Top Workforce Management Metrics and KPIs

Two of the biggest and most common issues for small businesses are maintaining healthy cash flow and shortfalls in operating expenses. Because small business owners often dig into their own reserves to cover budget shortfalls, finding every way to lower operational costs and ensure positive cash flow is a top priority.

Getting the most out of your workforce while keeping employees engaged and loyal can be a critical step in both managing cash flow and optimizing operations.

Why Measuring Workforce Performance Is Important

HR technology can improve workforce management, driving immediate cost savings and lower long-term costs borne of deeper employee engagement and lower attrition rates.

Workforce management software is well established in call centers as an indispensable tracking, scheduling and planning tool. But many other types of scheduling-intensive businesses are beginning to see the benefits as well — from healthcare, to retail and even manufacturing. What’s more, its use has grown beyond automating and ensuring scheduling that meets service-level agreements. It can now ensure compliance with labor regulations as well as analyze trends to predict and optimize staffing needs, including managing contingent workforces. The right workforce management software can keep the workforce more deeply engaged by giving them the power to schedule their own work, as well as easily put in for time off and track accruals.

Personnel costs often top 50% of operating budgets, but Oracle data shows that many business leaders spend 10% or less of their time enhancing workforce management practices. There are a number of KPIs you can use to help track your workforce management, but it’s important to choose the KPIs that work best for your organization.

Challenges in Tracking Workforce Management

Many of the challenges organizations have with workforce management — which include absenteeism, over-staffing or under-staffing, properly tracking time (both when it comes to hours worked and paid time off) and ensuring compliance with labor regulations — stem from an inability to easily collect, see and analyze data about their employees.

For instance, many businesses manage schedules with Excel that fails to take into account employee time off requests or certain employee requirements around what hours they can work. This forces employees to trade shifts “off the books” by phone or text. Sometimes, shifts won’t get filled at all. If they do, making sure the person working is paid correctly can be challenging. A swap of shifts may make someone eligible for overtime without the manager being aware of that.

And if the company is using software to track these things, often the software isn’t integrated with complementary systems — or data can’t be accessed without asking for help from someone in human resources. These issues can prevent business leaders from spotting and resolving potential inefficiencies in workforce management.

In sum, challenges include the following:

• Absenteeism
• Over- or under-staffing
• Properly tracking time
• Ensuring compliance with labor regulations
• Minimal access to data

Benefits of Tracking Workforce Management

Automating data collection — from tracking time on projects, to gathering payroll data, to ensuring proper pay codes, to time off tracking — eases the entire workforce management process. When historical and real-time transactional data is in a central database, a business can combine that with information on external trends and patterns to optimize staffing levels.

It also enables employees to check time off balances and accruals, get shifts covered or pick up shifts on their own, ensuring that they’re accurately compensated for all of it. For example, this data can be used to create schedules that are in line with foot traffic at a store or call volume to a call center to better match supply and demand.

Tracking workforce management helps businesses in all these ways and more:

• Simplified workforce management processes
• Easier trend tracking
• Employees can check time off balances
• Effortless shift coverage or trading
• More accurate compensation
• Precision schedule creation to match busyness

9 Workforce Management Metrics and KPIs

By measuring the KPIs listed below, a business can reduce labor costs as well as the costs of compliance (or noncompliance). Managers have better visibility into data and trends, and employees have the technology and the best possible environment in which to do their jobs. As a result, they are more productive, drive more sales and deliver better customer service. More engaged employees stay with the company longer, reducing training expenses and onboarding new employees.

Here are some key workforce management metrics that companies can track and may tie to certain KPIs:

1. Productivity Metrics. Workforce management simplifies a lot of administrative tasks. With workforce management software the business can better measure and track certain areas — phone calls taken by customer service representatives, number of picks by a warehouse worker, or how long it takes to complete manager reports. By having easy access to the data, managers can track production against planned schedules to forecast productivity lapses.

2. Labor Metrics. Workforce management software can reduce the time on scheduling, demographics or skill sets to help plan shifts — for example, a warehouse manager could use it to plan the number of forklift operators, engineers and receivers needed for each shift. The company can also measure how much time and money it spends on overtime or staffing level by season.

   By tracking workforce management metrics, the business has more insight into what’s driving broader HR-related KPIs. These include:

3. Attrition/Retention. Voluntary vs involuntary turnover is important to track. Employers surveyed by CareerBuilder said the average cost of losing a good hire is $29,600. It’s important to pay attention to trends in attrition that show a particular manager is losing employees more often than the average turnover rate for the company. This could be due to specific of the job or role, but it may lend insight into poor management.

   Workforce management software helps better align schedules with employee needs and their skills. Voluntary turnover can be measured using this formula:

   Turnover = Number of Employees Who Left (Separations) in X Time Period/Total # of Employees

4. Revenue Per Employee. Scenario planning has suddenly climbed up the list of priorities for FP&A teams recently. Organizations can benchmark KPIs such as revenue per employee against other industries.

   The formula for revenue per employee is:

   Revenue Per Employee = Revenue/Total Number of Employees

5. Total Cost of Workforce. The Society for Human Resources Management says the Total Cost of Workforce is more than just what the company spends on salaries and benefits, but measures the full amount invested in human capital.

   To calculate the total cost of workforce the organization will need to add up:

   Direct compensation – sum of all compensation to employees excluding benefits, this includes base pay, variable pay and supplemental pay + Benefits – sum of all health benefits and PTO + Labor costs – sum of insurance and taxes such as payroll taxes, as well as the contingent workforce + Workforce overhead – costs related to enabling the workforce and expenses associated with employee-related events (facilities expenses, IT and administrative expenses, severance and re-location expenses)

6. Recruitment. Those same scenario planning capabilities can help businesses conduct better workforce planning. Foreseeing workforce challenges, the business can move longer-term employees into more challenging roles, more effectively conduct succession planning and target the right new people to hire. One important metric is one related to the recruiting organization — time to fill.

   Time to fill = Time it takes to fill each position over X time frame/Number of Roles Filled

7. Training Effectiveness. Identifying and finding training opportunities for your current workforce is crucial. A recent Randstad RiseSmart study showed that fewer than 4% of employers have redeployed or reassigned employees to new roles during the pandemic — missing a great opportunity to keep talented people employed and engaged. Measuring training effectiveness also allows businesses to use contingent workers in a more thoughtful way that will help them reach key goals.

   It’s challenging to measure, but using the Kirpatrick Model is one way to do so. This is a combination of soliciting employee feedback about the training, mapping it to test scores or performance KPIs, how it has influence employee behavior and then actual business results.

8. Employee Engagement. Employee engagement can be difficult to measure, but is becoming a top priority in employee retention strategies. Giving employees tools to easily track time, manage vacation and time off accruals and ensure they are accurately paid are basic foundations of keeping employees engaged. More advanced workforce management tools include functionality that allows users to view schedules on mobile phones and easily switch shifts.

9. Customer Satisfaction. Collecting data at the time of purchase or service after an interaction with call center agents or retail associates can help businesses get a sense of customer satisfaction. Often, businesses send out an automated customer satisfaction survey to rate the experience or use a simple net promoter score question, which asks how likely a customer is to recommend the product or service. This data can be combined with workforce management tools for performance analysis and to better manage talent.

Adhering to State and Federal Labor Laws

Compliance can be difficult to measure but the costs of noncompliance are great. Workforce management software can save time and ensure adherence to regulations such as the Family Medical Leave Act (FMLA), the Fair Labor Standards Act (FLSA) and the Affordable Care Act (ACA) because it automates the calculation of absence accruals, eligibility and pay. Compliance metrics can also be extended to make sure a wide range of timely health and safety regulations are met — from physical capacity restrictions to compliance with the Families First Coronavirus Response Act (FFCRA).

Improve Workforce Management With HCM

Leading enterprise resource planning (ERP) systems often come with workforce management capabilities. This includes both data and analytics around time and attendance, labor management and budgeting, absence management, project tracking, task management, scheduling and forecasting. The data collected with that technology is integrated with the core human resources management systems — including all employee records and payroll.

Successful workforce management software integrates budgeting, planning, analytics, collaboration, and rules-based scheduling solutions with data on availability, skills and eligibility of workforce personnel. Workforce management software also makes it easier to contact trace and ensure schedules are optimized for capacity restrictions and employee safety.

Investments in workforce management technologies can help businesses increase their resilience. By leveraging advanced analytics and forecasting tools, the business can not only predict its future staffing needs and plan for them based on historical data, but leverage scenario planning to model out many different possibilities, anticipate risk and make changes to reduce it.