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HRM - Workforce Effectiveness


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HRM - Workforce Effectiveness

  1. 1. Measuring Workforce Effectiveness
  2. 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. 3. What this topic is about• Methods of measuring workforce effectiveness• Calculation and interpretation• Measures to improve workforce effectiveness
  4. 4. StaffTurnover
  5. 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. 6. What is Labour Turnover?The percentage of theworkforce (employees) that leave a business within a given period (usually a year)
  7. 7. Labour Turnover FormulaLabour turnover is calculated using this formula:Number of employees leaving during period X 100 Average number employed during period
  8. 8. Labour Turnover ExampleSurridge 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. 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. 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. 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. 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. 13. LabourProductivity
  14. 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. 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. 16. Labour Productivity FormulaLabour productivity is calculated using this formula: Output per period (units) Number of employees at workThe answer from the formula is usually expressed in terms of output per employee e.g. 1,000 units per employee
  17. 17. Labour Productivity Example (1)Marcouse Plastics makes 5,000 widgets each month. Totalmonthly 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. 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. 19. Absenteeism
  20. 20. Absenteeism Formula (1) Absenteeism calculated using this formula:Number of staff absent during period X 100 Number employed during period
  21. 21. Absenteeism Formula (2)An alternative formula uses the total number of days worked over a period (usually a year) Number days taken off forunauthorised absence (during period) X 100 Total days worked by workforce over the period
  22. 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. 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. 24. Absenteeism ExampleAnderton 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. 25. Measuring Workforce Effectiveness