Employee productivity plays a vital role in any organization , in assessing its performance and subsequently leading to its success or failure. The author has made an effort ,in this blog, to identify the HR metrics, which drive the employee productivity. The author has defined each of them along with the mode of their calculation, and the related aspects therein.
We must note that HR metrics alone will not be able to drive the employee productivity. However, if we measure and analyze them, they may prove to be extremely beneficial in improving the performance of an organization.
The author suggests that readers should go through the following blogs which CHRMP has published earlier.
1.0 12 HR metrics to drive employee productivity in your organization
Based on intensive literature survey, the author has identified 12 HR metrics, directly relating to employee productivity. We have enumerated these in subsequent sections, along with their mode of calculation.
1.1 Employee Absenteeism Rate (EAR)
We may calculate it in the manner furnished below:
EAR= Total number of absent days in a month/(total number of employees X Number of working days per employee in a month)
We may also report it weekly, fortnightly, quarterly, six monthly or annually. Further , we may report it, as a pure ratio or percentage.
Also, you may use EAR as follows:
- Across entire company
- Different departments
- For every specific job role
- Across different age groups
A higher EAR is an alarm, which we must look into immediately and redress it.
1.2 Profit Per Employee (PPE)
PPE= Total Profit/Total number of regular employees
We may calculate profit as follows :
PBT: Profit Before Tax= Total Revenue-operating cost
PAT: Profit After Tax= Total revenue-operating cost-tax
Profit per employee is an important measurement, and if it is decreasing, we must address it by taking short term and long term measures.
1.3 Employee Task Completion Rate (ETCR)
This is a new HR metrics evolved by the author, based on his 46 years of long experience in industry, research and field of education..
We may calculate it as follows:
Every work needs some standard time to accomplish it. If employee completes it before the allotted time, he is productive and efficient.
ETCR= Time taken to accomplish the task / standard time allotted to complete the task
If the above rate is less than 1.0 it means the employee is productive and efficient. We should award such employees, who complete the task before time, maintaining all the quality norms. However, if it is more than 1.0, we must address the problem behind this.
1.4 Overtime Hours (OTH)
We may calculate percentage over time hours as follows:
Percentage over time hours per month = (Overtime hours per month / Regular working hours + overtime hours ) x100
We should note the following in case of increase in percentage overtime hours or overtime hours:
- It indicates increase in workload. In all such cases, you should hire more people lest the regular workers should get overworked.
- Maybe , the employees don't finish their job knowingly, within regular working hours. So that they may get paid for overtime hours.
- Higher overtime hours is not good for any organization .
- You may calculate it age wise, department wise, team wise or across the organization , to study the behavior. This may help in taking decision to strengthen the weak spots, after identifying them.
1.5 Employee Productivity Rate (EPR)
As per reference, “profit-co”, EPR is the most innocuous HR metrics, which is simple to understand and calculate.
EPR = total company revenue / total number of employees
However, the decrease in EPR may not necessarily be related to employees, there may be other reasons also, like increase in non productive time of employees. We may calculate the productive time of employees by deducting non productive time from their total working time.
However, the total company revenue may also fall due to non employee and other extraneous reasons.
1.6 Revenue Per Employee (RPE)
Revenue per employee (RPE) and profit per employee (PPE) were the two main HR metrics used by the authors in their article [Reference2] “Explaining the relevance of employee productivity linked performance measures.”: An empirical study in India (Journal of translational management, volume 18, no I) .
We get RPE , after dividing total company revenue by total number of employees. This is same as employee productivity rate (EPR).
1.7 HR Expenses per employee
HR expenses for employee= Total salary and benefits of HR department/ Total number of employees in the organization
HR expenses per employee is the total expenses incurred by the human resource (HR) department , divided by the total number of employees, working for the organization, over the same period of time.
If HR expenses per employee increase, while HR effectiveness decreases, then it is indication that HR efficiency has gone down. It further means that HR department is not taking good care of employees. In that case, employee productivity may be affected.
1.8 Average time on promotion or pay increase
Average time until promotion=Date of pay increase or promotion – date of joining after selection
If average time until promotion is more than average of 18 months to 2 years for new entrants, it may be a demotivating aspect. Talented employees may leave, if not promoted or given a pay increase in time.
1.9 Billable hours per employee
Billable hours are the amount of work time of an employee , which we charge from the clients and ,thus, get money in return.
This is a common HR metrics in IT consulting and legal firms.
However, if employee is working full time for a client, his total worktime may not be booked as billable hours. You must deduct the lunch or tea time and other breaks from the total work time
As per reference,“fitsmallbusiness.com”, targets for billable hours per week should be 35. If billable hours per employee per week are less, the reasons should be investigated and remedial action should be taken.
1.10 Health care cost per employee
Health care cost per employee = insurance costs + other health care expenses in organization / total number of employees
Health of employees is a matter of prime concern. Organizational health programs that improve employees health by reducing, preventing or controlling diseases can affect employee productivity.
1.11 Timesheet and scheduling match
This HR metrics is very useful for retail shops, restaurants and other shop based sales businesses.
Timesheet and scheduling match= number of scheduled hours / number of hours worked
If the ratio is less than one, it means your people are working late.
On the other hand, if it is greater than one , it means your organization is over staffed. In the second case, people are sent home early. Timesheets bring structure and accountability to take critical decisions, especially when your employees are remote working. Best to track productivity of remote employees.
1.12 The average amount of non productive effort, employees are putting in
One of the most critical HR metrics, which affect the employee productivity enormously. This is due to a large number of processes, systems and procedures in place, specially in bigger organizations. Some of these systems don't add value and hinder productivity. Further, lack of interaction between two departments may waste a lot of time. As per one survey conducted , 96% of the employees say that unnecessary emails waste their time.
Hence, it is very essential to measure how much time employees spend on various tasks, such as meetings and emails. Also, you should ask if all those meetings are really important. Thus , one may easily calculate the non productive time of most employers.
The author has listed 12 HR matrix for driving employee productivity in your organization. An attempt has also been made to define and furnish a method of calculation in each case. Human Resource interventions required in each case has also been mentioned. This is owing to the fact that without employees being motivated ,and corrective action not taken, HR metrics, alone may not serve the purpose
1 Employee Productivity Rate | HR KPI Library
https://www.profit.co/blog/kpis-library/hr/employee-productivity-rate/Employee Productivity Rate | HR KPI Library | Profit.co
2 Explaining the Relevance of Employee Productivity-Linked Firm Performance Measures: An Empirical Study in India: Journal of Transnational Management: Vol 19, No 1.
3 Top 39 Human Resources (HR) Metrics & How to Calculate Them