People in BusinessMeasuring the Effectiveness of

the Workforce

Measuring the Effectiveness of the WorkforceIn this topic you will learn about:

Methods of measuring workforce performance

Labour turnover Labour productivityAbsenteeism Calculators

needed!

Labour Turnover

Labour turnover

Labour turnover (staff turnover) can be defined as the rate of change in a firm’s labour force.

You need to know the following formula:

Number of staff leaving x 100

Total Number of staff

We would normally look at labour turnover over a period of 1 year.

Labour turnover

Worked example: A car firm has 1000 full time employees in 1 year Of these, 50 employees leave the company What is the labour turnover for the company?

Using the formula :

50 x 100 = 5%

1000

Do you think this is highor low?

What are the advantagesof labour turnover?

What are the disadvantages of labour turnover?

Labour turnover

Labour turnover refers to the movement of employees in and out of a business. However, the term is commonly used to refer only to ‘wastage’ or the number of employees leaving.High labour turnover causes problems for business. It is costly, lowers productivity and morale and tends to get worse if not dealt with.

Measuring labour turnoverThe simplest measure involves calculating the number of leavers in a period (usually a year) as a percentage of the number employed during the same period. This is known as the "separation rate" or "crude wastage rate" and is calculated as follows:

Number of leavers / average no employed x 100

For example, if a business has 150 leavers during the year and, on average, it employed 2,000 people during the year, the labour turnover figure would be 7.5%

An alternative calculation of labour turnover is known as the "Stability Index" .

This illustrates the extent to which the experienced workforce is being retained and is calculated as follows:

Number of employees with one or more years’ service now / Number employed one year ago x 100

Labour turnover will vary between different groups of employees and measurement is more useful if broken down by department or section or according to such factors as length of service, age or occupation.

Labour Productivity

Labour Productivity

This can be measured in 2 ways….

3. Output per worker

5. Labour costs per unit of output

Labour productivity - output per worker

You need to know the following formula:

Total value of Output

Total Number of workers

We would look at labour productivity over a period of time e.g. 1 year

Labour productivity

Worked example: A car firm produces 100 000 cars per year It has a labour force of 1000 workers

What is the labour productivity (output per worker)

Using the formula then:100 000 = 100 cars per worker

1000

Labour Productivity cost per unit

You will also need to be able to calculate the financial aspect of labour productivity:

Labour Productivity cost per unit =

= Total Labour Cost

Number of units produced

Patterns of labour turnover

The highest rate of labour turnover tends to be among those who have recently joined an business.

Longer-serving employees are more likely to stay, mainly because they become used to the work and the business and have an established relationship with those around them.

Causes of labour turnover A high level of labour turnover could be caused by many factors:

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

Costs of labour turnover High rates of labour turnover are expensive in terms of:

- 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)

Benefits of labour turnover Labour turnover does not just create

costs. Some level of labour turnover is important to bring new ideas, skills and enthusiasm to the labour force.

A "natural" level of labour turnover can be a way in which a business can slowly reduce its workforce without having to resort to redundancies (this is often referred to as "natural wastage".

Labour Absenteeism

Absenteeism Absenteeism can be defined as the

number of staff who miss work as a proportion of the total number of staff

You can use the following formulaNumber of staff absent per time period x 100

Total number of staff days worked per time period

We would normally look at absenteeism over a period of time e.g. 1 month

Absenteeism

Worked example: A car firm has 1000 full time employees Of these, 40 employees did not turn up for work

on a Friday What is the absenteeism rate for that Friday

Using the formula then:

40 x 100 = 4%

1000

You need to know these formulas!

Remember to show formulas as well as calculating the answers

Summary of formulas needed:

Labour Productivity

Labour productivity per worker

Total value of Output

Total Number of workers

Labour cost per unit

= Total Labour Cost

Number of units produced

Labour turnover

= number of leavers p.a. x 100Average number of employees p.a.

Absenteeism

Number of staff absent per time period x 100 Total number of staff days worked per time

period

What can a Manager do….

To improve the labour productivity of the workers?

To reduce the labour turnover statistics?

To reduce the number of absenteeism days?

Factors Contributing to an Effective Workforce

Introduction

Effective organisations – what are they?

Can they be produced or do they crop up by accident?

What is the key to them?

Effective Workplaces: A Definition

‘Effective’ means having the desired effect.

Q. What’s the desired effect of travel and tourism organisations?

A. Achieving their objectives.

Travel & Tourism Organisations’ Objectives

Organisations may have a range of objectives. Among the most common are:

To serve customers To make profits (if commercial

organisation) To grow and develop

Good Performance in Organisations

Overall, effective organisations have the following hallmarks:

Good leadership/management Staff retention/low turnover Productive people Creative thinking/problem solving Adaptable to change

High Performing Workplaces

The DTI (Department for Trade and Industry) defines these as having:

Focus on people issues Focus on employee involvement Commitment to equality

and a diverse workforce Variety of working patterns Investment in training and development

Focus on People Issues

This aims to produce a workplace where: the right people are placed

into the right jobs where effective leaders and managers are

encouraged where disputes are solved quickly

and amicably through good communication channels

Focus on Employee Involvement: Where people are involved in their work and

organisation they are more committed, motivated and therefore productive

This focus leads to an atmosphere of trust, where better solutions to workplace problems are found

And where higher standards of service are achieved

Commitment to Equality and Diversity:

Aims to enable the organisation to draw people from a wider pool of talent, where:

they are able to identify more strongly with customers

promote creative thinking and problem solving

and harness the benefits of motivation as all people are treated fairly

Variety of Working Patterns:

Flexibility is the key: Work can be organised to meet changing market

conditions Staff performance can be enhanced

as employees feel their family and household needs are met

Work commitments are balanced with other responsibilities and staff morale improves as a result

Investment in Training and Development:

Where organisations commit to staff development and training, a more highly skilled workforce results

This leads to organisations better equipped to cope with change

These workplaces are more likely to see their business grow as a result.