M1 : HR Metrics and HR

Outsourcing
HR Metrics – the Need
• helps organizations figure out their people strategy for the future
• Technology Makes fact based Decisions possible
• Business Process Improvement – effectiveness of “backwater
operations” (warehousing ordering, Shipping) as a profit center
• Globalization and Mergers – forcing managers to take fact based
decision
Major Categories of HR Metrics
1. Organizational Performance
• Turnover percentages 
• Percentage of regretted loss 
• Statistics on reasons for personnel leaving 
• Absence percentages, and absence behaviors 
• Recruitment statistics (e.g. time to fill, number of applicants, recruitment costs) 
2. HR Operations
• HR efficiency (e.g. time to resolve HR self-service tickets)  
• HR effectiveness (e.g. perception of service quality) 
3. Process Optimization
• Changes in HR efficiency and effectiveness over time, which are used to re-engineer
and reinvent the nature of HR in the organization, optimizing its delivery process for
the future.  
Type of HR Metrics
HR Metrics in Recruitment 
• 1. Headcount: the total number of employees in the organization, or within the department you are tracking. 
• 2. Demographics: the characteristics of the workforce, including age, gender, education level, and length of
service in the company. 
• 3. Time to Hire: the average number of days between when a job is posted, and when the candidate accepts the
offer. 
• 4. Acceptance Rate: the number of offer letters extended by the organization, divided by the number of
candidates who accept an offer. 
• 5. Cost per Hire: the average cost of hiring a new employee. This can be generated by calculating the sum of
both internal and external hiring costs, then dividing that value by the total number of employees hired in a
given period. 
• 6. Time to Productivity: the time it takes for new hires to become acclimated in the organization and start
working at full productivity.  
• 7. New-Hire Turnover: the number of new hires who leave the organization within a set period of time (e.g.
within their first year of employment). 
HR Metrics in Engagement and Retention 

• 8. Employee Satisfaction: the number of employees who would recommend the organization

as a good place to work, versus the number of employees who wouldn’t. 
• 9. Total Turnover Rate: the number of employees who leave the company within a given period
of time, divided by the average number of total employees. This is usually indicated in a
percentage value, so this decimal is then multiplied by 100. 
• 10. Voluntary Turnover Rate: the turnover rate including only the employees who voluntarily
leave the organization. 
• 11. Talent Turnover Rate: the turnover rate among the organization’s highest-performing and
highest-potential employees.  
• 12. Retention Rate: the opposite of a turnover rate, in that the number of employees who
remained in the organization over a given period is divided by the total number of employees. 
• 13. Retention Rate per Manager: the retention rate broken down by individual teams and
managers.
HR Metrics in Time Tracking 
• 14. Absence Rate: the average number of days employees are absent in a given period of time, not including approved PTO  
• 15. Absence Rate per Manager: the absence rate broken down by individual teams and managers.  
• 16. Overtime Hours: the number of overtime hours worked by employees in a given period of time. This can be calculated either as
an average number, broken down by individual employees.  
• 
• HR Metrics in Employee Value & Performance 
• 17. Performance & Potential: a nine-box performance matrix where employees are categorized according to their performance
and potential levels
• 18. Employee Performance: metrics as received through self-assessments, peer reviews, manager assessments, or a combination
of all three. 
• 19. Goal Tracking: usually done so through a performance management software that include goal tracking, this metric monitors
the goals employees have set, how they connect to larger organizational goals, the progress the employees have made on those
goals. 
• 20. Company Performance: a comparison of how well employees are performing, versus how engaged and valued they feel within
the organization.  
• 21. Revenue per Employee: the total amount of revenue generated in a given period of time, divided by the total number of
employees. 
HR Metrics in Training and Development

• 22. Training Expenses per Employee: the total cost of the organization’s

training courses and programs, divided by the total number of employees. 
• 23. Training Completion Rate: the number of employees who complete a given
training course/program, divided by the total number of employees. This value
is then multiplied by 100 to get a percentage. 
• 24. Time to Completion: the amount of time it takes for an employee to
complete a given training course or program. 
• 25. Training Effectiveness: this can be measured in several different ways,
including running tests or assessments that generate a pass/fail rate for
training programs.  
• 
HR Metrics in HR Service & Software 
• 26. Ratio of HR Professionals to Employees: the number of
employees in the organization per HR professional on the HR team. 
• 27. Cost of HR per Employee: the total amount the organization
spends on HR functions and services, divided by the total number of
employees in the organization. 
• 28. HR Software Employee Participation Rate: the number of
employees who actively use the organization’s HR software, divided
by the total number of employees in the organization. 
HR Dashboard
HR Outsourcing
 Introduction
History of Outsourcing
• Barter system- First instance of outsourcing

• Idea was rooted in 1776 in “competitive advantage

theory” propagated by Adam Smith.

• Early examples of outsourcing-

-England Textile Industries in 1830
-Making of American wagon
covers
:A job outsourced to Scotland.
More Recent examples:-
• Eastman Kodak
• Nike

Outsourcing is defined as :-
 Delegation of task to an outside entity.
 Functions outsourced to a th ird party
under contract.
 Buying goods or services instead of producing
them in house.

• Outsourcing includes:-
-Offshoring
-Nearshoring
Need & Benefits of Human Resource Outsourcing:

• Cost Effective
• Risk Minimization
• Support & Compliance
• Security of Data
Outsourcing – What?
• Hiring & Recruitment
• Payroll & Compensation Management
• Specialized Consultancy Services
• may also handle employee handbooks and policy documents,
background checks and drug tests, etc.
Changing Trends in HR Outsourcing
Traditional Outsourcing
• Different HR functions were outsourced to
different vendors.

Recruiting
Payroll

Benefit company
Training
Admin

Supplier Supplier
3 4
Supplier Supplier
1 2
Outsourcing the whole process to a
single vendor

Benefit Admin Com. Plan

& Strat.
Pay Roll
Education &
Training
Value Chain
Cont. Integrator
Workforce
Mgt. Org Dvpt.

Personnel
Admin Recruiting
 Drivers for HR Outsourcing

• Downsizing
• Rapid growth
• Globalization
• Increased competition
• Restructuring
 Criteria for Outsourcing

1. Model for Virtual HR

Based on these theories:
• Transactional Cost theory

• Resource Based
Perspective
 Framework to decide which function
to Outsource

High Idiosyncratic
Core
HR Activities
HR Activities
Uniqueness

Peripheral Traditional
Low HR Activities HR Activities

Low High
Value
2. Alan Speaker’s Theory

Classification of HR Activities:-

• Type of Activity

• Strategic value of Activity

 HR Functions Outsourced in Practice

• Frequently outsourced functions: Fully or Partially

P a y Roll

H R IS
Fully
Re c r ui ti ng P ar tial

Tr ng & Dvpt

O t h e r Benefit M g t

0 20 40 60
HR Executives views on HR
Outsourcing
HR Functions Views in %

YES NO
Employee Communication 13% 87%

Assessment 43% 57%

Recruiting 52% 48%

HRIS 35% 65%

 Case Study-1
Bank Of America
• Leading financial service organization
• Approximately 1, 85, 000 employees.
• 4200 banking centers

HR- Department
• 1300 employees in HR
• Have outsourced many of their HR activities to
Exult like,
- International relocation
-administration , regional staffing,”life event
coordination”(Leave and Retirement) policy and
general benefits etc.
 Motives for outsourcing

• Reduce Costs
• Focus resources on core
activities and core
competencies
• Expand and improve
services.
• Benefits from Vendor’s
investments and
innovation
• Improve career
opportunities for staff.
• Increases Flexibility
 Results from outsourcing

• Activities like Payroll,benefits, administration

were completed within 7 months.
• Cost reduction goal of 12 per-cent annually was
achieved.
• Could focus on more strategic tasks like process
design and development.
• Increase in Percentage of internal recruitment
from 16% to 35%.
 Case Study-2

Sunoco Inc
 Headquartered in Philadelphia

 Leading Manufacturer and Marketer of

Petroleum and Petrochemicals.
 Approximately 14000 Em ployees
 5 Different Business Units
 45 Employees in Central HR
Department
HR Functions Outsourced at Sunoco
 Drug Screening

 Central advertising for new employees

 Posting of Employment Advertisement online
 Executive Search
 Salary Surveys and Statistics

Outsourcing Payroll Function

• Outsourcing Payroll to third party vendor
• Preparation for New Millennium
• People Soft HRMS
 Disadvantages
• Dependence on Vendors

• High Costs

• Loss of Control

• Low morale among permanent employees

• New Risks

• Sub-standard Service
Stages of Outsourcing

Planning for Outsourcing

Risk analysis and Actions Goals set

Determination of Contract
Termination Date Rights

Analysis

Performance and Cost of Activity and Failure Risk Assessment & Pricing Models
 Selection
Qualifying and Evaluating the service provider Drafting Request for Proposal(RFP)

Negotiation
Service Level Agreements Term Sheet

Transition of Resources

Team Roles , offers & Terminations Counseling for Selected ones

Managing the Relationship

Creation of Supervisory Council Scheduling and actual Performance