The utilisation of human resource metrics, measurements used to determine the value and effectiveness of human resources strategies, are on the rise and if your company does not employ these types of systems you should!
Human capital is an integral ingredient in the success of any business. However, many human resource professionals find themselves unable to measure the impact of programmes, or present a compelling case for an initiative due to lack of empirical data.
Employing human resource metrics allows companies to track trends of this nature. The above aids in informing management and the requisite parties of what human resource strategies are necessary to improve or sustain a company’s competitive advantage; characteristically, they ascertain whether the current strategies are working sufficiently well.
What type of metrics should you use? Metrics can fall under different categories, including but are not limited to the following examples:
Benefits – costs associated with the benefits extended to employees. The average cost for all benefits per employee. The total cost of benefits as a percentage of the total cost of compensation.
Organisational and employee development – the quantified costs of investment in training for individual staff or departments, as well as, measurements to ascertain the need for training.
Human capital value added – value of workforce’s knowledge, skill, and performance. Training costs as a percentage of compensation costs
Staffing management – systems measuring the company’s turnover and the associated costs. Days lost due to sickness
The Society for Human Resource Management is a useful resource with a plethora of metric systems at www.shrm.org which can be used in any organisation, regardless of industry or size. There are also templates of metric calculators for smaller businesses which may not require larger tracking systems. Larger companies may already have established human resource metric models and systems for collecting and collating their information. In the event that you do, we urge you to continuously search for areas that are not currently monitored but may provide useful information.
Why should you employ these methods?
It is key to note that businesses must start the process by capturing accurate and relevant information such as: recording sick days or late days per employee. Additionally, to quantify the loss or gain in productivity or cash flow a well established metric is required.
Human resource metrics, if accurately and articulately used, should aid in informing not just human resource professionals within a company, but serve as dependable indicators of emerging trends and likely problematic areas. Recent research amongst our membership has revealed the advantageous effects companies gain from tracking absenteeism; certified and uncertified. One large manufacturing company was able to identify specific types of injuries being noted for time off and was able to take corrective action. Many companies do record this information but fail to use it to revamp systems which may be outdated, and as a result, crippling a company’s operations. The persuasive reasons for using human resource metrics and advantages of the findings are endless but I will list a few:
Keeping tabs on the efficiency of human resource functions: this includes what it costs a company per hire (annually or otherwise) as well as monitoring the companies’ turnover rate.
They can reveal the effectiveness of human resource functions: with many companies turning much less of a profit than in previous years, training and development often takes a back seat in company expenditure. However, where human resources managers have solid information and/or statistics revealing reduced productivity in a specific department or inadequate supervisory skills in another, the case for training is often more solidified. A system of follow up should also be used to measure the effectiveness of any training undertaken.
Gauging employee’s performance, engagement and satisfaction: It has been proven that these areas are intrinsically linked to the overall productivity of a business especially where the employees interface with external customers. Determining whether your employees are in fact satisfied, and what you as an employer can do to improve conditions is key in maintaining competitive advantage in any industry.
Guidance for the development of human resource specific and general policies, guidance documents and strategies: The quantification of information collected, provides a better platform for the setting of agendas which are beneficial to the company.
When do you start? Immediately! Every day that passes your organisation loses information which could guide its decision making processes. An employer should aim to be as well informed about all areas which could impact his/her business and the human resource aspect is a central function. Employers should seek to use any systems that have the propensity to improve their overall efficiency and productivity, this can only be accurately assessed by gathering company data which can guide actions, policies and decisions.
