3.6.2 Analysing HR performance. Flashcards
What are the methods of measuring a
HR performance?
Labour turnover and retention rates.
Define labour turnover.
Proportion of employees leaving a business over a period of time, typically a year.
What is the calculation for labour turnover?
Number of employees leaving over a given period / average number employed over a given period x 100.
Define retention rate.
The proportion of employees within a specified length of service - typically one or more years - as a proportion of the total workforce.
What is the calculation for retention rate?
Number of employees with one or more years service / overall workforce numbers x 100.
When will the retention rate increase?
When the number of employees with one or more years service rises while the overall workforce number remains the same.
How can labour turnover and retention rate data be used for HR decision making and planning?
If labour turnover is high and retention rates are low, this is likely to be reflected in problems elsewhere in the organisation.
What are the problems associated with high labour turnover and low retention rates?
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.
What are internal causes for high labour turnover and low retention rates?
Ineffective leadership and management techniques.
Poor communications.
Lower wages and salaries in comparison to competitors.
Poor working conditions etc.
What are external causes for high labour turnover and low retention rates?
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.
How can you improve labour turnover and retention rates?
Monitoring and benchmarking.
Exit interviews.
Recruitment and selection.
Induction and training.
Reducing turnover of long term workers.
What happens if a business has high labour turnover and a low retention rate?
Costs of recruitment and training new staff leads to a weaker competitive position and a fall in efficiency.
Define labour productivity.
A measure of output per worker in a given time period.
What is the calculation for labour productivity?
Output per period / number of employees per period.
What is linked with labour productivity?
Labour costs per unit.
How are labour productivity and labour costs per unit linked?
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.
How do you calculate labour costs per unit?
Total labour costs / total units of output.
What are example strategies to increase labour productivity and reduce labour costs per unit?
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.
What are specific ways to reduce labour costs per unit?
Holding down wages.
Replacing workers with machines and technology.
Outsource production to other firms.
How to can you ensure that changes to improve LP and reduce LCPU are successful?
Employees recognise why LP must be increased.
Employees are involved in the change.
Jobs are not lost.
What does employee costs as a percentage of turnover show?
The percentage of sales turnover needed to cover employee or labour costs.
What is the calculation for employee costs as a percentage of labour turnover (ECAPOLT)?
Employee costs/sales turnover.
What do employee costs include?
Wages, salaries, payroll taxes and benefits such as bonuses.
What happens if employee costs increases and sales turnover remains the same?
The percentage will increase.
What are labour costs like for a highly automated business?
They are a relatively small percentage of the total costs of producing a product.
What could be the cause of ECAPOLT being too high?
Employees paid higher than the industry average.
LP may not be as high as it could be.
What could be the cause of ECAPOLT being too low?
Insufficient staff.
Paid below industry average - low quality workers.
What are the effects of ECAPOLT being too high?
Low profit margins.
Prices being too high for the nature of the product and in relation to employers.
What are the effects of ECAPOLT being too low?
Poor service.
Incomplete work.
Poor workmanship.
Why could labour turnover increase?
Employees are unhappy about the pressure they may be experiencing or the level of demand.
Define absenteeism.
The proportion of employees not at work on a given day.
What can cover for absent employees lead to?
Additional labour costs.
What can high rates of absenteeism be indicative of?
Poor levels of commitment and motivation.
Ineffective management and communication in a business.
What are some strategies to improve absenteeism?
Introducing more flexible working practices e.g. home working.
Interesting and challenging jobs.
Improving working conditions.
Attendance bonuses for incentive.
