Friday, April 07, 2006

HR Metrics

In a report release by Price Water house cooper and Saragota on HR metrics highlights how the structure of an organization influences the matrices to be followed, these metrics may underestimate the actual efforts required to deliver HR services.

For example, many organizations have HR functions such as Staffing and/or IT support that report to and have costs charged back directly to the line. At Saratoga, these types of costs and resources would be considered Indirect HR and the headcount and costs of these individuals would be excluded in Saratoga’s traditional HR calculations. Saratoga’s traditional definition of HR (AKA Direct HR) includes labor, outsourcing, system, and consulting/contractor costs charged directly to a centralized HR budget.

To help illustrate Indirect HR consider the following examples: Company A has an HR Headcount Ratio of 120 and spends about $1,200 per employee served for these HR services. All of Company A’s HR employees and costs are charged to a central budget. Contrast this with Company B which has an HR Headcount Ratio of 180 employees and spends about $1,000 per employee served. You might think that Company B is providing more cost effective HR service delivery, until you realized that all staffing at Company B is charged directly to the business unit and not to HR.

To help organizations monitor their true investment in HR, Saratoga offers Total HR Spend Per Employee and Direct and Indirect HR Headcount Ratio. The formula for Total HR Spend Per Employee is:
(Direct HR Costs + Indirect HR Costs) / Regular Headcount
The formula for Direct and Indirect HR Headcount Ratio is:
Regular Headcount / (Direct HR Headcount + Indirect HR Headcount)

It is important to note that while many organizations have Indirect HR, the majority of organizations do not.To read more download the report

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