforts 60% 45% 33% 33% 31% 35% 27% 23% 12% 11% 8% 0% Better Align Enable Control Demonstrate Prioritize Support Identify Respond to Provide Create “Line HR Strategy Managers to HR Cost the Bottom- HR Organizational Opportunities “Measurement Justification of Sight” for with Make Better Line Impact Investments Strategic For HR Impact Pressure” for HR in the Employees Corporate Decisions of Specific and Actions Planning from Senior Organization Strategy Regarding HR Practices/ Management Workforce Programs Management Source: CLC, Exploring the Measurement Challenges (2001). n=278 companies 8
  9. 9. Many Obstacles Block the Road While the Following Challenges Have Taken Precedence in Establishing a Human Capital Measurement System for HR … Primary Challenges of HR Measurement y g Percentage of Survey Respondents Citing Each Item as One of the Top Three Challenges 70% of HR Measurement Efforts 61% 55% 50% 35% 29% 25% 20% 18% 15% 10% 6% 0% Quantifiably Lack of Subjectivity HR Staff Access Linking Technology of HR Skills Gap to Metrics Identifying Integrating Obtaining Accountability Tying HR and Metrics Value- HR and Raw Data for Metrics Incentives Business Added Corporate to HR Goals HR Metrics Measurement Metrics Source: CLC, Exploring the Measurement Challenges (2001). n=278 companies 9
  10. 10. The Journey: Four Stages of Value Creation Transform HR from “Service Provider” to “Business Driver” High Consistent HC Business HC Metrics Reporting Insight Embedded Note: The first two levels of business impact are enabled by a successful rollout strategy. Enabling Phase 4 the third and forth levels requires significant cultural and behavioural change in the HR function. Phase 3 Business Driver • Build a data-driven Business Partner Phase 2 HR function • Integrate HC data Business Enabler Phase 1 • Manage core HR into planning Business processes with data • Support data self- processes Service Provider Impact service • Quantify impact of • Identify • Respond to ad-hoc HR interventions e e os • Ensure data problematic HR requests t consistency • Analytically trends • Prepare determine HC drivers • Provide automated performance of business success reports reports • Focus organization • Maintain HR on right HR databases dtb measures • Build data-driven business case for HR interventions Low Low High Time / Sophistication Source: CLC and InfoHRM Research 10
  11. 11. A Balancing Act: Common Concerns vs Unique Strategies Pattern of KPI Selection Reflects Both Common Human Capital Concerns and Unique Corporate Strategies Portion of Members Selecting Each Measure Common Concerns 100% The Gold Standard: 60% or greater penetration: • Termination Rate 90% • Staffing Rate (by gender, ethnic background, …) 80% The Silver Standard: 40% to 59% penetration: • Employees at Risk Factor • Employee Engagement 70% • Managerial Bench Strength ation Rate 60% The Bronze Standard: 30% to 39% penetration: • Revenue per FTE • Net Workforce Growth 50% Penetra • P fit per FTE Profit • C t of Turnover Cost f T • Performance-Based Pay Differential • Training Investment per FTE 40% • Management Performance • ROI of Training 30% • Successor Pool Coverage • New Hire Failures 20% L Long “t il” suggests diff “tail” t differentiation of company strategies. ti ti f tti 10% 0% 26 16 207 KPI's Selected Source: Infohrm, 207 measure across 88 workshops. 11
  12. 12. Five Metrics That Matter
  13. 13. The Struggle to Focus on HR Measures that Matter Most organizations are capturing thousands of pieces of data about their workforce, and it can be hard to focus on what really matters 20 8 5 10 6 X X X X Workforce Organizational Departments in Demographic Categories in Metrics Units Each Org Unit Dimensions Each Dimension = 48,000 measures , to analyze!
  14. 14. Five Metrics That Matter 1. Average Headcount 2. Age Staffing Breakdown 3. Average Workforce Tenure 4. 4 Termination Rate 5. Employee Engagement Index
  15. 15. Format for Remaining Measures 1. 1 Formula and Importance of Measure 2. Case Study 3. Limitations of Measure 4. Related Measures
  16. 16. Average Headcount Rolling daily headcount average Formula: Why it s it’s 1. Serves as the denominator for many workforce measures, including: important: • Termination Rate • Promotion/Demotion/Transfer Rate • External/Internal Hire Rate • Training Expense per Employee 2. Company size • End of period/Start of period headcount can be misleading due to seasonal termination patterns
  17. 17. Average Headcount “Case” Study Most companies use End of Period Headcount (EOP), Start of Period Headcount (SOP), or (EOP + SOP)/2 as a proxy for average headcount when calculating termination rate, external hire rate, etc. Day 1 Day 2 Day 3 Day 4 Day 5 HC = 12 HC = 10 HC = 15 HC = 15 HC = 12 SOP HC = 12 EOP HC = 12 (EOP + SOP) / 2 = 12 Average HC = 12.8 g
  18. 18. Average Headcount Limitations • Does not detail demographics, skill levels, or experience of the gp p workforce • Does not reflect churn within the workforce • Does not indicate internal movement patterns p
  19. 19. Average Headcount Related Measures • Age Staffing Breakdown • End of Period Headcount • External Hire Rate • Organization Tenure Staffing Breakdown • Promotion Rate • Staffing Rate – High Potential • Termination Rate • Transfer Rate
  20. 20. Age Staffing Breakdown End of Period Headcount.[Age] / End of Period Headcount * 100 Formula: Why it s it’s 1. Generational differences important: • Employee motivations • Employee attitudes about work • Employee benefits 2. Experience • Capability within company to execute on strategy • Training and development • Career paths 3. 3 Risk of talent and kno ledge drain d e to retirement knowledge due
  21. 21. Age Staffing Breakdown Case Study #1 Insurance Company concerned about their aging workforce • Finding #1: The Company does have an aging workforce – Th number of employees eligible t retire h iincreased from around 15% iin The bf l li ibl to ti has df d 2003 to around 20% in 2006; at the same time, the percent of those eligible to retire who actually do retire has also increased • Finding #2: The i Fi di #2 Th aging workforce d kf does not th t the business in the short term t threaten th b i i th h t t – Management employees over the age of 60 only represent about 6% of total company leadership – Current staffing levels should be able to accommodate the admin/technical employees eligible t retire within th next fi years l li ibl to ti ithi the t five – Advances in technology will mitigate the risk from office and special services employees eligible to retire • Finding #3: By changing policies, the threat can be further reduced – By implementing policies that reward employees to remain with the Company until age 65 rather than age 60, the number of employees eligible to retire shrinks from 18% of all employees to 6% through 2011 py g
  22. 22. Age Staffing Breakdown Case Study #2 Financial Services Company analyzing career paths within accounting department • Created a matrix of age and job grade for professional, exempt employees
  23. 23. Age Staffing Breakdown Case Study #2 Age 21 21-25 26-30 30-35 36-40 41-45 46-50 51-55 56+ Total Grade 6 8 5 2 2 4 5 1 27 Grade 7 14 7 4 4 5 6 6 1 47 Grade 8 1 15 4 4 2 3 29 Grade 9 9 8 2 1 2 2 3 27 Grade 10 1 6 2 1 10 Grade 11 1 1 2 1 5 Grade 12 1 1 2 4 Grade 13 1 3 4 Grade 14 2 2 Total - 23 38 26 12 16 12 16 12 155
  24. 24. Age Staffing Breakdown Case Study #2 Age 21 21-25 26-30 30-35 36-40 41-45 46-50 51-55 56+ Total Grade 6 8 5 2 2 4 5 1 27 Grade 7 14 7 4 4 5 6 6 1 47 Grade 8 1 15 4 4 2 3 29 Grade 9 9 8 2 1 2 2 3 27 Grade 10 1 6 2 1 10 Grade 11 1 1 2 1 5 Grade 12 1 1 2 4 Grade 13 1 3 4 Grade 14 2 2 Total - 23 38 26 12 16 12 16 12 155
  25. 25. Age Staffing Breakdown Limitations • Does not account for age p g profile of those entering and leaving the g g organization • Does not provide information on cost of retirements (pensions, defined (pensions benefit vs. defined contributions, etc) • Does not indicate the skill set, knowledge base, or tenure of employees
  26. 26. Age Staffing Breakdown Related Measures • Average Workforce Age • Benefits Satisfaction Index • Educational Attainment Breakdown • Employee Engagement Index • External Hire Rate • Organization Tenure Staffing Breakdown • Successor Pool Coverage • Termination Rate • Training Course Content Breakdown
  27. 27. Average Workforce Tenure Total Workforce Tenure / End of Period Headcount Formula: Why it s it’s important: 1. Determine knowledge base about company 2. Evaluate state of culture and innovation 3. Inform development needs 4. Research impact of tenure on certain jjobs and p p performance
  28. 28. Average Workforce Tenure Case Study Financial Services Company researching indicators of branch profitability • Finding #1: Top performing branches have managers with high average tenure • Finding #2: Employee allegations of fraud were twice as likely to come from branches with two or more managers in the past 18 months • Finding #3: Managers who terminated with short tenures were often promoted to manager due to high sales, not leadership s s o a age o g sa es, o eade s p skills
  29. 29. Average Workforce Tenure Breakdown Limitations • Does not inform the range or distribution of tenure above and below the average • Not an indicator of general work experience, skill level, or functional knowledge • Only looks at tenure of employees in the organization, not tenure within the current position
  30. 30. Average Workforce Tenure Related Measures • Age Staffing Breakdown • Average Annual Salary per FTE • Average Termination Value • Employee Retention Index • External Hire Rate • Manager Quality Index • Organization Tenure Staffing Breakdown • Termination Rate • Termination Reason Breakdown • Total Compensation Expense per FTE • Training Course Content Breakdown • Work Units per FTE
  31. 31. Termination Rate Terminations / Average Headcount * 100 Formula: Why it s it’s important: 1. Monitors adequacy of employment “offer” 2. Indicates effectiveness of staffing function 3. Represents costs to the company • Cost of hiring replacement gp • Lost productivity during vacancy and training • Training and onboarding costs g g • Lower morale and increased workload 4. Low turnover can show stagnation of ideas
  32. 32. Termination Rate Case Study #1 Company’s Sales Department concerned about high termination rates • Finding: Sales regions which terminated low performers had lower profitability than those branches who kept low performers – Low performers were those employees with the shortest tenure – Branches who kept low performers and gave them time to “grow” into their roles saw higher long-term profitability
  33. 33. Termination Rate Case Study #2 Company concerned about Call Center turnover • Finding #1: Non exempt terminations are high Non-exempt – Involuntary terminations overwhelmingly driven by failure to pass licensing exam, so need better upfront screening – Voluntary terminations driven by “better opportunity,” but can be mitigated by retention better opportunity bonuses, and promotion and development opportunities Voluntary 160% Involuntary 140% 120% nation Rate (%) 100% 80% 60% Termin 40% 20% 0% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 months of tenure
  34. 34. Termination Rate Case Study #2 Company concerned about Call Center turnover • Finding #2: Non exempt termination rates vary greatly by call center location Non-exempt – Further research needed to determine whether caused by labor market, competition, type of work, management, etc. 61% 37% Call Cen Locations 42% 10% 34% 15% 32% 16% 22% 13% nter 29% Voluntary Termination Rate 19% 10% Involuntary Termination Rate 14% 6% 6% 11%
  35. 35. Termination Rate Case Study #2 Company concerned about Call Center turnover • Finding #3: High non exempt termination rates may be caused by low exempt non-exempt termination rates – Few opportunities for advancement if there are no managerial positions opening – Long tenure in exempt position could mean managers are very “far removed” from the challenges of the non-exempt role
  36. 36. Termination Rate Limitations • Does not indicate voluntary vs. involuntary termination • Does not show specific reasons for termination (better opportunity, manager, compensation, returning to school, etc) • Does not reflect who is leaving or how those employees are being replaced to demonstrate true impact on the workforce composition
  37. 37. Termination Rate Related Measures • Average Termination Value • Compensation Satisfaction Index • Employee Retention Index • External Hire Rate • Involuntary Termination Rate • Manager Quality Index • Market Opportunity Index • Offer Acceptance Rate • Operating Expense per FTE • Organization Tenure staffing Breakdown • Return on Human Investment Ratio • Termination Breakdown by Performance Rating • Voluntary Termination Rate
  38. 38. Employee Engagement Index Derived from survey methodology Formula: Why it s it’s important: 1. Helps measure employee discretionary effort to the firm 2. Leading indicator for turnover 3. Leading indicator for customer satisfaction
  39. 39. Employee Engagement Index Case Study Major retail chain in the food service industry determining link between employee engagement (in the company) and store profitability • Finding #1: Employee engagement is linked to customer satisfaction • Finding #2: Employee engagement is linked to store profitability **For each graph the differential in percentage points from low engagement to For graph, high engagement is 6% • Finding #3: When combined with manager stability, average workforce tenure, and satisfaction with pay, employee engagement accounts for a 4% variance pay in financial profitability
  40. 40. Employee Engagement Index Limitations • Value of the measure depends on the effectiveness of survey design and delivery • Survey answers can reflect temporal events • Engagement is only one aspect an employees opinion about/ relationship with the company
  41. 41. Employee Engagement Index Related Measures • Age Staffing Breakdown • Voluntary Termination Rate y • Employee Commitment Index • Employee Retention Index • Employment Brand Strength • Internal Hire Rate • Manager Quality Index • Market Opportunity Index • Offer Fit Index • Organization Tenure Staffing Breakdown • Promotion Rate • Promotion Speed Ratio
  42. 42. Reference Information and Learning Opportunities
  43. 43. The Metrics Standard A rating A Detailed Guide of 200+ Metrics system for easy application. Retention Cost of Employee Turnover Turnover Engagement Category and subcategory provided for easy Interpretive text reference. describes what is measured, the importance of the measure, and the impact of high or low results. Provides a listing of Captures the variations and interrelated lessons learned measures for those “on the from CLC Metrics hunt” for the most members’ appropriate metric or set of experience ith e perience with this metrics f a given set of for f metric. circumstances.
  44. 44. Workforce Analytics and Workforce Planning Workshops March 7-8 June 19-20 Los Angeles, CA* Chicago, IL March 13-14 Sept. 27-28 New York, NY , Washington, DC g, April 17-18 Nov. 6-7 Boston MA Boston, MA* Dallas, Dallas TX April 24-25 Nov. 13-14 Washington, W hi t DC Atl t GA Atlanta, June 12-13 San Francisco, CA* *Workforce Analytics Only
  45. 45. 2007 Infohrm Human Capital Analytics Conference Keynote Speakers Include: • Thomas Manley, Cognos • Norm Smallwood, University of Michigan • Corbette Doyle, Aon • Jonathan Terrell, The Infohrm Group September 25-28, Washington DC
  46. 46. Workforce Planning Summit With presentations by: • Dr. Dr John Sullivan San Francisco State Sullivan, University • Dan Hilbert, Valero Energy , gy • Jeff Higgins, Countrywide Financial • Kari Trost & Merryl Rees, The Hartford • Peter Howes, Infohrm Group • Anastasia Ellerby, Infohrm Asia Pacific
  47. 47. The Infohrm Group Thank you for your time! For more information, please visit: www infohrm com www.infohrm.com Or contact Duncan Scott at: Duncan.Scott@infohrm.com Duncan Scott@infohrm com 202.589.2664

×