Measuring HR is important
12 Generic Reasons for Developing HR Metrics & Dashboards
1. HR services are only an expense until others see value in them
2. Metrics is the ‘language of business’; without metrics we can only offer an opinion
3. Results that we can’t report/measure often don’t count
4. What we don’t measure is difficult to improve upon
5. Measuring – just measuring – improves performance
6. To make better decisions
7. To better control HR processes
8. Metrics convey importance
9. Metrics ‘tell a story’; they ’paint a picture’
10. To show that we are not afraid of measuring our contributions
11. To compare ourselves to ‘best practices’ in other organizations
12. To survive/avoid outsourcing
Utilizing HR Metrics to Become a Business Partner; an HRBP is
1. Customer Focused
2. Strategic
3. Change-Oriented
4. Technically Competent
Recruiting, Interviewing and Selection Metrics
Cost: Per-Hire Formula:
CPH = AC + AF + RB + TC + RE + HR + 10% / H
Where:
AC = Advertising costs
AF = Agency/search firm fees
RB = Referral bonus
TC = Travel costs
RE = Relocation costs
HR = HR recruiter costs
H = Number of hires
+ an additional 10% which represents all other costs
Cost: Per-Interview:
CPI = HRT + MT/ I
HRT = HR staff costs ($ hr. rate x ave. interview time)
MT = Mgt. cost ($ hr. rate x ave. interview time)
I = No. of Interviews
Offers Resulting in a Hire:
% ORH = OA/ OE
ORH = % of offers resulting in a hire
OA = Offers accepted
OE= Offers extended
Quality of Hire:
QH = PR + HP + HR/ N
QH= Quality of the employees hired
PR= Ave. performance appraisal rating of new hires as a %
HP= % of new hires promoted within X period
HR= % of new hires retained within X period
N= Number of indicators used (3 in this ex.)
Requisition Rate
RR = NR
TR/M
RR = Requisition rate %
NR = # new requisitions added within X time period
TR/M = # requisitions at the beginning of the time period
Employee Compensation Cost
ECC = TC
FTE
ECC = Ave. comp per FTE
TC = Total compensation (with or without benefits)
FTE = Number of FTEs
% Compensation Expense
CE = TC
TE
CE% = Comp & benefits expenses as a % of total operating expenses
TC = Total compensation (salaries & benefits)
TE = Total operating expenses
Variable Compensation Percent
VC = TVP/TC
VC% = Variable compensation as a percentage of total compensation
TVP = Total variable pay
TC = Total wages and salaries
Profit Factor
PF= TR - TOE
FTE
PF = Income/profit per employee
TR = Total organizational revenue
TOE = Total operating expenses
FTE = Number of FTE’s
Revenue Factor
RF = TR / FTE
RF=Revenue per employee [without deducting expenses]
TR = Total organizational revenue
FTE = Number of FTEs
Training Cost Formula
TC = CT + TF + S + TL + TS + PS
TC = Training Cost [per event, time period, etc.]
CT= Cost of a consultant/external trainer
TF= Training facility and potentially fixed overhead expenses
S= Supplies
TL= Travel and lodging
TS= Internal trainer‘s salary and benefits
PS= Participants' salaries and benefits
Training Cost Per Hour
TCH = TC/TH
TCH = Training cost per hour
TC = Total cost of training event
TH = Total hours of training
Knowledge Change
KC = KA
KB
KC = Knowledge change
KA = Knowledge level after training
KB = Knowledge level before training
Skill Change
SC = SA
SB
SC = Observable change in skill/behavior as a result of training
SA =Skill/behavior demonstrated after the training: work
output, quality of work, interpersonal relations, etc.
SB = Skill level existing before the training, using same criteria
Performance Change
PC = PA
PB
PC = Change in desired work performance [sales, customer satisfaction, etc.]
PA = Performance appraisal rating or assessment X days after the training
PB = Performance appraisal rating or assessment conducted before the training
Average Length of Service
Ave. Length of Service =
Total Length of Service
# of Employees
Cost of Turnover
CT = SC + VC + RC + TC
N
CT= Ave. cost of turnover per event
SC= Separation/administrative costs
VC= Costs associated with job being vacant
RC= Cost of recruiting a replacement
TC= Cost of orienting & training a replacement
Quantity of Turnover Formula
SR% = TT
HC
SR% = Separation rate
TT = Total terminations during the period [voluntary and involuntary]
HC = Average headcount/employees
VS% = VS
TT
VS% = Percent of voluntary separations
VS = Number of voluntary separations
TT = Total terminations during the period
Separations by Service Length
Voluntary Separation Rate by Tenure
VS/5*% = S/5
TS
VS/5%= Voluntary separation with 5 years of service
S/5= Total voluntary separations with 5 years of service
TS= Total separations during the period
* Any no. of years of service
Replacement Factor Formula
RP% = RP
NH
RP%= Replacements % of new hires
RP= Number of replacements
NH= New hires (replacements & growth hires)
Quality of Retention Formula
PT% = R
L
PT = % separating at a specific performance appraisal rating
R= Number of voluntary separations with that rating
L= Total number of voluntary separations for the period
12 Generic Reasons for Developing HR Metrics & Dashboards
1. HR services are only an expense until others see value in them
2. Metrics is the ‘language of business’; without metrics we can only offer an opinion
3. Results that we can’t report/measure often don’t count
4. What we don’t measure is difficult to improve upon
5. Measuring – just measuring – improves performance
6. To make better decisions
7. To better control HR processes
8. Metrics convey importance
9. Metrics ‘tell a story’; they ’paint a picture’
10. To show that we are not afraid of measuring our contributions
11. To compare ourselves to ‘best practices’ in other organizations
12. To survive/avoid outsourcing
Utilizing HR Metrics to Become a Business Partner; an HRBP is
1. Customer Focused
2. Strategic
3. Change-Oriented
4. Technically Competent
Recruiting, Interviewing and Selection Metrics
Cost: Per-Hire Formula:
CPH = AC + AF + RB + TC + RE + HR + 10% / H
Where:
AC = Advertising costs
AF = Agency/search firm fees
RB = Referral bonus
TC = Travel costs
RE = Relocation costs
HR = HR recruiter costs
H = Number of hires
+ an additional 10% which represents all other costs
Cost: Per-Interview:
CPI = HRT + MT/ I
HRT = HR staff costs ($ hr. rate x ave. interview time)
MT = Mgt. cost ($ hr. rate x ave. interview time)
I = No. of Interviews
Offers Resulting in a Hire:
% ORH = OA/ OE
ORH = % of offers resulting in a hire
OA = Offers accepted
OE= Offers extended
Quality of Hire:
QH = PR + HP + HR/ N
QH= Quality of the employees hired
PR= Ave. performance appraisal rating of new hires as a %
HP= % of new hires promoted within X period
HR= % of new hires retained within X period
N= Number of indicators used (3 in this ex.)
Requisition Rate
RR = NR
TR/M
RR = Requisition rate %
NR = # new requisitions added within X time period
TR/M = # requisitions at the beginning of the time period
Employee Compensation Cost
ECC = TC
FTE
ECC = Ave. comp per FTE
TC = Total compensation (with or without benefits)
FTE = Number of FTEs
% Compensation Expense
CE = TC
TE
CE% = Comp & benefits expenses as a % of total operating expenses
TC = Total compensation (salaries & benefits)
TE = Total operating expenses
Variable Compensation Percent
VC = TVP/TC
VC% = Variable compensation as a percentage of total compensation
TVP = Total variable pay
TC = Total wages and salaries
Profit Factor
PF= TR - TOE
FTE
PF = Income/profit per employee
TR = Total organizational revenue
TOE = Total operating expenses
FTE = Number of FTE’s
Revenue Factor
RF = TR / FTE
RF=Revenue per employee [without deducting expenses]
TR = Total organizational revenue
FTE = Number of FTEs
Training Cost Formula
TC = CT + TF + S + TL + TS + PS
TC = Training Cost [per event, time period, etc.]
CT= Cost of a consultant/external trainer
TF= Training facility and potentially fixed overhead expenses
S= Supplies
TL= Travel and lodging
TS= Internal trainer‘s salary and benefits
PS= Participants' salaries and benefits
Training Cost Per Hour
TCH = TC/TH
TCH = Training cost per hour
TC = Total cost of training event
TH = Total hours of training
Knowledge Change
KC = KA
KB
KC = Knowledge change
KA = Knowledge level after training
KB = Knowledge level before training
Skill Change
SC = SA
SB
SC = Observable change in skill/behavior as a result of training
SA =Skill/behavior demonstrated after the training: work
output, quality of work, interpersonal relations, etc.
SB = Skill level existing before the training, using same criteria
Performance Change
PC = PA
PB
PC = Change in desired work performance [sales, customer satisfaction, etc.]
PA = Performance appraisal rating or assessment X days after the training
PB = Performance appraisal rating or assessment conducted before the training
Average Length of Service
Ave. Length of Service =
Total Length of Service
# of Employees
Cost of Turnover
CT = SC + VC + RC + TC
N
CT= Ave. cost of turnover per event
SC= Separation/administrative costs
VC= Costs associated with job being vacant
RC= Cost of recruiting a replacement
TC= Cost of orienting & training a replacement
Quantity of Turnover Formula
SR% = TT
HC
SR% = Separation rate
TT = Total terminations during the period [voluntary and involuntary]
HC = Average headcount/employees
VS% = VS
TT
VS% = Percent of voluntary separations
VS = Number of voluntary separations
TT = Total terminations during the period
Separations by Service Length
Voluntary Separation Rate by Tenure
VS/5*% = S/5
TS
VS/5%= Voluntary separation with 5 years of service
S/5= Total voluntary separations with 5 years of service
TS= Total separations during the period
* Any no. of years of service
Replacement Factor Formula
RP% = RP
NH
RP%= Replacements % of new hires
RP= Number of replacements
NH= New hires (replacements & growth hires)
Quality of Retention Formula
PT% = R
L
PT = % separating at a specific performance appraisal rating
R= Number of voluntary separations with that rating
L= Total number of voluntary separations for the period
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