SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

Table of Contents
SHRM About SHRM Forum Pakistan

Introduction ....................................................................................................................................7 The Survey ......................................................................................................................................8 Scope and Limitations......................................................................................................................8

Scope .................................................................................................................................................. 8 Limitations ......................................................................................................................................... 9

The Findings ..................................................................................................................................10

HR employees in companies...12 HR staff to orgnizational staff12 HR cost/employee...13 NIBT/employee...14 Gender diversity..14 Recruitment in organizations..15 Voluntarily staff turnover..15 Involuntarily staff turnover....15 Internal to external.16 Average time to fill vacancy..16 Compensation.....17 Compensation/revenue...17 Compensation/cost.17 Organizational data.....18 Revenue/employee.18 Cost/employee....18 HR expense data.....19 HCROI...19 Training/employee.....19

Conclusion ....................................................................................................................................20 Appendix A ...................................................................................................................................21 References .....................................................................................................................................24

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

List of Tables
Table 1: Key area of study vs. percentiles ....................................................................................10

Table 2: Size bracket vs. HR staff to organizational staff ratio ....................................................13

Table 3: Sector vs. HR staff to organizational staff ratio.............................................................13 Table 4: Size bracket vs. HR cost/employee.................................................................................13 Table 5: Sector bracket vs. HR cost/employee .............................................................................13 Table 6: Size bracket vs. NIBT/employee ....................................................................................14 Table 7: Sector bracket vs. NIBT/employee .................................................................................14 Table 8: Size bracket vs. gender diversity ratio ............................................................................14 Table 9: Sector bracket vs. gender diversity ratio .........................................................................14 Table 10: Size bracket vs. voluntary staff turnover ratio ..............................................................15 Table 11: Sector bracket vs. voluntary staff turnover ratio...........................................................15 Table 12: Size bracket vs. involuntary staff turnover ratio ...........................................................15 Table 13: Sector bracket vs. involuntary staff turnover ratio .......................................................15 Table 14: Size bracket vs. internal to external hire ratio ..............................................................16 Table 15: Sector bracket vs. internal to external hire ratio ...........................................................16 Table 16: Size bracket vs. average time to fill vacancy ..............................................................16 Table 17: Sector bracket vs. average time to fill vacancy ..........................................................16 Table 18: Size bracket vs. compensation/revenue ratio ................................................................17 Table 19: Sector bracket vs. compensation/revenue ratio.............................................................17 Table 20: Size bracket vs. compensation/cost ratio ......................................................................17 Table 21: Sector bracket vs. compensation/cost ratio ...................................................................17 Table 22: Size bracket vs. revenue/employee ratio.......................................................................18 Table 23: Sector bracket vs. revenue/employee ratio ...................................................................18 Table 24: Sector bracket vs. cost/employee ratio .........................................................................18
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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

Table 25: Sector bracket vs. cost/employee ..................................................................................18 Table 26: Size bracket vs. HCROI ratio .......................................................................................19 Table 27: Sector bracket vs. HCROI ratio ....................................................................................19 Table 28: Size bracket vs. training/employee ...............................................................................19 Table 29: Sector bracket vs. training/employee ............................................................................19

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

SHRM
The Society for Human Resource Management (SHRM) is the worlds leading association devoted to human resource management and represents more than a total of 250,000 members in over 140 countries. Founded in 1948, SHRM has more than 575 associated chapters within the United States and subsidiary offices in China and India. SHRM forums exists in 11 countries including France, Switzerland, Lebanon, Egypt, Ghana, Cayman Islands, Trinidad and Tobago, Kuwait, Nigeria, UAE and Pakistan. SHRM vision is to be a globally recognized authority whose voice is heard on the most pressing people management issues of the day now and in the future. Its mission is: to provide a community for human resource professionals, media, governments, non-governmental organizations, businesses and academic institutions to share expertise and create innovative solutions on people management issues; and to provide thought leadership, education and research to human resource professionals, media, governments, non-governmental organizations, businesses and academic institutions. The Society for Human Resource Management (SHRM), formerly called the American Society for Personnel Administration (ASPA), was founded in 1948 by a group of just 28 individuals. These founding members anticipated the need for a national organization to represent the personnel profession. Their goal was to provide professional development opportunities, promote national networking, and to generally advance the interests of a profession they recognized as being in transition. In 1989, the organization's name was changed from ASPA to SHRM to reflect its broadened scope and influence in business and political worlds internationally. Today, SHRM includes global membership; with a staff of more than 350, there are more than 30 specialized departments within SHRM to serve the needs of HR professionals by providing the most essential and comprehensive set of resources available.

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

About SHRM Forum Pakistan

SHRM Forum Pakistan is one of the 11 international Forums of SHRM US that recently started its operations in this country under leadership of Mr. Zahid Mubarik GPHR. This is a platform for HR professionals to interact, communicate, share professional experiences, and engage in mutually beneficial learning activities. The forum will help in promoting and networking across different categories to create robust interaction, serve the HR experts and solidify professional relationship building. SHRM Forum Pakistan will help in promoting consistency and standardization in HR practices.

Vision
SHRM forum envisions to emerge as a recognized body at national level, whose voice is heard on the most pressing people management matters.

Mission
SHRM Forum Pakistan exists to: build and sustain partnerships with human resource professionals, media, government, non-governmental organizations, businesses and academic institutions to address people management challenges that influence the effectiveness and sustainability of their organizations and communities; and, to serve as an advocate to ensure that policy makers, law makers and regulators are aware of key people concerns facing organizations and the human resource profession.

Objectives
The main objectives of this forum are: 1. To act as a platform for HR professionals facilitating interaction, communication, sharing of professional experiences, and beneficial learning activities. 2. To identify workforce productivity benchmarks so that organizations can aim for leveraging business performance. 3. To help organizations focus on long range value-added initiatives in HR management and contribute towards enhancing business productivity. 4. To liaise with global HR credentialing organization and facilitate certification of HR professionals. 5. To improve linkages between HR academia and practitioners and facilitate new entrants in mentorship with HR practitioners.
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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

The Human Capital Survey Introduction

Numbers are universal language of business; business managers prefer to take decision on measurable and verifiable data. They expect HR to be more precise in its input and output measurements. Thus, in order to help organisations ensure success, HR experts need to measure the effectiveness of HR programs at every level and establish HR metrics for comparison with other organizations. Comparison, numbers and ratios also help in justifying the contribution of HR to the overall organizational performance in a quantifiable way. In Pakistan, SHRM Forum Pakistan has taken the initiative to carry out this benchmarking study for the HR practices within the organizations. The main objective of this study is to measure key metrics in staffing, developing, rewarding and retaining effective workforce in sample organizations and also establish workforce productivity benchmarks in various sub streams of HR. The metrics calculated in this survey, can also help the HR professionals to measure the efficacy of their departments and compare the performance against industry standards. They can act as vital tools to respond to emerging organizational change initiatives and a point of leverage to improve the contribution of HR to the overall business. Being a fact based decision framework, HR practitioners can use it as an opportunity to come at the fore front of business equation.

HR benchmarking surveys are conducted throughout the world to facilitate people with management decision making at organizational level. Examples of these include the benchmarking survey by SHRM in the US and WERS survey in UK.

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

The Survey
SHRM Pakistan Human Capital Benchmarking Study 2011 is an initiative of SHRM Forum Pakistan in order to collect and present human capital metrics information across various industries in the country. The questionnaire for the pilot study was designed by SHRM panel members and was emailed to 41 members of SHRM Forum Pakistan, who were representing 32 companies. Out of these, 17 organizations replied, yielding a response rate of 53%. As the survey was based on individual business units rather than group of companies, the total number of questionnaires received were 28. The survey was based on the previous fiscal years information and collected data on human resource departments and expenses, hiring trends, compensation, and turnover. In addition, organizational data, such as revenue, expenses and employee size, was also obtained. In short, the key areas of this study were few selective metrics: 6. 7. 8. 9. 10. 11. 12. 13. 14. Staff turnover ratio (Involuntary) Internal to external ratio Average time to fill vacancy Compensation/revenue ratio Compensation/cost ratio Revenue/employee Cost/employee HCROI Training cost/employee

Further details of these metrics have been provided in the Appendix A.

Scope and Limitations

The scope and limitations of the study are discussed below:

Scope The scope of the study is to calculate the HR metrics mentioned above, in order to help professionals in quantifying the performance of HR function. These metrics constitute the base of Human Capital Benchmarking Study. This report, illustrating the sector and size wise findings, has been published for all SHRM Pakistan members and will serve as a base for future Pan Pakistan survey.
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1. 2. 3. 4. 5.

HR staff to organizational staff ratio HR cost/employee Net income before tax/employee Male to female ratio Staff turnover ratio (Voluntary)

SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

Limitations

1.

The pilot study data was obtained for a small number of companies. Therefore, only size and broad-sector analysis has been performed on the data. Further, the size brackets defined by SHRM US proved to be inappropriate for this pilot study because of the small sample size. Therefore we have merged these brackets for more accurate and reasonable results. The table demonstrates the initial and modified size brackets used for analysis. Initial and final company size brackets Initial < 100 100 - 249 250 - 499 500 - 999 1000 - 2499 2500 - 7499 > 7500 Modified < 100 100 - 249 250 - 499 500 - 999 > 1000

the data received, most of the companies gave cumulative figures i.e. a collective figure for the number of contractual and permanent employees. Therefore the ratios in the report are based on "total number of employees" rather than "Full-time Equivalent (FTE)", for example cost/employee has been calculated instead of cost/FTE. 4. Figures that were found to be inaccurate, ambiguous, or incomplete were discarded to maintain credibility of results. For example, a considerable amount of companies failed to provide figures of revenue generated in their organization. So this in return affected revenue/employee, compensation/revenue and HCROI results, and this is the reason for varying number of companies in different ratios. We have exempted the ratios of cost per hire and average training hours per employee that were initially part of the pilot study. This was due to the fact that more than half of the companies were not able to provide the relevant data. The report is a pilot study, based on a small number of companies and not a large representative sample of organizations. Therefore, the results should be taken as guidelines rather than absolute standard.

5.

2.

Since there are a limited number of companies in the study, the sectors defined in the questionnaire required regrouping as a small sample size in each sub-group can provide misleading results. Therefore, this pilot study uses two broad sectors only manufacturing and service. The survey was designed to calculate separate metrics for permanent and contractual employees. However, in

6.

3.

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

Key Findings
The SHRM Human Capital Benchmarking studies, conducted in the US over the last few years, have used percentiles to report HR metrics data. Therefore, this report also uses percentiles to show the deviation and spread of data. In the following tables, P25 indicates 25th percentile, P50 the 50th percentile or median, while P75 presents the value of 75th percentile. The column n is showing the number of questionnaires received from the SHRM Pakistan members. All figures are rounded till three decimal places.

The need to measure the performance of HR functions and to use it for analysis and strategic decision-making is increasing every day. By showing the value of assets or the return on investment, HR metrics become the key to advancing the HR profession (Cohen 2003).

Table 1 illustrates the overall ratios, irrespective of organizational size and sector. This table presents a generalized picture of Pakistani market and compares the data with that of US market, where comparable figures are available.

Table 1: Key study areas vs. percentiles Ratios HR to organizational staff HR cost/employee Net income before tax/employee Male to female ratio Staff turnover ratio (voluntary) n 28 24 22 24 28 P25 0.62 70,056 18,083 7 3% 0% 0.000 30 0.049 0.047 357,143 475,367 1.482 1,087 P50 1.59 247,642 142,933 37 6% 3% 0.000 45 0.153 0.181 960,750 881,092 2.625 2,488 P75 6.226 377,236 556,030 74 9% 5% 0.111 45 0.4 0.322 2,015,949 2,904,348 6.188 11,842 n 2,332 1,634 1,635 2,057 P25 0.71 5% 1% 20 P50 1.12 10% 4% 30 8% 45 P75 1.85 19% Pakistani market US market*

Staff turnover ratio (involuntary) 28 24 Internal to external hire ratio 28 Average time to fill vacancy Compensation/revenue ratio Compensation/cost ratio Revenue/employee Cost/employee HCROI Training cost/employee 22 22 22 22 22 19

* Most of the US based data is not comparable with this pilot study as the bases of the ratios calculated in both the studies are different. * Source: SHRM Human Capital Benchmarking Study: 2009 Executive Summary, SHRM customized Human Capital Benchmarking report. Note: The formulae used for the calculation of these HR metrics are attached in Appendix A.

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

Overall, the HR to organisational staff ration is higher in Pakistan than in the US. This ratio is lower in Pakistan than the US in the lowest quartile and significantly higher in the highest quartile. Almost half of the companies in Pakistan have the HR cost per employee higher than PKR. 247,642. This shows that the HR budget has significance portion in the overall cost of the firm and can play a vital role in the strategic and the operational policies of the company. The gender diversity ratio depicts that the hiring of female employees relative to male hiring is extremely low. Although companies do employ the female staff, the gender ratio at 50th percentile is 37. The voluntary turnover ratio is relatively higher than the involuntary one. Comparing with the US data, the turnover rate in the US is higher than the Pakistani market. The figures show that Pakistani companies prefer external hiring system and rarely use internal hiring to fill a vacant position. On average, companies in Pakistan take almost 30-45 days to fill a vacant position. In comparison, 75% of US based companies take less than a months time to hire a new employee. Overall, companies in Pakistan allocate a small portion of total revenue and operational cost to compensate their employees. The Human Capital Return on Investment (HCROI) ratio is an indicator of revenue generation and cost control within an organization. Higher the ROI means better output of workforce (high revenue) while being efficient in terms of cost (particularly HR cost). Majority of companies in Pakistan are maximizing the revenue generation despite cautious spending on the workforce. That amount allocated for the training of the employees is fairly low in majority of the companies. If we see the training cost per employee in relation to HR cost per employee or overall cost per employee, then it seems that organizations spend more on salary and benefits and spend a little percentage on personal growth and development of employees.
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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

Figure 1 and 2 exhibit size and sector wise division of the data received from 28 companies dispersed all over Pakistan. Of our sample, 43% of the companies fall into manufacturing group and 57% into service one. On the basis of size, largest number of company lies in the 100 to 249 and the 1000 and above

brackets, which is 25% each. Preceding that are 18% in 500 to 999 and 250 to 499 ranges; and the remaining lie in fewer than 100 bracket with 16% of the companies.

HR employees in companies
Tables 2 and 3 report HR staff to organizational staff ratios. Discussing the size wise distribution, smaller companies i.e. those with fewer than 100 employees, have a larger proportion of HR staff in their organization. Results for the manufacturing companies in Pakistan illustrate that they have fewer HR employees compared to service ones. Comparing results with the US market, smaller companies in the US also have a larger proportion of HR staff than larger US companies in the US. However, small US companies have lesser HR employees per organizational staff compared to Pakistani market.

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

Table 2: Size bracket vs. HR staff to organizational staff ratio Size brackets Fewer than 100 100 to 249 250 to 499 500 to 999 1000 or more n 4 7 5 5 7 P25 3.846 0.541 0.217 0.780 0.8 P50 6.818 0.820 0.546 1.894 1.0 P75 8.333 1.587 0.8 2.232 6.226 n 267 203 115 78 P25 1.67 0.91 0.7 0.71 P50 US market* 3.03 1.36 1.01 0.98 6.67 1.92 1.33 1.31 P75 Pakistani market

*The last 3 brackets of SHRM Human Capital Benchmarking Study US has been merged for this pilot study, therefore that data is not comparable * Source: SHRM Human Capital Benchmarking Study: 2009 Executive Summary, page 7

Table 3: Sector vs. HR staff to organizational staff ratio Sector brackets Manufacturing Service n 12 16 P25 0.622 0.832 P50 1.0 2.233 P75 1.894 6.226

HR cost/employee

The HR cost per employee is listed in Table 4 and 5. The HR cost per employee is lower in larger organizations as compared to smaller ones (Table 4).
Table 4: Size bracket vs. HR cost/employee Size brackets Fewer than 100 100 to 249 250 to 499 500 to 999 1000 or more n 3 6 5 5 5 P25 363,889 106,808 70,056 222,613 19,694 P50 377,236 216,071 236,133 347,357 44,444 P75 607,909 451,351 474,319 797,448 318,378

Also, service oriented companies have lower HR cost per employee compared to the manufacturing ones (Table 5), with the median spending for service based companies reported at PKR 286,041 versus PKR 347,357 for manufacturing.

Table 5: Sector bracket vs. HR cost/employee Sector brackets Manufacturing Service N 11 13 P25 145,043 38,373 P50 347,357 286,041 P75 451,351 377,236

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

Net income before tax (NIBT)/employee Table 6 demonstrates profit generated per employee by size no specific trends have emerged from this table and the overall sample size is too small to comment on individual figures.
Table 6 Size bracket vs. NIBT/employee Size brackets Fewer than 100 100 to 249 250 to 499 500 to 999 1000 or more N 3 6 3 5 5 P25 (147,705) 684,649 (122,951) (1,236,045) 17,462 P50 0 456,522 38,986 51,741 P75 18,083 585,323 556,030 142,933

1,095,238 6,359,649

Table 7 represents the net profit before tax per employee for manufacturing and service oriented organizations. The ratio is significantly higher for service based companies with the reported median values of the former being eight times that of the latter.

Table 7: Sector bracket vs. NIBT/employee Sector brackets Manufacturing Service n 11 11 P25 0 17,462 P50 51,741 411,504 P75 456,522 6,359,649

Gender diversity

Table 8 and 9 represent gender diversity ratios. Overall, larger organizations have poorer male to female ratios i.e. proportional to the total number of employees in an organization, there are fewer women working in larger organizations. For example, the 75th percentile ratio for the fewer than 100 and the 1000 or more category are 14 and 249 respectively.
Table 8: Size bracket vs. gender diversity ratio Size Brackets Fewer than 100 100 to 249 250 to 499 500 to 999 1000 or more n 3 5 4 5 7 P25 4 37 15 74 6 P50 8 40 21 84 41 P75 14 61 43 267 249

The data for manufacturing and service companies is listed in Table 9. The trends show that in Pakistan per female there are more men employed in manufacturing companies compared to the service ones.

Table 9: Sector bracket vs. gender diversity ratio Sector brackets Manufacturing Service n 11 13 P25 41 6 P50 79 15 P75 267 59

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

Recruitment in organization
Staff turnover ratio (Voluntary and Involuntary)

Tables 10-13 represent voluntary and involuntary turnover rate. Overall, it was noted in Table 1 that voluntary turnover is higher than involuntary turnover in Pakistan and US. No patterns emerge regarding organizational size and turnover in Pakistan. However referring to Table 1 the US data gives similar results to our findings, but not to forget, our sample size is very minute compared to more than 1600 US companies, and therefore their figures tend to be more reliable than our results.

Sector wise results show lesser turnover for manufacturing companies, particularly in case of voluntary turnover.

Table 12: Size bracket vs. involuntary staff turnover ratio Size brackets Fewer than 100 100 to 249 250 to 499 n 4 7 5 5 7 P25 0% 3% 1% 1% 2% P50 0% 5% 4% 2% 4% P75 0% 16% 5% 5% 5%

Table 10: Size bracket vs. voluntary staff turnover ratio Size brackets Fewer than 100 100 to 249 250 to 499 500 to 999 1000 or more n 4 7 5 5 7 P25 0% 3% 5% 4% 1% P50 6% 8% 6% 8% 6% P75 8% 11% 8% 22% 8%

500 to 999 1000 or more

Table 13: Sector bracket vs. involuntary staff turnover ratio Sector brackets Manufacturing Service n 12 16 P25 0% 2% P50 4% 4% P75 6% 6%

Table 11: Sector bracket vs. voluntary staff turnover ratio Sector brackets Manufacturing Service n 12 16 P25 3% 6% P50 6% 8% P75 25% 11%

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

Internal to external hire ratio

Tables 14 and 15 exhibit internal to external hire ratio for size and sector wise division. The figure of 0.000 indicates that internal hiring wasnt practiced at all. Many organizations, irrespective of the organizational size, do not practice internal hiring, as reflected by the P25 column in Table 14 and 15. Results of the top quartile of manufacturing companies indicate that they use internal hiring more than external.
Table 14: Size bracket vs. internal to external hire ratio Size brackets n P25 0.000 0.000 0.000 0.000 0.000 P50 0.000 0.000 0.000 0.000 0.111 P75 1.333 0.750 0.052 0.094 0.546 Fewer than 100 3 7 100 to 249 3 250 to 499 500 to 999 1000 or more 4 7

This could be an anomaly in the findings because of small sample size, or a reflection of greater use of internal labor markets in manufacturing organizations in Pakistan.

Table 15: Sector bracket vs. internal to external hire ratio Sector brackets Manufacturing Service n 12 12 P25 0.000 0.000 P50 0.111 0.000 P75 3.132 0.750

Average time to fill vacancy

Table 16: Size bracket vs. average time to fill vacancy Size brackets Fewer than 100 n 4 7 5 5 7 P25 30 45 20 24 30 P50 30 60 22 30 45 P75 45 90 30 45 90

Tables 16 and 17 present figures in days, which indicate average time to fill a vacant position. No patterns emerge from our sample of 28 companies at this pilot study stage.

100 to 249 250 to 499 500 to 999 1000 or more

Table 17: Sector bracket vs. average time to fill vacancy Sector brackets Manufacturing Service n 12 16 P25 30 26 P50 45 45 P75 45 73

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

Compensation
Compensation / revenue ratio and Compensation /cost ratio

Tables 18 and 20 display compensation to revenue ratio and compensation to cost ratio with regard to organizational size. Overall, based on Table 18, it can be summarized that smaller organizations are spending more on compensation as compared to larger organizations. However, the final bracket of 1000 or more employees does not follow this pattern, perhaps because of the particular nature of organizations in our pilot study sample. No patterns emerge from Table 20.

In Tables 19 and 21, it is noted that manufacturing companies are spending less on compensation than service sector. This can be a reflection of the labor intensive work in many service industries compared to manufacturing where automated production may decrease this compensation ratio.

Table 20: Size bracket vs. compensation/cost ratio Size brackets Fewer than 100 100 to 249 250 to 499 500 to 999 1000 or more n 3 6 3 5 5 P25 0.005 0.067 0.039 0.047 0.213 P50 0.322 0.181 0.075 0.067 0.286 P75 2.497 0.390 0.657 0.322 0.586

Table 18: Size bracket vs. compensation/revenue ratio Size brackets Fewer than 100 100 to 249 250 to 499 500 to 999 1000 or more n 3 6 3 5 5 P25 0.317 0.112 0.036 0.037 0.147 P50 0.400 0.161 0.065 0.049 0.252 P75 0.633 1.642 0.625 0.259 0.409

Table 21: Sector bracket vs. compensation/cost ratio Sector brackets Table 19: Sector bracket vs. compensation/revenue ratio Sector brackets Manufacturing Service n 11 11 P25 0.037 0.161 P50 0.065 0.400 P75 0.301 0.625 Manufacturing Service n 11 11 P25 0.047 0.181 P50 P75 0.075 0.308 0.322 0.586

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

Organizational data
Revenue/employee and Cost/employee

Tables 22 and 23 present results for revenue per employee, and Tables 24 and 25 present results for cost per employee. As in the previous section, no patterns emerge based on organizational size. However, manufacturing companies make more money per employee than service one, with the median revenue per employee in the manufacturing sector more than twice that of service (Table 23).

Comparing this with the cost per employee, this cost is two to three times higher in manufacturing costly assembly lines and highly expensive operations in manufacturing can be a key reason for this difference.

Table 22: Size bracket vs. revenue/employee ratio Size brackets Fewer than 100 100 to 249 250 to 499 500 to 999 1000 or more n 3 6 3 5 5 P25 357,143 951,327 631,917 1,292,962 75,815 P50 960,750 1,539,683 1,926,230 2,015,949 134,252 P75 1,113,889 2,559,786 3,356,522 9,354,267 848,554

Table 24: Sector bracket vs. cost/employee ratio Size brackets Fewer than 100 100 to 249 250 to 499 500 to 999 1000 or more n P25 P50 1,095,806 634,921 1,811,475 1,626,794 105,255 P75 80,661,426 6,798,246 2,904,348 8,798,237 745,622 3 243,477 6 588,496 3 607,757 5 961,290 5 11,273

Table 23: Sector bracket vs. revenue/employee ratio Sector brackets Manufacturing Service n 11 11 P25 P50 P75

Table 25: Sector bracket vs. cost/employee Sector brackets Manufacturing Service n 11 11 P25 881,092 475,367 P50 1,918,033 634,921 P75 4,655,870 1,626,794

960,750 1,959,016 6,125,687 134,252 848,554 1,539,683

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

HR expense data
HCROI Tables 26 and 27 represent the human capital return on investment ratio is the marker of effi- Table 26: Size bracket vs. HCROI ratio n P25 P50 ciency of workforce in terms of dollar invest- Size brackets 3 1.051 1.069 ment and return on investment. If the ratio is Fewer than 100 6 1.162 4.397 one, then the company just balances the overall 100 to 249 3 1.078 2.638 cost and revenue (break even). Beyond 1, it is 250 to 499 5 1.457 1.744 income. Higher the HCROI, higher is the reve- 500 to 999 nue generation capability or effective cost con- 1000 or more 5 1.736 2.472 tainment strategy of the company. Overall, the manufacturing sector has higher HCROI compared to the service oriented companies. Table 27: Sector bracket vs. HCROI ratio Workforce in manufacturing concerns is labor oriented and are paid conservatively, hence their cost is efficient, due to which ROI is better. The service oriented industry requires less labor and more technology/knowledge oriented workforce. Despite being less in number, they are better paid, hence cost is high therefore ROI is lower.
Sector brackets Manufacturing Service n P25 P50 3.067 1.744 11 2.625 11 1.482

P75 2.180 4.654 3.067 2.625 7.823

P75 7.677 4.397

Training/employee
Table 28: Size bracket vs. training/employee

Tables 28 and 29 list the training/employee ratio by size and sector respectively. With a little deviation, the data illustrates that size of the companies is somewhat directly proportional to amount allocated for training per employee. The median value for investment in training for fewer than 100 and 1000 or more brackets are PKR 1,136 and 19,598 respectively. Table 29 indicates that that service oriented companies are investing more in training as compared to manufacturing ones, with median values of PKR 8,140 and 1,087 respectively.

Size brackets Fewer than 100 100 to 249 250 to 499 500 to 999 1000 or more

n 3 4 3 4 5

P25 0 0 1,087 2,488 5,085

P50 1,136 1,639 1,124 17,302 19,598

P75 11,111 11,842 8,140 28,708 33,333

Table 29: Sector bracket vs. training/employee Sector brackets Manufacturing Service n 9 10 P25 1,087 5,085 P50 1,136 8,140 P75 2,703 28,708

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Conclusion
The objective of this benchmarking study is to highlight the importance of quantifying the HR functions in order to make quality decisions. The pilot study is the first step towards achieving this goal and to help in formalizing the HR system of Pakistan. Due to small sample size, the organizational size and sector brackets have been merged and the reliability of the data has also been decreased. Moreover, the trends shown through the ratios can partially depict the overall picture of HR system in Pakistan. The extent to which these results are representative of the entire population and can be generalized is questionable but, they serve as a first step to fill an enormous gap in the availability of data in HR in Pakistan. All the stated issues will be covered in the next phase of the study and the Pan Pakistan survey will minimize the error while maximizing the accuracy rate. The experience gained through this pilot study will be of immense importance while designing the next questionnaire and preparing future reports. To conclude, we hope that many of the trends outlined in this document and the planned Pan Pakistan study will help the members of SHRM Forum Pakistan to make constructive decisions in future.

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

Appendix A
Percentile The percentile is the percentage of responses that have values less than or equal to that particular value. For example, when data are arranged from lowest to highest, the 25th percentile is the point at which 75% of the data are above it and 25% are below it. Conversely, the 75th percentile is the point at which 25% of the data are above it and 75% are below it.

Median (50th percentile) The median is the midpoint of the set of numbers or values arranged in ascending order. It is recommended that the median is used as a basis for all interpretations of the data when the average and median are discrepant.

Total HR Staff Total HR staff is the actual number of employees supporting the HR function for an organizational level.

HR to organizational staff ratio The HR to organizational staff ratio provides a more manageable way to compare HR staffing levels between organizations. It represents the number of HR staff per 100 employees supported by HR in the organization. The number is calculated by dividing the number of HR FTEs by the total number of FTEs in the organization and multiplying the outcome by 100:

HR to organizational staff ratio =

Total number of HR employees Total number of employees in an organization

x 100

HR cost per employee =

HR cost Total number of employees in an organization

Net income before tax Net income before tax is the amount of revenue received during the fiscal year minus the operating expenses during the fiscal year.
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Net income before tax per employee Net income before tax (NIBT) per employee is the net income before tax divided by the total number of employees in an organization.

NIBT per employee = NIBT Total number of employees in an organization

Male to female ratio =

Total number of male employees in an organization Total number of female employees in an organization

Annual Voluntary Turnover Rate Annual voluntary turnover rate is the rate at which employees enter and voluntarily leave a company in a given fiscal year. To calculate annual voluntary turnover, first calculate the voluntary turnover for each month by dividing the number of voluntary separations during the month by the average number of employees during the month and multiplying by 100. The annual voluntary turnover rate is then calculated by adding the 12 months worth of voluntary turnover percentages together.

Annual voluntary turnover rate =

Voluntary turnover x 100 Average number of employees during the month

Annual Involuntary Turnover Rate Annual involuntary turnover rate is the rate at which employees enter and involuntarily leave a company in a given fiscal year. An involuntary termination occurs, for example, when the organization asks the employee to leave the company. Such terminations usually occur as a result of poor performance, layoffs or other reasons. To calculate annual involuntary turnover rate, first calculate involuntary turnover for each month by dividing the number of involuntary separations during the month by the average number of employees during the month and multiplying it by 100. The annual involuntary turnover rate is then calculated by adding the 12 months worth of turnover percentages together.

Annual Involuntary turnover rate =

Involuntary turnover x 100 Average number of employees during the month

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

Internal to external hire =

Number of Internal hire Number of External hire

Time-to-fill Time-to-fill represents the number of days from when the job requisition was opened until the offer was accepted by the candidate. This number is calculated using calendar days, including weekends and holidays.

Compensation to revenue ratio =

Total compensation Revenue

Compensation to cost ratio =

Total compensation Operating cost (HR + Non HR)

Revenue per employee Revenue per employee is the total amount of revenue received during an organizations fiscal year divided by the total number of employees in an organization.

Revenue per employee = Revenue Total no of employees in an organization (Permanent+ Contractual)

Cost per employee =

Total Operating cost (HR + Non HR) Total number of employees in an organization

Human capital return on investment (HCROI)

HCROI =

Revenue (operating cost compensation) Compensation

Training cost per employee =

Training cost Total number of employees in an organization

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

References
Boudreau, John W., Ramstad, Peter M. (1998), Human Resource Metrics: Can Measures Be Strategic?, WP 10/1998, CAHRS Working Paper Series, Cornell University ILR School and Personnel Decisions International.

Boudreau, John W. (1998), Strategic Human Resource Management Measures: Key Linkages and the PeopleVantage Model, WP 28/1998, CAHRS Working Paper Series, Cornell University ILR School.

Boudreau, John W. and Ramstad, Peter M. (2001), "Beyond Cost-per-Hire and Time to Fill: Supply-Chain Measurement for Staffing", WP 16/2001, CAHRS Working Paper Series, Cornell University ILR School and Personnel Decisions International.

Cohen, Debra J. (2003), HR metrics: a must - Future Focus, HR Magazine, Vol. 48, No. 2, [online] Available from http://findarticles.com/p/articles/mi_m3495/is_2_48/ai_97873187/, [Accessed 21st July 2011]

Dooney, John, Blackmon, Olivia, Williams, Steve (2009), SHRM Human Capital Benchmarking Study - 2009 Executive Summary, SHRM Research Department USA

Scribd (2011), Flyer-SHRM-Forum-Pakistan, [online] Available from http://www.scribd.com/doc/62256847/SHRM-Forum-Pakistan, [Accessed 24th July 2011] SHRM, About SHRM, [online] Available from http://www.shrm.org/about/, [Accessed 24th July 2011]

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SHRM Forum Pakistan - Human Capital Benchmarking Study: 2011

Project Team Members:

Durria Anjum, Student, FAST School of Business, NUCES, Islamabad Misbah Ul Ain, Student, FAST School of Business, NUCES, Islamabad

Supervisors:
Dr Sadia Nadeem MCIPD, Head/ Associate Professor, FAST School of Business, NUCES, Islamabad Mr. Zahid Mubarak, Leader, SHRM Forum Pakistan

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