Measuring workforce performance is the process of assessing how well a group of employees are performing their jobs and achieving their individual and team goals.
It is important to measure workforce performance because it can help organizations to:
- Identify areas where employees are excelling and need to be rewarded.
- Identify areas where employees need improvement and provide them with the necessary support.
- Make informed decisions about hiring, training, and promotion.
- Track progress towards organizational goals.
How to measure workforce performance?
Measuring workforce performance is not easy. It tends to be less complex in manufacturing industries and more complicated in service industries.
There are two main indicators that Human Resources (HR) managers typically use to assess the level of workforce performance in a business organization.
1. Labor Productivity (per worker). Labor Productivity (per worker) is the output per worker in a given time period usually one year. It is a commonly used measure of workforce performance, or workforce efficiency. For example, kilometers traveled per driver per year in the transportation industry, parcels delivered per courier per year in the shipping industry, number of guest nights per employee per year in hotels, revenue earned on average per employee per year in banks, etc. It is calculated in the following way:
Labor Productivity (per worker) = Total Output produced (In time period) / Total workers employed
Labor productivity (per worker) is calculated by dividing the total output by the total labor hours worked. When output per worker increases over time, then productivity, or efficiency, is increasing. It means that labor costs per unit of output will be decreasing (given constant wage rates). However, when output per worker decreases over time, then productivity, or efficiency, is decreasing. It means that labor costs per unit of output will be increasing (given constant wage rates).
Labor productivity (per worker) is a major factor influencing the competitiveness of a business. If labor costs per unit are lower than other firms, there could be an opportunity to set lower prices. However, if labor costs per unit are higher than other firms, there may not be an opportunity to set lower prices.
Labor productivity (per worker) usually increases over time when the business offers better staff training, purchases more efficient capital equipment and improves staff motivation. Other reasons might include increased worker involvement in problem solving to speed up production or improved internal efficiency when waiting time for materials to arrive is minimize to zero.
2. Absenteeism Rate (%). Absenteeism Rate (%) is the proportion of workforce absent from work as a proportion of all employees. It is a commonly used measure of workforce motivation – really well-focused and motivated staff will avoid missing days from work at all costs. It is calculated in the following way:
Absenteeism Rate (%) = No. of Employees absent (In time period) / Total Workers employed x 100%
Absenteeism Rate (%) is calculated by dividing the number of employees who are absent by the total number of employees. This is a percentage of the total number of working days that could have been worked, but were lost through absenteeism.
Staff absenteeism can be caused by lack of the hygiene factors of the job as well as motivating factors not being fully present at work. For instance, poor working conditions, over-supervision or working during days off.
Staff absenteeism is disruptive to any business manufacturing goods because there is a need to employ extra staff just to cover for staff away from work or to ask other workers to work overtime. Additionally, it is especially severe in firms offering consumer services as these cannot be held in stock for use during periods of absence. When a customer experiences poor service due to staff absence, that consumer may never return which will result in loss of sales revenue and customer loyalty.
3. Other measures of workforce performance. There are several other measures of workforce efficiency and motivation in the workplace. However, not all of these may be applicable to all types of business activity. Some of the other methods include:
- Wastage levels. Wastage level is the amount of waste generated relative to the total output of a process or system. It is the number of wasted or damaged products expressed as the proportion of total output. It is typically expressed as a percentage. For example, a wastage level of 10% means that 10% of the total output is wasted.
- Rejection rates. Rejection rates are the percentage of applications, submissions, or requests that are rejected. They can be used to measure the competitiveness of a process or the selectivity of an organization.
- Consumer complaints. Consumer complaints are expressions of dissatisfaction from consumers about products or services as a proportion of total customers served. They can be made to the company directly, to a government agency, or to a third-party organization such as a consumer protection group.
- Days lost. Days lost is a measure of the number of days that a person or organization is unable to work or produce due to a particular event or circumstance. For example, the days lost through strikes within a business, the impact of illness, weather, injury or other disruptions.
Limitations to measuring workforce performance
The data are usually recorder over time and compared with previous time periods, as well as compared with results from other businesses in the same industry.
However, relying only on quantitative data when measuring workforce performance can lead to false conclusions as different levels of workforce motivation and performance could true under different circumstances.
Any data related to human performance do have some very important uses but, as with any single measure of performance, the causes of changes need careful analysis.
In conclusions, by following these major methods or measuring workforce performance, you can develop a performance measurement system that will help you to improve workforce performance and achieve your organizational goals.
