1. Measuring Workforce Effectiveness

2. Labour Productivity
Labour productivity = output per period number of employees per period
If output per month is 20,000 units and 40 people are employed during that month to produce the goods, labour productivity is 500 units per worker (20,000/40)

3. Increasing labour productivity
HRM policies
Recruitment & selection of suitably skilled & trained employees
Provision of training to enhance skills & attitudes of existing employees
Appropriate remuneration & non-financial benefits that improve motivation & effort
Improved working practices
Improved technology & capital equipment

4. Advantages to the firm
Lower labour cost per unit (assuming wages stay the same)
Charge a lower price – gain market share
Enjoy a higher profit margin
NB labour productivity is a crucial measure
Direct connection between productivity of a workforce & competitiveness of a firm because labour costs are such a high proportion of total costs for most firms

5. Labour Turnover Rate of labour turnover = number leaving a business
over a given period x 100
average number employed
over a given period
e.g. if the average no. of staff employed last year was 250 and 10 employees left the firm, labour turnover would be 4% - (10/250) x 100

6. How good a measure is this?
Useful as a benchmark
Includes redundancy & retirement
Also includes temporary workers
Is there a better measure?

7. Stability index = number of leavers with more than
1 year’s service x 100
total number of staff in post 1 year ago

8. Causes of high labour turnover
Internal factors
Ineffective leadership & management techniques
Poor communications
Wages & salaries that are lower than other firms offering comparable jobs in the area
Poor selection procedures – the wrong people are appointed to the wrong jobs
Unchallenging jobs that lack career & developmental opportunities
Poor working conditions & unpopular working practices
Low more & motivation as a result of the above

9. Causes of high labour turnover
External factors
Increase in vacancies for more attractive jobs
Better pay
Better training & working conditions
More interesting & challenging
Closer to home or easier transport links

10. Problems of high labour turnover
High recruitment & selection costs
High induction & training costs
Need to redesign jobs
Reduced productivity
Low morale among existing workers

11. What is the ideal labour turnover rate?
It depends! Wide variations by occupation & by industry
Private sector turnover is 22%, compared to just under 14% in the public sector
Highest rates overall found in retailing, hotels, catering & leisure (over 30%) – why?
Typically employs students & seasonal workers
Higher proportion of low-skilled jobs

12. How would you improve labour turnover?
Monitoring & benchmarking
Exit interviews
Recruitment & selection
Induction & training
Reducing turnover of long-term workers
NB Knowing how & why rate of labour turnover is changing is as important as the figure itself

13. Absenteeism The proportion of employees not at work on a given day
= number of staff absent on 1 day x 100
total number of staff
e.g. if 21 people out of a workforce of 300 are absent on a given day, absenteeism rate is 7%
(21/300) x 100

14. Annual rate of absenteeism
= total number of days lost due to
absence during the year x 100
total number of days that could be
worked x number of employees

15. Absenteeism due to health & safety
= number of working days lost per
year due to health & safety x 100
total number of possible working
days per year

16. Causes of absenteeism Illness Transport problems
Poor motivation & commitment
Ineffective management & communication

17. Problems of absenteeism
It depends on the extent & whether work can be covered by those present
Expensive – cost to cover those absent
Delay production
Demotivate workers who are present & have extra work

18. How can absenteeism be reduced?
Introduce more flexible working practices
Ensure jobs are interesting & challenging
Improve working conditions
Improve relations between employers & employees
Introduce attendance bonuses