Why is this important?
In many businesses, employees are not only the most important assets and key enablers of future success but often the biggest expense (or rather investment). It is therefore important to understand to what extent employees add value to the financial performance of the organisation. Employees are often a missing ingredient in accounting and finance (except as an expense) and with a little effort we can calculate the effects of people on financial performance. Research finds that while most businesses have a range of HR indicators, less than half actively track the impact of employees on financial business performance. The reason I am given for not using such measures is often the argument that there are no agreed ways or valid ways of calculating this. Here I’d like to quote human capital guru Dr Jac Fitz-enz, who says:
‘To contend that there is no valid and consistent way to do this is simply to admit one’s ignorance.’
With respect to Employee Perspective, below are few KPI's which a businessman should be mindful of:
- Human capital value added (HCVA)
- Revenue per employee (RPE)
- Employee satisfaction index
- Employee engagement level
- Staff advocacy score
- Employee churn rate
- Average employee tenure
- Absenteeism Bradford factor
- 360-degree feedback score
- Salary competitiveness ratio (SCR)
- Time to hire
- Training return on investment
Hoshin Kanri (Policy Deployment)
What is Hoshin Kanri?
Align the goals of the company (Strategy), with the plans of middle management (Tactics) and the work performed on the plant floor (Action).
How does Hoshin Kanri help?
Ensures that progress towards strategic goals is consistent and thorough – eliminating the waste that comes from poor communication and inconsistent direction.
KPIs (Key Performance Indicators)
What are KPIs?
Metrics designed to track and encourage progress towards critical goals of the organization. Strongly promoted KPIs can be extremely powerful drivers of behavior – so it is important to carefully select KPIs that will drive desired behavior.
How do KPIs help?
The best manufacturing KPIs:
- Are aligned with top-level strategic goals (thus helping to achieve those goals)
- Are effective at exposing and quantifying waste (OEE is a good example)
- Are readily influenced by plant floor employees (so they can drive results)