hr metrics

Fi e HR Metrics That Five HR Metrics That Matter

June 12, 2007

Agenda

• Welcome & Introduction

• The HR Measurement Journey• The HR Measurement Journey

• Five Metrics that Matter– Average Headcount– Age Staffing Breakdown– Average Workforce TenureAverage Workforce Tenure– Termination Rate– Employee Engagement Index

• Reference Information and Learning Opportunities

• Questions

Today’s Presenters

Brian KellyThe Infohrm Group

Paige MengeThe Infohrm Group The Infohrm GroupThe Infohrm Group

The Infohrm Group

• Global leader in on-demand workforce reporting, analytics & planning solutions

• Three primary offices: Brisbane, AU; Washington, DC; London, UK

• Founded in 1982

• Original partner in CLC Metrics Program; acquired Corporate Executive Board’s interest in 2006; ongoing research relationship

• Focus on public & private sectorFocus on public & private sector– Goldman Sachs, EMC, Charles Schwab, ING, Time Warner, Aetna,

MetLife, The Hartford, Starbucks, Lowe’s

Infohrm’s Core Capabilities:A Partnership Model

Our Capabilities• Business Information

• Business IntelligenceOur Expertise

• Business Intelligence

• Business Impact• Business Reporting Services

• Workforce Reporting Services

• Workforce Planning

Flexible Solutions

g

• Business & Employee Surveying

• Human Capital Management ROI

B i & W kf A l ti l S i• Programs

• Tools

• Consulting

• Business & Workforce Analytical Services

• Metrics & Benchmarking

• Strategic HR Consulting• Consulting

• Professional Development

Representative Client List

The HR Measurement Journey

Vision of “Human Capital” Measurement

Primary Goals of HR Measurement

Most HR Measurement Initiatives Aspire to Align HR and Corporate Strategy and to Enable Managers to Make Better Workforce-Related Decisions

60%70%

yPercentage of Survey Respondents Citing Each Item as One of the Top Three Goals of HR

Measurement Efforts

45%

33% 33% 31%27%

35%27%

23%

12% 11%8%

0%Better AlignHR Strategy

with CorporateStrategy

Enable Managers to Make BetterDecisionsRegarding

ControlHR Cost

Demonstratethe Bottom-Line Impactof Specific

HR Practices/

PrioritizeHR

Investmentsand Actions

SupportOrganizational

StrategicPlanning

IdentifyOpportunities

For HR Impact

Respond to“Measurement

Pressure”from Senior

Management

ProvideJustificationfor HR in theOrganization

Create “Lineof Sight” forEmployees

8

Strategy RegardingWorkforce

Management

HR Practices/Programs

Management

Source: CLC, Exploring the Measurement Challenges (2001).

n=278 companies

Many Obstacles Block the Road

Primary Challenges of HR Measurement

While the Following Challenges Have Taken Precedence in Establishing a Human Capital Measurement System for HR …

y gPercentage of Survey Respondents Citing Each Item as One of the Top Three Challenges

of HR Measurement Efforts61%

55%50%

70%

50%

29%25%

35%25%

20% 18%15%

10%6%

QuantifiablyLinkingHR and

Business

IdentifyingValue-Added

Lack ofTechnology Integrating

HR andCorporate

Subjectivityof HR Metrics Obtaining

Raw Data

HR StaffSkills Gap Accountability

for Metrics

Accessto Metrics Tying

Incentivesto HR

0%

9

Goals AddedHR Metrics

CorporateMeasurement

to HRMetrics

Source: CLC, Exploring the Measurement Challenges (2001).

n=278 companies

The Journey: Four Stages of Value CreationTransform HR from “Service Provider” to “Business Driver”

HighConsistent HC

ReportingBusiness Insight

HC Metrics Embedded

Phase 2 Business Partner

Phase 3 Business Driver• Build a data-driven

Phase 4Note: The first two levels of business impact are enabled by a successful rollout strategy. Enabling the third and forth levels requires significant cultural and behavioural change in the HR function.

Business Impact Service Provider

• Respond to ad-hoct

Phase 1 Business Enabler• Support data self-

service• Ensure data

Phase 2 Business Partner• Integrate HC data

into planning processes

• Identify problematic HR

HR function• Manage core HR

processes with data• Quantify impact of

HR interventionsrequests• Prepare

performance reports

• Maintain HR d t b

Ensure data consistency

• Provide automated reports

problematic HR trends

e e o s• Analytically

determine HC drivers of business success

• Focus organization on right HRdatabases

Low

on right HR measures

• Build data-driven business case for HR interventions

10

Source: CLC and InfoHRM Research

Time / SophisticationLow High

A Balancing Act: Common Concerns vs Unique StrategiesPattern of KPI Selection Reflects Both Common Human Capital Concerns and

Unique Corporate StrategiesPortion of Members Selecting Each Measure

80%

90%

100% Common ConcernsThe Gold Standard: 60% or greater penetration:• Termination Rate• Staffing Rate (by gender, ethnic background, …)

The Silver Standard: 40% to 59% penetration:

50%

60%

70%

atio

n R

ate

The Silver Standard: 40% to 59% penetration:• Employee Engagement• Managerial Bench Strength

The Bronze Standard: 30% to 39% penetration:• Revenue per FTE

P fit FTE

• Employees at Risk Factor

• Net Workforce GrowthC t f T

20%

30%

40%

Pen

etra • Profit per FTE

• Performance-Based Pay Differential• Management Performance• Successor Pool Coverage

L “t il” t diff ti ti f t t i

• Cost of Turnover• Training Investment per FTE• ROI of Training• New Hire Failures

0%

10%

KPI's Selected2072 6 16

Long “tail” suggests differentiation of company strategies.

11

Source: Infohrm, 207 measure across 88 workshops.

Five Metrics That Matter

The Struggle to Focus on HR Measures that Matter

Most organizations are capturing thousands of pieces of data about their workforce, and it can be hard to focus on what really matters

8 Organizational

UnitsX

5 Departments in Each Org Unit

20 Workforce

Metrics

10 DemographicDimensions

6Categories in

Each DimensionX X X

48,000 measures = ,to analyze!

Five Metrics That Matter

1. Average Headcount

2. Age Staffing Breakdown

3. Average Workforce Tenure

4 Termination Rate4. Termination Rate

5. Employee Engagement Index

Format for Remaining Measures

1 Formula and Importance of Measure1. Formula and Importance of Measure

2. Case Study

3. Limitations of Measure

4. Related Measures

Average Headcount

Formula: Rolling daily headcount average

Why it’s Why it s important: 1. Serves as the denominator for many workforce measures, including:

• Termination Rate

• Promotion/Demotion/Transfer Rate

• External/Internal Hire Rate

• Training Expense per Employee

2. Company size

• End of period/Start of period headcount can be misleading due to seasonal termination patterns

Average Headcount “Case” Study

Most companies use End of Period Headcount (EOP), Start of Period Headcount (SOP), or (EOP + SOP)/2 as a proxy for average headcount when calculating termination rate, external hire rate, etc.

Day 1 Day 4Day 2 Day 3 Day 5Day 1 Day 4Day 2 Day 3 Day 5HC = 12 HC = 10 HC = 15 HC = 12HC = 15

SOP HC = 12

EOP HC = 12

(EOP + SOP) / 2 = 12

Average HC = 12.8g

Average Headcount Limitations

• Does not detail demographics, skill levels, or experience of the g p pworkforce

• Does not reflect churn within the workforce• Does not reflect churn within the workforce

• Does not indicate internal movement patternsp

Average Headcount Related Measures

• Age Staffing BreakdownAge Staffing Breakdown• End of Period Headcount• External Hire Rate• Organization Tenure Staffing Breakdown• Promotion Rate• Staffing Rate High Potential• Staffing Rate – High Potential• Termination Rate• Transfer Rate

Age Staffing Breakdown

Formula: End of Period Headcount.[Age] / End of Period Headcount * 100

Why it’s Why it s important: 1. Generational differences

• Employee motivations

• Employee attitudes about work

• Employee benefits

2. Experience

• Capability within company to execute on strategy

• Training and development

• Career paths

3 Risk of talent and kno ledge drain d e to retirement3. Risk of talent and knowledge drain due to retirement

Age Staffing Breakdown Case Study #1

Insurance Company concerned about their aging workforce

• Finding #1: The Company does have an aging workforceTh b f l li ibl t ti h i d f d 15% i – The number of employees eligible to retire has increased from around 15% in 2003 to around 20% in 2006; at the same time, the percent of those eligible to retire who actually do retire has also increased

Fi di #2 Th i kf d t th t th b i i th h t t• Finding #2: The aging workforce does not threaten the business in the short term– Management employees over the age of 60 only represent about 6% of total

company leadership– Current staffing levels should be able to accommodate the admin/technical

l li ibl t ti ithi th t fi employees eligible to retire within the next five years– Advances in technology will mitigate the risk from office and special services

employees eligible to retire

• Finding #3: By changing policies, the threat can be further reduced– By implementing policies that reward employees to remain with the Company until

age 65 rather than age 60, the number of employees eligible to retire shrinks from 18% of all employees to 6% through 2011p y g


Financial Services Company analyzing career paths within accounting department

• Created a matrix of age and job grade for professional, exempt employees


Age 21 21-25 26-30 30-35 36-40 41-45 46-50 51-55 56+ TotalGrade 6 8 5 2 2 4 5 1 27Grade 7 14 7 4 4 5 6 6 1 47Grade 8 1 15 4 4 2 3 29Grade 8 1 15 4 4 2 3 29Grade 9 9 8 2 1 2 2 3 27

Grade 10 1 6 2 1 10Grade 11 1 1 2 1 5Grade 12 1 1 2 4Grade 13 1 3 4Grade 14 2 2

Total - 23 38 26 12 16 12 16 12 155

Age Staffing Breakdown Limitations

• Does not account for age profile of those entering and leaving the g p g gorganization

• Does not provide information on cost of retirements (pensions defined • Does not provide information on cost of retirements (pensions, defined benefit vs. defined contributions, etc)

• Does not indicate the skill set, knowledge base, or tenure of employees

Age Staffing Breakdown Related Measures

• Average Workforce AgeAverage Workforce Age• Benefits Satisfaction Index• Educational Attainment Breakdown• Employee Engagement Index• Employee Engagement Index• External Hire Rate• Organization Tenure Staffing Breakdown• Successor Pool Coverage• Termination Rate• Training Course Content BreakdownTraining Course Content Breakdown

Average Workforce Tenure

Formula: Total Workforce Tenure / End of Period Headcount

Why it’s Why it s important: 1. Determine knowledge base about company

2. Evaluate state of culture and innovation

3. Inform development needs

4. Research impact of tenure on certain jobs and performancep j p

Average Workforce Tenure Case Study

Financial Services Company researching indicators of branch profitability

• Finding #1: Top performing branches have managers with high average tenure

• Finding #2: Employee allegations of fraud were twice as likely to come from branches with two or more managers in the past 18 months

• Finding #3: Managers who terminated with short tenures were often promoted to manager due to high sales, not leadership skillso a age due o g sa es, o eade s p s s

Average Workforce Tenure Breakdown Limitations

• Does not inform the range or distribution of tenure above and below the average

• Not an indicator of general work experience, skill level, or functional knowledge

• Only looks at tenure of employees in the organization, not tenure within the current positionthe current position

Average Workforce Tenure Related Measures

• Age Staffing Breakdown• Average Annual Salary per FTE• Average Termination Value• Employee Retention Index• External Hire RateExternal Hire Rate• Manager Quality Index• Organization Tenure Staffing Breakdown• Termination Rate• Termination Reason Breakdown• Total Compensation Expense per FTE• Total Compensation Expense per FTE• Training Course Content Breakdown• Work Units per FTE

Termination Rate

Formula: Terminations / Average Headcount * 100

Why it’s Why it s important: 1. Monitors adequacy of employment “offer”

2. Indicates effectiveness of staffing function

3. Represents costs to the company

• Cost of hiring replacementg p

• Lost productivity during vacancy and training

• Training and onboarding costsg g

• Lower morale and increased workload

4. Low turnover can show stagnation of ideas4. Low turnover can show stagnation of ideas

Termination Rate Case Study #1

Company’s Sales Department concerned about high termination rates

• Finding: Sales regions which terminated low performers had lower profitability than those branches who kept low performers– Low performers were those employees with the shortest tenure– Branches who kept low performers and gave them time to “grow” into their

roles saw higher long-term profitability


Company concerned about Call Center turnover

• Finding #1: Non exempt terminations are high• Finding #1: Non-exempt terminations are high– Involuntary terminations overwhelmingly driven by failure to pass licensing exam, so

need better upfront screening– Voluntary terminations driven by “better opportunity ” but can be mitigated by retention Voluntary terminations driven by better opportunity, but can be mitigated by retention

bonuses, and promotion and development opportunities

140%

160% Voluntary

Involuntary

80%

100%

120%

natio

n Rate

(%)

0%

20%

40%

60%

Term

in

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23months of tenure



• Finding #2: Non exempt termination rates vary greatly by call center location• Finding #2: Non-exempt termination rates vary greatly by call center location– Further research needed to determine whether caused by labor market, competition,

type of work, management, etc.

34%

42%

61%

15%

10%

37%

tions

29%

22%

32%

13%

16%

Voluntary Termination Ratenter L

oca

11%

6%

14%

19%

6%

10%Involuntary Termination Rate

Call C

en

11%



Finding #3: High non exempt termination rates may be caused by low exempt • Finding #3: High non-exempt termination rates may be caused by low exempt termination rates– Few opportunities for advancement if there are no managerial positions

openingopening– Long tenure in exempt position could mean managers are very “far removed”

from the challenges of the non-exempt role

Termination Rate Limitations

• Does not indicate voluntary vs. involuntary termination

• Does not show specific reasons for termination (better opportunity, manager, compensation, returning to school, etc)

• Does not reflect who is leaving or how those employees are being replaced to demonstrate true impact on the workforce composition

Termination Rate Related Measures

• Average Termination Value• Compensation Satisfaction Index• Employee Retention Index• External Hire Rate• Involuntary Termination Rate• Manager Quality Index• Market Opportunity Index• Offer Acceptance Rate• Operating Expense per FTE• Organization Tenure staffing Breakdown• Return on Human Investment Ratio• Termination Breakdown by Performance Rating• Voluntary Termination Rate

Employee Engagement Index

Formula: Derived from survey methodology

Why it’s Why it s important: 1. Helps measure employee discretionary effort to the firm

2. Leading indicator for turnover

3. Leading indicator for customer satisfaction

Employee Engagement Index Case Study

Major retail chain in the food service industry determining link between employee engagement (in the company) and store profitability

• Finding #1: Employee engagement is linked to customer satisfaction• Finding #1: Employee engagement is linked to customer satisfaction• Finding #2: Employee engagement is linked to store profitability

**For each graph the differential in percentage points from low engagement to For each graph, the differential in percentage points from low engagement to high engagement is 6%

• Finding #3: When combined with manager stability, average workforce tenure, and satisfaction with pay employee engagement accounts for a 4% variance and satisfaction with pay, employee engagement accounts for a 4% variance in financial profitability

Employee Engagement Index Limitations

• Value of the measure depends on the effectiveness of survey design and delivery

• Survey answers can reflect temporal events

• Engagement is only one aspect an employees opinion about/ relationship with the company

Employee Engagement Index Related Measures

• Age Staffing Breakdown• Voluntary Termination Ratey• Employee Commitment Index• Employee Retention Index• Employment Brand Strength• Internal Hire Rate• Manager Quality IndexManager Quality Index• Market Opportunity Index• Offer Fit Index• Organization Tenure Staffing Breakdown• Promotion Rate• Promotion Speed Ratio• Promotion Speed Ratio

Reference Information and Learning Opportunities

The Metrics StandardA rating system for easy application.

A Detailed Guide of 200+ Metrics

Retention

Turnover Cost of Turnover

Employee Engagement

Category and subcategorysubcategory provided for easy reference.

Interpretive text describes what is measured, the importance of theimportance of the measure, and the impact of high or low results.

Provides a listing of variations and interrelated measures for those “on the hunt” for the most appropriate metric or set of

f f

Captures the lessons learned from CLC Metrics members’ e perience ith this metrics for a given set of

circumstances.experience with this metric.

Workforce Analytics and Workforce Planning Workshops

March 7-8Los Angeles, CA*

June 19-20Chicago, IL

March 13-14New York, NY

Sept. 27-28Washington, DC,

April 17-18Boston MA*

g ,

Nov. 6-7Dallas TXBoston, MA

April 24-25W hi t DC

Dallas, TX

Nov. 13-14Atl t GAWashington, DC

June 12-13

Atlanta, GA

San Francisco, CA**Workforce Analytics Only

2007 Infohrm Human Capital Analytics Conference

Keynote Speakers Include:

• Thomas Manley, Cognos

• Norm Smallwood, University of Michigan

• Corbette Doyle, Aon

• Jonathan Terrell, The Infohrm Group

September 25-28, Washington DC

Workforce Planning Summit

Dr John Sullivan San Francisco State

With presentations by:

• Dr. John Sullivan, San Francisco State University

• Dan Hilbert, Valero Energy, gy

• Jeff Higgins, Countrywide Financial

• Kari Trost & Merryl Rees, The Hartford

• Peter Howes, Infohrm Group

• Anastasia Ellerby, Infohrm Asia Pacific

The Infohrm GroupThe Infohrm Group

Thank you for your time!For more information, please visit:

www infohrm comwww.infohrm.com

Or contact Duncan Scott at:Duncan Scott@infohrm [email protected]

202.589.2664