3.6.2 Analysing HR performance.

Question 1

What are the methods of measuring a

HR performance?

Answer 1

Labour turnover and retention rates.

Question 2

Define labour turnover.

Answer 2

Proportion of employees leaving a business over a period of time, typically a year.

Question 3

What is the calculation for labour turnover?

Answer 3

Number of employees leaving over a given period / average number employed over a given period x 100.

Question 4

Define retention rate.

Answer 4

The proportion of employees within a specified length of service - typically one or more years - as a proportion of the total workforce.

Question 5

What is the calculation for retention rate?

Answer 5

Number of employees with one or more years service / overall workforce numbers x 100.

Question 6

When will the retention rate increase?

Answer 6

When the number of employees with one or more years service rises while the overall workforce number remains the same.

Question 7

How can labour turnover and retention rate data be used for HR decision making and planning?

Answer 7

If labour turnover is high and retention rates are low, this is likely to be reflected in problems elsewhere in the organisation.

Question 8

What are the problems associated with high labour turnover and low retention rates?

Answer 8

High recruitment and selection costs to replace staff who leave.

High induction and training costs.

Need to redesign jobs in some industries where LT is a particular problem.

Low employee morale.

Question 9

What are internal causes for high labour turnover and low retention rates?

Answer 9

Ineffective leadership and management techniques.

Poor communications.

Lower wages and salaries in comparison to competitors.

Poor working conditions etc.

Question 10

What are external causes for high labour turnover and low retention rates?

Answer 10

Economy or a part of it is improving and there are more job opportunities.

Other jobs could be more attractive, perhaps due to wages or conditions etc.

Question 11

How can you improve labour turnover and retention rates?

Answer 11

Monitoring and benchmarking.

Exit interviews.

Recruitment and selection.

Induction and training.

Reducing turnover of long term workers.

Question 12

What happens if a business has high labour turnover and a low retention rate?

Answer 12

Costs of recruitment and training new staff leads to a weaker competitive position and a fall in efficiency.

Question 13

Define labour productivity.

Answer 13

A measure of output per worker in a given time period.

Question 14

What is the calculation for labour productivity?

Answer 14

Output per period / number of employees per period.

Question 15

What is linked with labour productivity?

Answer 15

Labour costs per unit.

Question 16

How are labour productivity and labour costs per unit linked?

Answer 16

Both measure employee efficiency.

LP measures how much, on average, an individual employee produces.

LCPU are the average labour costs involved in producing one unit of output in a given period of time.

Question 17

How do you calculate labour costs per unit?

Answer 17

Total labour costs / total units of output.

Question 18

What are example strategies to increase labour productivity and reduce labour costs per unit?

Answer 18

Recruitment and selection of suitably skilled and trained employees.

Provision of training to enhance skills and attitudes of existing employees.

Improved working practices, more employee engagement in decision making.

Question 19

What are specific ways to reduce labour costs per unit?

Answer 19

Holding down wages.

Replacing workers with machines and technology.

Outsource production to other firms.

Question 20

How to can you ensure that changes to improve LP and reduce LCPU are successful?

Answer 20

Employees recognise why LP must be increased.

Employees are involved in the change.

Jobs are not lost.

Question 21

What does employee costs as a percentage of turnover show?

Answer 21

The percentage of sales turnover needed to cover employee or labour costs.

Question 22

What is the calculation for employee costs as a percentage of labour turnover (ECAPOLT)?

Answer 22

Employee costs/sales turnover.

Question 23

What do employee costs include?

Answer 23

Wages, salaries, payroll taxes and benefits such as bonuses.

Question 24

What happens if employee costs increases and sales turnover remains the same?

Answer 24

The percentage will increase.

Question 25

What are labour costs like for a highly automated business?

Answer 25

They are a relatively small percentage of the total costs of producing a product.

Question 26

What could be the cause of ECAPOLT being too high?

Answer 26

Employees paid higher than the industry average.

LP may not be as high as it could be.

Question 27

What could be the cause of ECAPOLT being too low?

Answer 27

Insufficient staff.

Paid below industry average - low quality workers.

Question 28

What are the effects of ECAPOLT being too high?

Answer 28

Low profit margins.

Prices being too high for the nature of the product and in relation to employers.

Question 29

What are the effects of ECAPOLT being too low?

Answer 29

Poor service.

Incomplete work.

Poor workmanship.

Question 30

Why could labour turnover increase?

Answer 30

Employees are unhappy about the pressure they may be experiencing or the level of demand.

Question 31

Define absenteeism.

Answer 31

The proportion of employees not at work on a given day.

Question 32

What can cover for absent employees lead to?

Answer 32

Additional labour costs.

Question 33

What can high rates of absenteeism be indicative of?

Answer 33

Poor levels of commitment and motivation.

Ineffective management and communication in a business.

Question 34

What are some strategies to improve absenteeism?

Answer 34

Introducing more flexible working practices e.g. home working.

Interesting and challenging jobs.

Improving working conditions.

Attendance bonuses for incentive.