Workforce Metrics Dictionary:

Six Steps for Measuring HR Initiatives

Measuring HR Initiatives
What is the value of your workforce to your organizations bottom line?
This is a question that HR professionals face on a daily basis. Its also the reason why workforce metrics have
become critical tools for businesses.
Developed by the workforce planning and analytics division of Peoplefluent, a leader in talent management
solutions, this guide provides definitions of key metrics, as well as a step-by-step process and examples for
identifying the net benefits gained from a specific HR initiative.
Section 1 identifies nine core HR practice areas, along with the key metrics associated with each. From
absenteeism to recruiting and work-life balance initiatives, HR professionals look closely at these to
determine how to track and measure performance.
Section 2 delivers a six-step process that focuses on a specific business problem, such as absenteeism,
and calculates the cost to the organizations bottom line as well as the net benefit of the HR initiative that
addresses this problem.
Through this simple process, HR professionals, workforce planners and other key stakeholders in the
organization can use data to clearly represent the value of HR initiatives to the organizations bottom line.

Key Workforce Metrics and the Impact on the Bottom Line

Key HR Practice
Area / Initiative
Absenteeism

Benefits / Educational
Reimbursement

Development /
Management Training
Program

related metrics/kpis

bottom-line impact

Absence Rate
Absence Days per Employee
Unscheduled Absence Rate
Unscheduled/Sick Days per Employee
Overtime Expense
Overtime as a % of Total Labor Costs
Employee Performance/Productivity Index

Tuition Reimbursement Request Ratio

Promotion Rates
Employee Performance/Productivity Index
Performance Differential Rate
Retention Rates
Benefit Costs per Employee

Total benefit costs vs. value (sales/revenue/

productivity) employee will generate over course
of employment
Correlation between benefit participation &
business results
Correlation between benefit and
turnover intentions
Turnover/Replacement costs
(see employee separation)

Employee Performance/Productivity Index

Training Expense per Employee
Training Hours per FTE
Training Effectiveness Index
Retention Rate

Cost of development/training program

Correlation between participation &
business results (such as retention, sales,
customer service)
Impact on performance/productivity/
profitability before & after training program (or
split sample differential)

Key Workforce Metrics and the Impact to Your Bottom Line

Payment of salary/benefits during absence

Insurance/health care costs
Overtime costs
Cost of replacement workers
Impact on employees morale and on
customer satisfaction
Productivity impact on employees/
team/department

Key HR Practice
Area / Initiative
Employee Attitudes

Overall HR

Recruiting
Hiring
Selection

Retention
Employee Separation

Safety Program

Work-Life Balance
Initiatives

related metrics/kpis

bottom-line impact

Employee Satisfaction Rate

Employee Engagement Index/Score
Manager Quality Index/Satisfaction Rate
Voluntary/Preventable Turnover
Employee Performance/Productivity Index

Correlation between employee attitudes and

turnover intentions
Turnover/Replacement costs as result of
preventable attrition
Correlation between employee attitudes and
customer satisfaction
Productivity impact on employees/
team/department
Impact on employees morale and on
customer satisfaction

Revenue per Employee/FTE

Sales per Employee
Profit per Employee/FTE
Labor Costs as % of Revenues
Units Produced per Employee
Workforce Productivity

External/Internal Hire Rate

New Hire Performance Rate
Performance Differential Rate
Quality of Hire Index
Source of Hire
Average Time-to-Fill
Average Cost per Hire
Time-to-Productivity
New Hire Turnover

Total compensation & hiring costs vs. value (sales/

revenue/productivity) employee will generate
over course of employment
Performance differential
Recruitment costs
Cost of vacant position (lost sales/
revenues/productivity)
Savings from unfilled job
Impact on employees morale and on
customer satisfaction

Turnover Rate
Voluntary/Involuntary Turnover Rate
Good/Bad Attrition Rate
High/Low Performer Retention Differential
Staffing Rate Approaching Retirement Eligibility
Retirement Rate
Average Workforce Age
Average Tenure at Termination

Correlation between turnover and profitability

Separation, replacement/hiring and
training costs
Overtime costs
Cost of replacement workers
Impact on employees morale and on
customer satisfaction
Productivity impact on employees/
team/department

Number of documented safety violations

Number of defects/accidents
Incidence Rates
Safety Training Expense per Employee
Workers Comp Cost per Employee

Correlation between safety program

participation & incidence rates
Cost of safety program
Workers compensation costs
Cost of safety violations/penalties

Employee Performance/Productivity Index

Performance Differential Rate
Unscheduled Absence Rate
Voluntary/Preventable Turnover Rate

Cost of work-life balance initiative

Health care/insurance costs
Turnover/Replacement costs
(see employee separation)
Correlation between benefit participation &
business results
Impact on employees morale and on
customer satisfaction
Productivity Impact

Key Workforce Metrics and the Impact to Your Bottom Line

Total Revenues
Total Cost of Workforce
Labor Costs
HR Costs

Determining the Bottom Line Impact of an HR Initiative

steps
1. Start with the Business Problem
2. Calculate the Cost of the Problem

3. Identify the Solution to the Problem

4. Calculate the Cost of the Solution

5. Identify Expected or Actual Result

6. Perform Cost/Benefit Analysis

description
Clearly state the business problem. Be as specific as possible.
Calculate the cost of the business problem specified above. Examine both
direct and indirect cost implications and use conservative estimates or
industry guidelines if exact figures are not available.
Identify a solution based on specific company data/analysis or industry research.
(When using research findings, keep in mind that the most effective solution may
be different for each organization.)
Calculate how much implementing the solution will cost the organization today
and in the future. Account for indirect and internal costs as well using conservative
estimates.
For a new initiative, identify the results you expect to see after 3/6 months, 1/2
years, etc. For an existing initiative, track the impact of the solution on the business
problem over the course of the past months/years.
As a final step, perform a cost/benefit analysis to analyze the net benefits gained
from your initiative. This can use several methodologies, including (but not limited
to):
Benefit/Cost Ratio
Return on Investment
Net Present Value
Payback Period

Example #1:
Absenteeism/Employee Wellness Program Example

steps
1. Start with the Business Problem

2. Calculate the Cost of the Problem

description
Our organization has an unscheduled absenteeism rate of 5% among our 100-person employee population. This means that five employees are absent, unscheduled,
on any given day.
The cost of sick day can be conservatively estimated as the employees salary plus
30% benefit costs divided by 260 (# of workdays). Using the actual average salary
of $40,000, this is $52,000/260 or $200/day/person. With 5 people out every
single day, this costs the organization $1,000/day or $260,000/year.
(This is a conservative estimate. Unplanned absences like sick days result not only in
these direct costs but also in higher insurance costs and lost productivity.
Indirectly, they can negatively impact coworkers productivity and morale, which can
affect customer service and other business objectives.)

3. Identify the Solution to the Problem

4. Calculate the Cost of the Solution
5. Identify Expected or Actual Result

As a solution, the organization has decided to implement a workplace

wellness program after researching all available options.
The cost of implementing a workplace wellness program is $30,000/year.
Based on industry studies and historical results of this particular wellness program,
the organization expects to see a 20% decrease in absenteeism,
going from 5% to 4% a year or from 5 absent employees to 4 absent employees on
any given workday (i.e., net benefit of 1 non-absent employee).

Key Workforce Metrics and the Impact to Your Bottom Line

steps
6. Perform Cost/Benefit Analysis

description
Calculate the Return on Investment using the following formula:
ROI = (Program Benefits Costs) / Costs
[($200 * 260) $30,000] / $30,000 =
$22,000 / $30,000 = 73%
As a benefit, youll save $200/day or $52,000/year vs. the cost of the program at
$30,000 or a net benefit of $22,000/year for the organization. This translates to a
positive ROI of 73%.

Example #2:
Turnover/Management Training Initiative

steps
1. Start with the Business Problem

2. Calculate the Cost of the Problem

3. Identify the Solution to the Problem

4. Calculate the Cost of the Solution

5. Identify Expected or Actual Result

6. Perform Cost/Benefit Analysis

description
Our organization has an annual voluntary turnover rate of 20% for its computer
programmers. This means that one in every five programmers, or 10 out of our
50-employee department, leave voluntarily each year.
Industry studies show that the total cost of replacing an employee (including
separation, replacement, training and indirect costs) can be as much as 150% of
a persons salary. Using an actual average salary of $80,000, this translates to
$120,000/programmer or $1.2 million per year ($120,000 * 10 programmers).
Based on the past three years employee engagement survey results, you decide to
implement a 3-year management training initiative. Study results showed that ineffective managers have the most impact on employee
engagement and they are the main cause of voluntary attrition within your organization. So a combination of management training and one-on-one coaching is the
solution youre implementing.
A series of management training workshops and internal coaching lessons with
individual supervisors will cost the organization $100,000/year.
After you implement the solution and monitor the results, you find that
voluntary turnover decreases from 20% to 18% (Year 1) to 16% (Years 2 and 3). This
means that the program saved 1 (Year 1) and 2 (Years 2 and 3) people from leaving
voluntarily.
Cost/Benefit Analysis:

After calculating the improvement benefit (150% of the salary of 1 or 2 additional

people who did not leave), you calculate the net improvement benefit.
Dividing the Total Net Improvement Benefit ($200,000) by the Total Cost of the
Training ($400,000) over the course of three years results in a ROI of 50%.
The Net Present Value of these improvements is calculated at $115,300 using a 15%
discount rate.
The payback period of 1.6 years tells us that this program breaks even in about a
year and a half.

Key Workforce Metrics and the Impact to Your Bottom Line

Example #3:
HR Initiative

steps

description

1. Start with the Business Problem

2. Calculate the Cost of the Problem

3. Identify the Solution to the Problem

4. Calculate the Cost of the Solution

5. Identify Expected or Actual Result

6. Perform Cost/Benefit Analysis

Key Workforce Metrics and the Impact to Your Bottom Line

Peoplefluents workforce analytics solutions give you the wisdom to strategically

address critical business issues.

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Key Workforce Metrics and the Impact to Your Bottom Line

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