5 metrics you should measure to better manage your workforce
Tracking these workforce metrics will help you get more out of your team.
It’s often been said that, “what gets measured gets done.” And nowhere does that sentiment ring more true than in the workforce. You need a clear and current picture of the value your employees are bringing and how they impact the bottom line. To make sure your workforce is as optimized as possible, begin tracking these five metrics.
Productivity
A tried and true measure of how much your workforce is getting done. The Houston Chronicle recently featured a simple-to-follow formula for calculating productivity. While far less analytical, leaders of smaller teams should consider time tracking tools and methods to build awareness around office productivity. Even something simple, such as having employees provide a time sheet with a list of everything they worked on once a week, encourages accountability, without requiring heavy-handed micromanagement.
Retention
Turnover can be costly to any organization in a range of ways, including lowered productivity, raised training costs and lost knowledge. So closely tracking your retention and attrition rates is essential to better workforce management.
While turnover is generally viewed as a negative, it’s also important to understand who is leaving — your stars or your underperformers. That’s why an even more revealing metric can be to measure the high-performer turnover rate, and then building strategies to keep your top performers. To calculate your losses, take the total number of high performers that leave during a defined time period and divide it by the average high-performer total headcount.
Revenue per employee
Profitability is essential for any successful organization, so it’s important to track how much revenue is generated by each employee. To calculate, simply divide total revenue by total number of employees. This calculation not only helps in measuring what employees contribute to the bottom line, but also provides insight into evaluating the cost of a lost employee due to turnover.
Total cost of workforce
This is the sum of all workforce-related costs, including all compensation, benefits and other expenses related to full-time and contingent workers in a given period of time. This metric helps paint a true picture of your workforce spend and can help you make more informed workforce strategy decisions — particularly when it comes to staffing.
Effectiveness ratio
To track this metric, calculate how much gross profit the company gets for every dollar spent on salary for full-time and contingent employees. Accounting entrepreneur W. Michael Hsu was recently featured in RhodiesWorld online magazine emphasizing the importance of calculating the effectiveness ratio. "Results and value-add trumps hours of work any day of the week.” he said. “It's better than measuring profit against time because we want the team to work smarter, not longer.”
No doubt about it, what gets measured gets done. Metrics can help drive results and lay the groundwork for continuous improvements. Ultimately, it's a win for your high-performing employees and a win for your organization's bottom line.
For help implementing these metrics, or for more valuable workforce management advice, contact us today.
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