<< Chapter < Page Chapter >> Page >

There is one other main reason why companies would downsize. If a company observes that they could be getting the same amount of output from fewer workers it makes economic sense to let the excess workers go. As an example, imagine a job that it would take three workers an hour to do. Now, if a fourth worker was added the job area would get crowded so everyone worked slowly and it took the four of them over an hour to complete. Clearly, the fourth worker is not adding value to the job and the company should downsize by firing the fourth worker. This practice is somewhat common, as most businesses continually review their processes to look for areas of the business that could run more efficiently with fewer expenses. For example, by evaluating and changing a manufacturing process could be streamlined resulting in reduced labor, material, and/or time costs while producing the same output.

In order to continue growth and avoid the need for downsizing, products and services must constantly be made better, cheaper, and/or faster than what is being offered by the competition. A company that does this successfully will enjoy increased revenues and most likely growth. Companies that fail to offer products and services that are better, cheaper, and/or faster than their competition will not succeed. Companies are constantly battling with each other for market share, and downsizing and growth are two results of how effectively companies create demand for their good.

Hr metrics

By Ronald Tam

For any company that is implementing new human resource programs or adjusting existing ones, these changes can quickly become a substantial company project. The roles of human resource programs are to manage the employees of companies to increase the human capital in a company. However, the specific goals or strategies that HR seeks to achieve may be different for each company or situation. Therefore, there is no set standard for measuring the success of HR.

The business world is dominated by people who look at metrics, and the HR world needs to play in that space…if you can measure manufacturing efficiency with Six Sigma, why not use similar analytics to measure human capital performance
(Grossman, 2006). It is suggested that the business world is focused on metrics in determining success. Similar approaches must be taken to value HR in order for it to be widely accepted,
but were the HR policies and practices really worth the time and effort? HR thought so, based on overall company performance. But Poses, who also had served as a financial analyst at AlliedSignal, wanted more. He wanted substantive proof, validation that his HR investments were paying off
(Grossman, 2006). This is the most common view of companies when it comes to HR, so the metrics sought out here is a financial measure.

The first approach to HR metrics would be the approach in measuring the financial success of the company as a result of the HR implementations. Evaluations can be viewed as company projects or investments in this case. The first measurement is just a simple ratio of change in profits due to new HR divided by cost of the new HR. This measure will give an idea of how well the new changes paid off relative to how much was spent on it. Another measure is payback period, “The payback period of an investment is the period of time required for the cumulative cash inflows (net cash flows) from a project to equal the initial cash outlay (net investment)” (Moyer, McGuigan,&Kretlow, 2006). The payback period is measured by the net investment divided by the annual cash inflows as a result of that investment; this measure will give a company an idea of how long it takes the project to earn by its cost. The final measure for financial metrics of HR is a net present value, “The net present value of a capital expenditure project is defined as the present value of the stream of net (operating) cash flows from the projects minus the project’s net investment” (Moyer, McGuigan,&Kretlow, 2006). This is done by taking the present value of all future expected cash flows from the HR change and subtracting it from the cost of the project. This will put the value of the HR project in monetary terms like any other investment for the company. These are all measures that can be used to express the HR program or changes in terms of a relationship between its financial returns and costs. There are no specific standards for determining whether an HR project was a good investment or not, but the company should relate their results with industry results or historic results.

The other approach to HR metrics is more towards operations aspect of the company. “The old HR measures, such as head count, the cost of compensation and benefits, time to fill, and turnover, no longer cut it in this new world of accountability. They don't go far enough to create shareholder value and align people decisions with corporate objectives” (Schneider, 2006). Since the purpose of HR is to improve an operational aspect of the company, it should also be measured in that context. “Many companies are forging ahead on efforts to create a new set of metrics that the traditional HR functions like recruiting, training, and performance review [relate] to overall corporate goals” (Schneider, 2006). Measurements here can include a variety of traditional measurements such as employee turnover, average stay of employees, efficiency of employees, etc. These measures all affect the operation aspects of a company and are standardized information currently. A new measure that can be introduced is the measurement of human capital; “human-capital metrics can provide meaningful correlations that help predict behavior and human-capital investment demands well ahead of the annual budget”. Another new HR metric can be directly related to the operational aspects of the company. “HR metrics might measure efficiency, or the time and cost of activities; human-capital metrics measure the effectiveness of such activities. Time to fill becomes time to productivity; turnover rate becomes turnover quality; training costs become training return on investment” (Schneider, 2006). The take from non-financial HR metrics is that there is no limit to any measurements or techniques. They can range from something simple and standard such as employee turnover to something creative that measures the effects of human capital increases, customer satisfaction increases, etc.

Human resources should be treated like any other projects that a company can undertake. It can be measured both with financial results or operational results. The financial results are measures to compare the cost against the return from HR. The operational measure can look at standards or more complex and creative measures. Ultimately HR metrics are valued and judged against the goals or strategies of the company and how well they are aligned with the results. Therefore, a company should not limit themselves on how they are evaluating their HR success and build techniques around how they feel they feel they should value it.

Questions & Answers

A golfer on a fairway is 70 m away from the green, which sits below the level of the fairway by 20 m. If the golfer hits the ball at an angle of 40° with an initial speed of 20 m/s, how close to the green does she come?
Aislinn Reply
cm
tijani
what is titration
John Reply
what is physics
Siyaka Reply
A mouse of mass 200 g falls 100 m down a vertical mine shaft and lands at the bottom with a speed of 8.0 m/s. During its fall, how much work is done on the mouse by air resistance
Jude Reply
Can you compute that for me. Ty
Jude
what is the dimension formula of energy?
David Reply
what is viscosity?
David
what is inorganic
emma Reply
what is chemistry
Youesf Reply
what is inorganic
emma
Chemistry is a branch of science that deals with the study of matter,it composition,it structure and the changes it undergoes
Adjei
please, I'm a physics student and I need help in physics
Adjanou
chemistry could also be understood like the sexual attraction/repulsion of the male and female elements. the reaction varies depending on the energy differences of each given gender. + masculine -female.
Pedro
A ball is thrown straight up.it passes a 2.0m high window 7.50 m off the ground on it path up and takes 1.30 s to go past the window.what was the ball initial velocity
Krampah Reply
2. A sled plus passenger with total mass 50 kg is pulled 20 m across the snow (0.20) at constant velocity by a force directed 25° above the horizontal. Calculate (a) the work of the applied force, (b) the work of friction, and (c) the total work.
Sahid Reply
you have been hired as an espert witness in a court case involving an automobile accident. the accident involved car A of mass 1500kg which crashed into stationary car B of mass 1100kg. the driver of car A applied his brakes 15 m before he skidded and crashed into car B. after the collision, car A s
Samuel Reply
can someone explain to me, an ignorant high school student, why the trend of the graph doesn't follow the fact that the higher frequency a sound wave is, the more power it is, hence, making me think the phons output would follow this general trend?
Joseph Reply
Nevermind i just realied that the graph is the phons output for a person with normal hearing and not just the phons output of the sound waves power, I should read the entire thing next time
Joseph
Follow up question, does anyone know where I can find a graph that accuretly depicts the actual relative "power" output of sound over its frequency instead of just humans hearing
Joseph
"Generation of electrical energy from sound energy | IEEE Conference Publication | IEEE Xplore" ***ieeexplore.ieee.org/document/7150687?reload=true
Ryan
what's motion
Maurice Reply
what are the types of wave
Maurice
answer
Magreth
progressive wave
Magreth
hello friend how are you
Muhammad Reply
fine, how about you?
Mohammed
hi
Mujahid
A string is 3.00 m long with a mass of 5.00 g. The string is held taut with a tension of 500.00 N applied to the string. A pulse is sent down the string. How long does it take the pulse to travel the 3.00 m of the string?
yasuo Reply
Who can show me the full solution in this problem?
Reofrir Reply
Got questions? Join the online conversation and get instant answers!
Jobilize.com Reply

Get Jobilize Job Search Mobile App in your pocket Now!

Get it on Google Play Download on the App Store Now




Source:  OpenStax, Business fundamentals. OpenStax CNX. Oct 08, 2010 Download for free at http://cnx.org/content/col11227/1.4
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Business fundamentals' conversation and receive update notifications?

Ask