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As Peter Drucker puts it: "If you want it, measure it; but if you
can¶t measure it, forget it!" Thus use financial measurement for
HR, since it is a typical measurement that is applicable to every
function.
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Every HR activity should be based on a need to solve problems or lead
to intended results.

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HR should first compile a list of the problems or intended

results. Then, it should use the "Peeling the Onion"
Example:
Someone in your company gives this statement: "Our communication
is lousy!".
Raise questions to clarify the meaning of "communication" and "lousy."
Find out if the situation has any financial impact by asking: "When the
communication is lousy, what happens?" The answers will provide
evidence on this situation.
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When you find hard evidence, ask the following questions:

ƔHow do you measure it?

ƔWhat is it now? What is the current situation?

ƔWhat would you like it to be?

ƔWhat is the value of the difference?

ƔWhat is the total value over time? (3 to 5 years)

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When measuring the impact, we use the "back of the envelope"

economics
  

Problem: "Low Sales Productivity"

How do you measure it? Calls per hour
What is it now? 15 calls per hour
What would you like it to be? 20 calls per hour
What is the value of the difference?
5 calls x total headcount (200) x average profit per call (Rs.
10,000) x total hours per week (30 hours)
= Rs 300,000,000/week
= Rs 1,200,000,000/month
What is the value over time? (3 to 5 years)
= Rs. 43,200,000,000,000 (for 3 years)
= Rs. 72,000,000,000,000 (for 5 years)
HR measures - Examples

Here are several examples of HR measures that provides financial

analysis:

ƔProductivity Ratio
ƔAbsenteeism Ratio/Cost

ƔEmployee Turnover Cost:

ƔRecruitment Cost

ƔReplacement Cost

ƔTraining Cost

ƔAdministrative Cost

ƔTotal Personnel Cost