6.2.1 A NALYSING HUMAN RESOURCE PERFORMANCE AQA Business 6 D ECISION MAKING TO IMPROVE HUMAN RESOURCE PERFORMANCE What criteria would you use to measure your performance in the sixth form? Can the same criteria be used to measure workforce performance?

6.2.1 A NALYSING HUMAN RESOURCE PERFORMANCE  In this topic you will learn about  Calculating and interpreting human resource data  The use of data for human resource decision making and planning

H UMAN RESOURCE DATA  Human resource data is quantifiable information that can be used to measure workforce performance  This will help inform decision making e.g. is corrective action needed, should bonuses be paid, are staff motivated?  Human resource data includes:  Labour turnover and retention rates  Labour productivity  Employee costs as a percentage of turnover  Labour cost per unit

L ABOUR TURNOVER  Labour turnover is the rate of change in a firm’s labour force  Calculated as: Number of staff leavingx 100 Average number of staff Example:  A car firm has full time employees in 1 year  Of these, 50 employees leave the company  What is the labour turnover for the company? 50 x 100 = 5%  Labour turnover is normally shown over a period of 1 year What are the advantages of labour turnover? What are the disadvantages of labour turnover?

L ABOUR TURNOVER Staff turnover costs Britain £4.1bn Staff turnover costs Britain £4.13bn a year, according to a report by Oxford Economics and the insurer Unum. It costs an average of £30,614 to replace a departing employee. That is £5,433 for agency fees, advertising and interviewing, plus £25,182 over the time that new hires take to hit full productivity. Source: July 2015http:// Why do you think labour turnover rates vary between industries? Use the data provided to justify your response.

L ABOUR TURNOVER In year 1 Laptops4u had 100 workers who produced laptops. In order to try and reduce costs at the end of year 1 they laid off 20 workers. In year 2, with 80 workers, they produced laptops. 1.What is the labour turnover between year 1 and year 2? 2.Make a list of six factors that might lead to high labour turnover in a business. 3.Choose two of these factors and explain what you think that a firm could do to reduce labour turnover in these circumstances.

R ETENTION RATES  Retention rates are a measure of a firm’s ability to keep its workforce within the business normally for more than one year  Calculated as: number of employees serving for more than 1 year x 100 average number of staff  Low retention rates may present a threat to a business:  High recruitment, selection and training costs  Risk of loss of important information (secrets)  Loss of talent What are the costs to a business of resigning employees? Why do Brompton bikes want to retain their engineers?

L ABOUR PRODUCTIVITY  Labour productivity is a measure of workforce performance that looks at output per worker  Calculated as: Total output Number of workers Example:  A car firm produces cars per year  It has a labour force of workers  What is the labour productivity of the company? =100 cars per worker  Labour productivity is normally shown over a period of 1 year How significant is the UK’s productivity gap? What factors do you think are influencing labour productivity in the UK?

E MPLOYEE COSTS AS A PERCENTAGE OF TURNOVER  Employee costs are all the costs associated with the workforce  One measure of workforce performance is to calculate these costs as a percentage of the revenue coming in from sales  The percentage will be influenced by a number of factors including:  Capital or labour intensive  Tertiary, secondary or primary sector  Skills and qualifications of the average employee  Calculated as: Employee costs x 100 Revenue What is meant by labour intensive and capital intensive? What are employee costs?

L ABOUR COSTS PER UNIT  A measure of the average employee cost per unit of output  Labour costs per unit are affected by:  Labour productivity  Average employee costs  Calculated as: Total labour costs Total output Recap. What is meant by labour productivity?

L ABOUR PRODUCTIVITY AND LABOUR COST PER UNIT In year 1 Laptops4u had 100 workers who produced laptops. In order to try and reduce costs at the end of year 1 they laid off 20 workers. In year 2, with 80 workers, they produced laptops. On average an employee is paid an annual salary of £ What was the labour productivity in year 1 and year 2? 2.What was the percentage change in labour productivity? 3.What was the labour cost per unit in year 1 and year 2? 4.What was the percentage change in labour cost per unit in year 1 and year 2 5.Wat is the relationship between labour productivity and labour cost per unit?

A CTIVITY – L IGHT FLIGHTS Company information No. of workers10090 Aircraft produced2025 Total labour costs£ £ Revenue£1.5m£1.8m Light Flights took over a light aircraft manufacturer in 2015 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 (2016 = 6%). Comment on the workforce performance at Light Flights between 2015 and 2016.

U SE OF DATA FOR HUMAN RESOURCE DECISION MAKING AND PLANNING  Human resource planning to identify current staffing levels and needs and future staffing levels and needs in order to be able to take action to ensure future needs are met  Assess employee performance  Implement reward and sanction policies  Compare different branches, functions or product lines  Negotiate with trade unions  Inform decisions re redundancies if necessary How could HR data be used to inform decision making in other functional areas e.g. marketing?

6.2.1 A NALYSING HUMAN RESOURCE PERFORMANCE  In this topic you have learnt about  Calculating and interpreting human resource data  The use of data for human resource decision making and planning