People in Business Measuring the Effectiveness of the

People in Business Measuring the Effectiveness of the Workforce “It is much more difficult to measure non-performance than performance. Performance stands out like a ton of diamonds. Non-performance can almost always be explained away. ” Harold Geneen “I always arrive late at the office, but I make up for it by leaving early. ” Charles Lamb 2. 5 Measuring the Effectiveness of the Workforce

Measuring the Effectiveness of the Workforce In this topic you will learn about: p Methods of measuring workforce performance n n n Labour productivity Labour turnover Absenteeism 2. 5 Measuring the Effectiveness of the Workforce

Labour productivity can be defined as output per worker. p We can use the following formula: Output Number of workers p We would look at labour productivity over a period of time e. g. 1 year p 2. 5 Measuring the Effectiveness of the Workforce

Labour productivity Worked example: A car firm produces 100 000 cars per year p It has a labour force of 1000 workers p What is the labour productivity (output per worker) Using the formula then: p 100 000 = 1000 2. 5 Measuring the Effectiveness of the Workforce 100 cars per worker

Labour productivity In 2007 Laptops 4 u had 100 workers who produced 10000 laptops. With a recession looming they laid off 20 workers at the end of 2007. In 2008, with 80 workers, they produced 9000 laptops. Work out the labour productivity for Laptops 4 u in both 2007 and 2008. Labour cost per unit = Total Labour Cost / Number of units produced In 2007 each of the 100 workers was paid a £ 10000 annual salary at Laptops 4 u. What was the labour cost per unit for Laptops 4 u? The firm did not increase wages in 2008. What was the new labour cost per unit? 2. 5 Measuring the Effectiveness of the Workforce

Labour productivity Answer 1 In 2007 Laptops 4 u had 100 workers who produced 10000 laptops. With a recession looming they laid off 20 workers at the end of 2007. In 2008, with 80 workers, they produced 9000 laptops. Work out the labour productivity for Laptops 4 u in both 2007 and 2008. 2007: 10000/100 = 100 laptops per worker 2008: 9000/80 = 112. 5 (113) laptops per worker Answer 2 In 2007 each of the 100 workers was paid a £ 10000 annual salary at Laptops 4 u. What was the labour cost per unit for Laptops 4 u? The firm did not increase wages in 2008. What was the new labour cost per unit? 2007: 100 x £ 10000 = £ 1000000/10000 laptops = £ 100 per laptop 2008: 80 x £ 10000 = £ 800000/9000 laptops = £ 88. 90 per laptop 2. 5 Measuring the Effectiveness of the Workforce

Labour productivity Labour Productivity is extremely important in the car industry. The Chinese have recently moved into the UK car market by taking over the MG brand. Watch this clip from the BBC and see if you can work out the current weekly labour productivity. You will need access to the internet to watch this video clip As the Chinese invest more money into capital equipment such as the latest technology what do you think will happen to labour productivity? 2. 5 Measuring the Effectiveness of the Workforce

Labour turnover (staff turnover) can be defined as the rate of change in a firm’s labour force. p We can use the following formula: Number of staff leaving x 100 Total Number of staff p We would normally look at labour turnover a period of 1 year p 2. 5 Measuring the Effectiveness of the Workforce

Labour turnover Worked example: p p p A car firm has 1000 full time employees in 1 year Of these, 50 employees leave the company What is the labour turnover for the company? n Using the formula : 50 1000 x 100 = 5% Do you think this is high or low? What are the advantages of labour turnover? What are the disadvantages of labour turnover? 2. 5 Measuring the Effectiveness of the Workforce

Labour turnover In 2007 Laptops 4 u had 100 workers who produced 10000 laptops. With a recession looming they laid off 20 workers at the end of 2007. In 2008, with 80 workers, they produced 9000 laptops. Work out the labour turnover for Laptops 4 u between 2007 and 2008. Make a list of six factors that might lead to high labour turnover in a business. Choose two of these factors and explain what you think that a firm could do to reduce labour turnover in these circumstances. 2. 5 Measuring the Effectiveness of the Workforce

Labour turnover Answer 1 In 2007 Laptops 4 u had 100 workers who produced 10000 laptops. With a recession looming they laid off 20 workers at the end of 2007. In 2008, with 80 workers, they produced 9000 laptops. Work out the labour turnover for Laptops 4 u between 2007 and 2008. Number of staff leaving x 100 Number of staff 20 100 x 100 = 20% Why is staff turnover important? Watch this clip from Australian site www. profitablehospitality. com to find out: You will need access to the internet to watch this video clip 2. 5 Measuring the Effectiveness of the Workforce

Absenteeism can be defined as the number of staff who miss work as a proportion of the total number of staff p We can use the following formula p Number of staff absent per time period x 100 Total number of staff days worked per time period p We would normally look at absenteeism over a period of time e. g. 1 month 2. 5 Measuring the Effectiveness of the Workforce

Absenteeism Worked example: A car firm has 1000 full time employees p Of these, 40 employees did not turn up for work on a Friday p What is the absenteeism rate for that Friday Using the formula then: 40 x 100 = 4% 1000 p 2. 5 Measuring the Effectiveness of the Workforce

Absenteeism At Laptops 4 u absenteeism was seen as a problem. In 2007 there were 100 workers who worked an average of 225 days each a year. Altogether, the workforce took 4500 days off. What was the absenteeism rate for 2007? In small groups think of 3 different ways to reduce the absenteeism rate. How will these methods reduce absenteeism? What are the costs to a business of absenteeism: a) In the short term? b) In the long term? 2. 5 Measuring the Effectiveness of the Workforce

Absenteeism Answer At Laptops 4 u absenteeism was seen as a problem. In 2007 there were 100 workers who worked an average of 225 days each a year. Altogether, the workforce took 4500 days off. What was the absenteeism rate for 2007? 100 workers x 225 days = 22500 days 4500 22500 x 100 = 20% 2. 5 Measuring the Effectiveness of the Workforce

Activity – Mini Airlines took over a small aircraft manufacturer in 2007 and immediately invested in factors of production at the company. New capital equipment in the form of machinery and new methods of training were brought into the firm. The result was an increase in labour productivity but, at the same time, a rise in labour turnover (2007 = 6%) and absenteeism. Company information No. of workers Aircrafts Produced Days workers absent Total no. of days available for work 2007 2008 1000 900 225 1500 20000 18000 With reference to the information in the table work out the figures for the different measures of workforce performance. For each measure suggest why there might have been differences between 2007 and 2008. 2. 5 Measuring the Effectiveness of the Workforce