Measuring The Effectiveness of the Workforce

1. Measuring The Effectiveness of the Workforce AS Business StudiesUnit 2

2. Aims and Objectives Aim: • Understand how to measure the effectiveness of the workforce. Objectives: • Define workforce performance • Calculate workforce performance measures • Analyse workforce performance measures

3. Starter • How could a business measure the effectiveness of it’s workforce?

4. Workforce Performance • Methods of measuring the effectiveness of employees including labour productivity, staff turnover and absenteeism.

5. Labour Turnover • Percentage of workforce who leave in a given period of time. • Voluntary • Involuntary – redundancies/dismissal • UK between 16%-18% • (Number of leavers per year / average number of employees per year) x 100

6. Calculating Labour Turnover • Calculate labour turnover rate for each year • What do the figures suggest about the introduction of the new training programme and bonus scheme? • Make a list of what the costs of labour turnover might be

7. Labour Turnover Costs • Additional recruitment costs • Lost production costs • Increased costs of training replacement employees • Loss of know-how and customer goodwill • Potential loss of sales (e.g. if there is high turnover amongst the sales force) • Damage that may be done to morale and productivity (an intangible cost)

8. Labour Turnover Causes Task: Brainstorm causes of labour turnover.

9. Labour Turnover Causes • Inadequate wage levels leading to employees moving to competitors • Poor morale and low levels of motivation within the workforce • Recruiting and selecting the wrong employees in the first place, meaning they leave to seek more suitable employment • A buoyant local labour market offering more (and perhaps more attractive) opportunities to employees

10. Labour Productivity Measure 1 • Output per employee • Manufacturing businesses easy to measure • Can be hard to measure service business • Total value of output / total number of employees

11. Labour Productivity Measure 2 • Labour cost per unit of output • (Total labour costs / total output) x 100 • An increase in labour productivity will reduce labour cost per unit of output and improve competitiveness

12. Labour Productivity Measure 3 • UK Productivity • Used to compare UK internationally • Total UK output / Total UK hours worked

13. Calculating Labour Productivity • Calculate the labour productivity per year using the output per employee formula. • Calculate the labour productivity using the labour costs per unit of output method. • What do these figures suggest about the effectiveness of the workforce?

14. Measuring the effectiveness of the workforce Lesson 2

15. Why calculate labour productivity? • Business can see if using resources efficiently. • If output per employee is falling, there is room to improve efficiency. • Figures do not provide a solution, but allow identification and investigation of problems.

16. Absenteeism • Number of working days lost as a result of an employee’s deliberate or habitual absence from work. • (Average number of staff absent on one day/total number of staff) x100

17. Calculating Absenteeism • Calculate the percentage absenteeism rate for years 1-4. • Describe the trend you observe from the answers in question 1. How might you explain this trend?

18. Why Calculate Absenteeism? • High or rising abs. represents costs to business. • Requires investigation and solutions which focus on improving job satisfaction and motivation to ensure workers enjoy their work and will only be absent if very ill. • Cost UK £11.6bn p.a. • On average 2.6% of total business costs

19. Exam Question • June 2009 Question 2a