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Human Resources Management What Metrics Should You Be Using

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Human Resources Management What Metrics Should You Be Using to Rate Your Effectiveness? Bob Keller Vice President, Compensation & Benefits Norwood Promotional ... – PowerPoint PPT presentation

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Title: Human Resources Management What Metrics Should You Be Using


1
Human Resources ManagementWhat Metrics Should
You Be Using to Rate Your Effectiveness?
  • Bob Keller
  • Vice President, Compensation Benefits
  • Norwood Promotional Products, Inc.
  • 2006 Indiana State
  • Human Resources Conference
  • August 29, 2006

2
Agenda
  • A seat at the table
  • Metrics will help get you there
  • Key HR Metrics
  • How to Use Metrics Effectively
  • Top Ten Recommended Metrics

3
1. A seat at the table
  • Long term HR objective
  • The objective of every HR professional
  • How do you accomplish this?

4
Answer
  • Through speaking the language of business
  • Financial Language
  • Quantitative
  • Qualitative, to support your points
  • Business Process Language
  • Unique to your business and industry

5
HR is usually quality focused
  • We often speak in quality terms
  • Cant measure in dollar terms
  • Or difficult to quantify

6
My premise
  • Until you speak in financial and business process
    terms you will never have an equal seat at the
    table
  • HR will only be considered tactical and
    administrative
  • You wont have senior managements true respect
  • Be strategic!

7
2. Metrics will help you get there
  • What are your strategic objectives?
  • Productivity
  • Cost management
  • Customer satisfaction
  • Employee Satisfaction
  • Others
  • Develop metrics/measures that quantify goals and
    sell their accomplishments
  • This is beyond your department budget

8
3. What are the Key HR Metrics? Principles
  • No cookie cutter approach
  • Analyze your company key drivers
  • Analyze your business and industry
  • Get to know your sr. executives needs and focus
  • Set your priorities, agenda to match business
    needs
  • Costs/savings are king
  • Less (metrics) is more
  • Performance improvement on all key organizational
    drivers

9
Metric Categories to Explore
  • Compensation
  • Benefits
  • Employment
  • Turnover/Absenteeism
  • Training and Organization Development
  • Workers Compensation
  • Employee Attitude Surveys
  • Labor Contracts
  • HR Department costs
  • Revenues per FTE

10
1. Compensation
  • What is your Average Hourly Rate (AHR)?
  • Total company, individual plants
  • What is your average annual Salary?
  • Exempts, non-exempts
  • What is your annual payroll?
  • Average annual base pay per employee?
  • Merit pay increase percent
  • Hourly, non-exempt, salaried, executive
  • Incentive compensation programs

11
Why Important
  • Comparison to product people competitors
  • Comparison within your industry community
  • Comparisons between plants
  • Global competitor costs
  • Cost management

12
Example - Implications
  • Your plant/company AHR 15
  • Community AHR 14
  • Key people competitor AHR 16
  • Key products competitor AHR 13.50
  • Global product competitor AHR 3.00
  • What potential impact will your situation have
  • on the business?

13
2. Benefits
  • Medical Plan Cost
  • Company paid portion per employee
  • Total cost per employee
  • Total employee population
  • Other Plans Dental, STD, LTD, Pension, etc.
  • Government mandated benefits
  • Total plans cost
  • Per employee
  • As a percent of company-wide average base pay

14
Why Important
  • Second largest company expenditure
  • Comparison to product people competitors
  • Competitiveness
  • Attract and retain employees
  • Costs the company can/cannot afford

15
Example 1 Cost trend success
  • Percentage Change in Costs 2002-6
  • Cost decrease to company -11
  • Cost increase to employees 30
  • Cost increase total Company ees 25
  • National medical cost increase 68
  • Company cost
  • Starting cost 13.5 million
  • Current cost 11.9 million
  • Annual cost savings 1.6 million

16
Example 2 Vs. National Average
  • Medical Plan cost per employee
  • 6,114
  • National Average (Manufacturing)
  • 7,279
  • Annual savings (Company 2,500 ees)
  • 3 million
  • Company annual savings at 75 cost
  • 2.25 million

17
Example Single Page Cost Summary
18
3. Employment
  • Cost per hire
  • Internal staffing department
  • Requisition management, internet, agencies, open
    houses, campus
  • Applicant tracking system, reports
  • IT overhead, telecom, other overhead burdens
  • Reference checking
  • Executive search
  • Responsiveness/Efficiency
  • Response time
  • Time-to-fill
  • Hire ratios
  • Hit Ratio offers accepted vs. offers made
  • Qualitative
  • After one year working for the company
  • After five years
  • Should be part of annual Talent Assessment Review
    Process (Session C)

19
Why Important
  • Significant company-wide expense
  • Internal function vs. agencies or outsourcing
  • Cost
  • Internal customer satisfaction
  • Efficiency
  • Effectiveness
  • Internal talent development
  • Cost effectiveness

20
Example Employment Costs
21
4. Turnover/Absenteeism
  • Annual turnover rates
  • Voluntary, involuntary
  • Coding (reasons)
  • Complete financial cost of turnover
  • Cost to train, recruit, declining productivity of
    incumbent, unfilled position overtime or contract
    labor, unemployment compensation, new hire
    training and learning curve of new hire
  • Absenteeism percentage rate
  • Similar additional cost to the business
  • Do the math with your management to get buy-in

22
Why Important
  • Obvious costs of replacement
  • Turnover - permanent employees
  • Absenteeism temporary, overtime or lost
    production
  • Huge hidden costs for both

23
Example Turnover Costs
24
5. Training Organization Development
  • Training (vs. educating) expenditures
  • Cost per unit of training delivered
  • Change in behavior and performance
  • Impact financial results or outcomes (ROI)
  • OD Succession Planning
  • Internal candidates filling openings
  • Employee Attitude ratings
  • Viable individual development plans

25
Why Important
  • Training, OD perceived as difficult to quantify
  • Training one of the first budget items to be
    eliminated during downturns
  • Must be very specific to defend
  • Sell the expected financial impact, then measure

26
Examples
  • Sales training increased revenues per sales rep
  • Hourly workers increased efficiency
  • Managers improved leadership, higher employee
    satisfaction, less turnover, increased efficiency
  • Generic savings
  • Decrease in turnover, recruitment, new hire
    training and learning curve factors

27
6. Workers Compensation
  • Cost per employee
  • Total company-wide costs
  • Savings won in contested cases
  • Reduced reserves through investigation
  • OSHA DART rates
  • Importance of trends
  • Days away from work, on restriction or job
    transfer

28
Why Important
  • Multi-million dollar annual expense
  • Second largest HR expenditure category
  • Lost cost reduction opportunity if sites dont
    focus on it

29
Example Workers Compensation
30
7. Employee Attitude Surveys
  • Employee satisfaction versus
  • National/industry/vendors medians
  • World class (75th percentile) companies
  • Prior years
  • Sorted by
  • Company location
  • Departments in each location

31
Why Important
  • Employee satisfaction correlates to customer
    satisfaction
  • Customer satisfaction correlates to sales
  • Additional financial correlations to turnover and
    absenteeism

32
8. Labor Contracts
  • Increase/decrease in hourly AHR
  • Cost savings/cost avoidance achieved
  • Compensation
  • Benefits
  • Manufacturing efficiency

33
9. HR Department Costs
  • Total HR costs per FTE
  • True HR costs, not non-HR costs thrown into HR
    budget
  • Annual admin. cost of each outsourced HR program
  • HR Costs as of total Manpower Expense
  • Number of employees per HR head
  • Annual admin. cost of each outsourced HR program
  • Benchmark to national/industry/similarly sized
    companies
  • HR Costs include/exclude mandated government
    benefits

34
Why Important
  • Knowing your costs and how you compare gives you
    opportunity for continuous improvement
  • Communicates the value of HR compared to
    competition and the external world in an
    objective and financial manner

35
Example Total HR Costs
36
10. Revenues per FTE
  • Revenues per FTE of your company
  • Historical trend
  • Versus other companies in your industry
  • Versus customer satisfaction trends

37
Why Important
  • Establishes HR as a strategic partner
  • Helps control staffing levels
  • Even in prosperous times
  • Appropriate organization design (flatter)
  • Eliminates need for many layoffs
  • Efficient companies are more profitable companies

38
Example Revenues per FTE
39
SummaryTop Ten HR Metric Categories
  • Compensation
  • Benefits
  • Employment
  • Turnover/Absenteeism
  • Training and Organization Development
  • Workers Compensation
  • Employee Attitude Surveys
  • Labor Contracts
  • HR Dept costs
  • Revenues per FTE

40
SummaryTop Ten Recommended HR Metrics
  • Compensation
  • Average hourly rate (AHR) average annual salary
  • Benefits
  • Company paid portion of medical plan costs of
    all benefit plan costs
  • Employment
  • Cost per hire response time
  • Turnover/Absenteeism
  • Complete cost of turnover per hourly/salaried
    employee
  • Complete cost of absenteeism per hourly/salaried
    employee
  • Training and Organization Development
  • Positive financial impact per delivered training
    unit
  • Workers Compensation
  • Workers Compensation costs
  • Employee Attitude Surveys
  • Employee satisfaction versus median and 75th
    percentile companies
  • Labor Contracts
  • Change in average hourly rate (AHR), other cost
    savings/avoidance
  • HR Dept costs
  • HR expense as of total Manpower expense (do
    the same for other functions as well)

41
SummaryTop Ten Recommended HR Metrics
  • Compensation
  • Average hourly rate (AHR) average annual salary
  • Benefits
  • Company paid portion of medical plan costs of
    all benefit plan costs
  • Employment
  • Cost per hire response time
  • Turnover/Absenteeism
  • Complete cost of turnover per hourly/salaried
    employee
  • Complete cost of absenteeism per hourly/salaried
    employee
  • Training and Organization Development
  • Positive financial impact per delivered training
    unit

42
SummaryTop Ten Recommended HR Metrics
  • 6. Workers Compensation
  • Workers Compensation costs
  • 7. Employee Attitude Surveys
  • Employee satisfaction versus median and 75th
    percentile companies
  • 8. Labor Contracts
  • Change in average hourly rate (AHR), other cost
    savings/avoidance
  • 9. HR Dept costs
  • HR expense as of total Manpower expense (do
    the same for other functions as well)
  • 10. Revenues per FTE
  • Revenues per FTE

43
Top Ten Recommended HR MetricsPrioritized
  • Revenues per FTE
  • Revenues per FTE
  • HR Dept costs
  • HR expense as of total Manpower expense (do
    the same for other functions as well)
  • Employment
  • Cost per hire response time
  • Compensation
  • Average hourly rate (AHR) average annual salary
  • Benefits
  • Company paid portion of medical plan costs of
    all benefit plan costs
  • Workers Compensation
  • Workers Compensation costs
  • Training and Organization Development
  • Positive financial impact per delivered training
    unit
  • of internal applicants filling promotional
    opportunities
  • Turnover/Absenteeism
  • Complete cost of turnover per hourly/salaried
    employee
  • Complete cost of absenteeism per hourly/salaried
    employee
  • Employee Attitude Surveys

44
SummaryHow to Successfully Use Them
  • 1. Choose the metrics most important to your
    company
  • - Select a few to start
  • - The 20 that drives the 80 (most) value
  • - Make sure your numbers are accurate
  • 2. Use them as your HR metrics in Quarterly
    Business Meetings with Senior Management
  • 3. Compare to appropriate benchmarks both
    internally and externally
  • 4. Use Continuous Improvement

45
Suggested ReadingHR Metrics
  • How to Measure Human Resources Management
  • Jac Fitz-enz, Saratoga Institute, McGraw Hill
  • Benchmarking, The Search for Industry Best
    Practices that Lead to Superior Performance
  • Robert C. Camp, Xerox, Quality Press
  • SHRM Customized Human Capital Benchmarking
    Service

46
Suggested ReadingFinance
  • The McGraw-Hill 36-Hour Course for Non-Financial
    Managers
  • Robert A. Cooke, McGraw Hill
  • Understanding Balance Sheets
  • George T. Friedlob, Wiley
  • Finance for Strategic Decision-Making
  • M. P. Narayanan, Jossey-Bass

47
Suggested Self Development Course to Attend
  • Financial Management for Non-Finance Managers
  • Any Universitys School of Business

48
Norwood Promotional Products, Inc .
  • Premier supplier of customized products and
    business solutions
  • Headquartered in Indianapolis
  • Pens, mugs, KooziesTM, caps, magnets, canvass
    bags, marble crystal awards, personalized
    calendars, etc.
  • Purchase through distributors
  • Ask for our products by name
  • Positive Norwood Experience
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