Dear Workforce How Do We Develop Performance Yardsticks for Human Resources

By Staff Report

Apr. 29, 2005

Dear Searcher:

There is no single formula for developing key performance indicators, or KPIs for short. Seldom do two organizations have the same KPIs, since each is likely to measure the performance of its human resources department differently. Some organizations use a balanced-scorecard approach, some use Six Sigma, and some choose other methods that focus on key performance metrics.

Countless things could be measured, so focus on a small number of metrics that are strategic, can be compared to past and future data, and enable you to take quick action. Sample KPIs might include:

Human resources department cost per full-time employee (FTE)
Here you calculate the total cost of the human resources department, including salaries, divided by the number of full-time employees. It measures the cost of providing human resources services to each employee.

FTEs per human resources department FTEs
This is a measure of the ratio of human resources staff to employees, and is calculated by dividing the total number of employees by the number of human resources staff.

Quality of service
Make it an ongoing practice to measure the quality of service your human resources department delivers. Many organizations use annual surveys to gauge user satisfaction. Surveying people more regularly gives you an even better handle on service levels. Use follow-up surveys after individual human resources transactions. For example, send a brief satisfaction survey to the hiring manager and to a new employee regarding the recruiting process.

Your KPIs have to measure quality of service to provide a balanced perspective, since driving down costs is not desirable if service levels diminish as well.

Strategic KPIs
If you want human resources to be more than an administrative arm, you’ll need to track the strategic value it provides to the organization. First look at what your organization’s KPIs are and how they are influenced by the performance of the human resources department. For example, turnover can have a dramatic effect on many organization-wide metrics, such as revenue per FTE. If your human resources department helps curb turnover, then you should include it as a key performance yardstick. However you develop these principles, never lose sight of the reason behind your planning and strategy: to run your business more efficiently.

SOURCE: Scott Weston, principal, Falcon Strategic Group, San Francisco, June 22, 2004.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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