Measuring The Effectiveness of the

WorkforceAS Business Studies

Unit 2

Aims and ObjectivesAim:• Understand how to measure the effectiveness of

the workforce.

Objectives: Define workforce performance Calculate workforce performance measures Analyse workforce performance measures

Starter• How could a business measure the

effectiveness of it’s workforce?

Workforce Performance• Methods of measuring the

effectiveness of employees including labour productivity, staff turnover and absenteeism.

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

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

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)

Labour Turnover CausesTask: Brainstorm causes of labour turnover.

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

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

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

Labour Productivity Measure 3

• UK Productivity

• Used to compare UK internationally

• Total UK output / Total UK hours worked

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?

MEASURING THE EFFECTIVENESS OF THE WORKFORCE LESSON 2

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.

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

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?

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

Exam Question• June 2009 Question 2a