WHITE PAPER

FROM HR METRICS TO
WORKFORCE ANALYTICS:
Five Key Workforce Insights That
Every Employer Should Capture
for Greater Business Impact

In February of 2012, HRmarketer Services

Group surveyed over 150 U.S.-based
employers regarding their workforce
analytics practices, preferences and future
plans. The respondents who participated
in the survey represented a wide variety of
organizations that use workforce analytics
to varying degrees. These organizations
ranged in size from less than 1,000
employees to organizations with well over
10,000 employees. The majority of the
participants worked in an HR role, although
a small demographic represented senior
management, and other departmental groups
such as IT and Finance. The survey was
conducted online on behalf of Visier Inc.

MAXIMIZE YOUR HUMAN

CAPITAL INVESTMENT AND
MAKE BETTER DECISIONS BY
MEASURING FIVE CRITICAL
INDICATORS

68%
65%
57%
54%
51%
Source: Visier WFA Usage Survey, 2012

In order to excel in todays complex business

environment, HR leaders are challenged more
than ever to make sound business decisions with
confidence. In order to make those informed business
decisions, executive leaders need the right data. This
has created a growing demand for workforce analytics,
which are more informative, insightful and accurate
than ever before. However, organizations continue
to struggle answering the most important and
fundamental question regarding workforce analytics:
What should we measure about our workforce?

According to the Visier 2012 Survey of Employers:

Workforce Analytics Practices, Preferences & Plans,
when survey participants were asked to identify the
key performance indicators that are most important
to their organization (multiple answers were allowed)
turnover, performance and compensation were the
most common answers. The complete breakdown of
responses are, as follows:

39%
38%
30%
21%
5%

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Successful organizations in todays market need to

re-evaluate and re-invent their business tools and
processesand most importantly, make organizational
changes based on facts with insights into what
changes will keep them competitive and successful.

MEASURING WORKFORCE ANALYTICS

Em

Todays HR leaders face unprecedented challenges in

making the most of their human capital investment.
Change is the only constant in todays business world.
Compliance legislation, global competition for talent,
outsourcing labor, offshore locations with remote
workers, and an aging population are just some of the
unique business challenges faced by organizations
today that were unheard of a generation ago.

READ THE REPORT

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The reality is that the most commonly measured

workforce metrics do very little to help HR professionals
and business leaders achieve real insight into
maximizing their human capital investment. To make
better business decisions regarding their workforce,
leaders need to see the connections in their workforce
data and examine comprehensive workforce topics.
In order to achieve true business impact, employers
should be measuring five critical performance
indicatorsor workforce topics, that will positively
affect their organizations productivity and profitability:
1. Critical Talent Retention

1. Critical Talent Retention

The most measured and prevalent metric throughout
corporate Americaturnoveris one that provides
very little insight for an organization to make sound
business decisions. In fact, no organization can claim to
have a turnover problem as turnover is not a specific
problem, and there exists many types of turnover.
Indeed, employee turnover can also be healthy for
organizations as it helps to bring new people with fresh
ideas and diverse experience to the organization.
Instead of focusing on turnover rates, every organization
should be ensuring that it is retaining its critical top talent.

2. Recruiting Effectiveness
3. Productivity
4. Compensation and Pay Equity
5. Performance Management
HR Metrics, including time to hire or employee
turnover, simply do not get to the heart of how people
(and people strategies) are affecting organizations. To
glean these deeper insights, HR leaders need to focus
on related metrics that highlight the connections that
drive business performance and productivity.

We live in a knowledge-based economy. The skills

of an organizations top talent represent a vital
competitive advantage in the marketplace. According
to research done by Cornerstone OnDemand, a global
leader of cloud-based talent management software
solutions, 21 million Americans are planning to change
jobs in 2012 alone. The competition for top talent, then
remains a constant in both good and bad economic
times. Every organization must ensure they are doing
all they can to ensure they retain their top talent,
so they do not go elsewhere. Mark Murphy, CEO of
executive education firm Leadership IQ and author of
The Deadly Sins of Employee Retention, calculates that
when the labor market rebounds companies that did
not stay focused on retaining top talent will see their
turnover rates go from 5 percent to 50 percent, and it
will happen overnight.
To be effective, every HR leader must be aware of
whether their top talent and the vitally important
workers in their organization are resigning, or at risk of
resigning, at a greater rate than less crucial employees.

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DID YOU KNOW?

The average cost-per-hire for the
2010-11 recruiting season was $5,054.
In general, there is a correlation
between cost-per-hire and size of
company: The larger the organization,
the lower its cost-per-hire.
To uncover this critical insight, HR should begin by
measuring who is leaving the organization, and related
factors such as engagement, career development and
compensation. Specific metrics would include:
Resignation Rate: The number of employees
who have resigned in a given period,
expressed as a percentage of the entire
workforce.
Resignation Rate of Top Performers: The
number of employees with top performance
ratings who resigned, expressed as a
percentage of the entire workforce.
Promotion Rate and Promotion Wait Time:
The ratio of employees who were promoted,
and the average time (in years) between
promotions.
Engagement Index: The overall level of
engagement of employees in the organization.
Market Compensation Ratio: The ratio
showing average direct compensation of
employees compared to the average for
corresponding market targets.
Additionally, to better understand knowledge and
skill erosion, HR leaders should know how the overall
tenure of the organization is trending.

The average amount of time from

interview to offer is 22.5 days.
Source: The National Association of Colleges and Employers

2. Recruiting Effectiveness
The flip side of retaining critical workers is ensuring that
an organizations recruiting strategies are attracting
new talent of the same caliber. Historically, recruiting
metrics have focused purely on time to fill, which by
itself fails to give a true measure of the basic goal of
recruitingto ensure their organization has the best
people to achieve its business goals. To adequately
understand whether this goal is being met, HR leaders
should look beyond how fast positions are filled to
understand business-impact shortfalls in capacity,
whether new hires stay on with the organization,
and whether their performance exceeds or lags
that of other employees. Ultimately, the result of
recruiting initiatives should consistently increase the
organizations performance through improved talent.
To understand the true recruiting effectiveness,
organizations should look at time to fill, but also look
to understand quality of hire and business capacity
measures. Specific metrics would include:
Vacancy Rate: The average number of vacant
positions as a percentage of all positions in
the company.
First Year Turnover Rate: The ratio of new
hires that left the organization within the first
year compared to the total number of new
hires.
New Hire Performance: The ratio of new
hires whose performance ratings are above
the lowest ranking, compared to all new
hires.
Time to Fill: The average number of days
from when a position was opened until a
new hire accepts an offer of employment.

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3. Productivity
According to a survey conducted by the Society of
Human Resource Management (SHRM), the total cost of
a workforce represents nearly 70 percent of operating
expenses for Fortune 500 companies. Without
question, if an organization were considering a capital
investment that represented almost 70 percent of its
operating expenses, that investment would be subject
to intense analytic scrutiny and would be measured
carefully to ensure that it created a real return-oninvestment (ROI). Therefore, the ROI of human capital
should be a core metric for every HR leader, and
to understand the ROI of human capital requires
organizations to measure the productivity of their
workforce in financial terms.
To begin measuring productivity, the financial
impact of human capital, and to see the connection
to business measures of human capital, three core
metrics are essential:
Return on Human Capital Investment: The
ratio of profit compared to total workforce
costs.
Revenue per Full-Time Equivalent (FTE): The
average revenue per full-time employee.
Profit per FTE: The average operating profit a
company generates per full-time employee.
Employers might also consider measuring productivity
on both an annual and a quarterly basis, and comparing
these figures to the national averages that are published
by the U.S. Bureau of Labor Statistics, or other benchmark statistics. Productivity for the nonfarm business
sector, for example, decreased at a 0.5 percent annual
rate in 2012, while it increased 0.5 percent when
comparing the first quarter of 2011 to the first quarter of
2012. Knowing how an organization compares to these
national productivity statistics can provide the necessary
context to understand your organizations overall
performance.

4. Compensation and
Pay Equity
With compensation contributing to the largest share
of the total cost of a workforce, it is imperative that
HR leaders give considerable focus to make certain
their incentive programs are competitive and aligned
with business goals. Traditionally, compensation
strategy and budgets have been defined centrally, but
allocations and decisions are distributed throughout
the organization. This can create a disconnect
between strategy and execution, as it is difficult to
obtain visibility into how distributed compensations
decisions align to corporate goals. Are top performers
differentiated? Are compensation targets being
adhered to? Is compensation allowing an organization
to be competitive in the labor market? Clearly, HR
leaders need to know the answers to all of these
questions, and be able to relate performance, roles and
compensation to understand how it properly rewards
and creates incentive for the organization. Specific
metrics recommended for every organization include:
Performance-Based Pay Differential:
The ratio of direct compensation for
high performers compared to the direct
compensation of the non-high performing
employees.
Median Performance and Pay Level: The
mid-point, or median, of all performance
ratings and pay levels, or grades. It is critical
that these can be compared for different
employee populations, and their distribution
can be visualized.
Direct Compensation and Direct
Compensation Increases: Total direct
compensation (salary, bonus, incentives,
and allowances) and the average increase in
direct compensation. It is critical that these
can be compared to performance ratings for
different roles and locations.

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AN INTERESTING FINDING
Only about 20 percent of organizations use
HR metrics that measure the actual impact of
training on performance.
Source: The Hackett Group

To ensure the proper alignment among pay, position

and performance, it is important that these metrics
are understood at more than just a corporate level.
Averages can hide extreme outliers, so it is critical to
look at locations, roles and corporate teams to ensure
true compensation equity. It can also help to track
the national averages published by the U.S. Bureau
of Labor Statistics or other benchmark statistics. For
example, during the first quarter of 2012, median
weekly earnings for full-time wage and salary workers
rose 1.9 percent to $769 (or just under $40,000 per
year).

5. Performance Management
According to McKinsey research, companies that
scored in the top third of its talent management
capabilities survey averaged 39 percent more profit
per employee than companies in the bottom third.
Performance management is a core pillar of talent
managementbut organizations cannot hope to
manage and improve performance, if they do not
possess the analytics to understand performance in
their organization. Are performance reviews being
completed? Are performance ratings consistent and
properly distributed? Who are the top talent and critical
employees? How is performance related to turnover
and compensation? Indeed, performance can be one
of the most important measures of the workforce, but
its true value comes when it can be compared to other
critical measures and the connections are understood.
To begin seeing those connections, organizations
should focus on the following critical performance
metrics:

Performance Appraisal Participation Rate:

The percentage of employees with a completed
performance appraisal and rating.
Top Talent: Who are the organizations top
performers and how many of them are there?
Low and High Performer Turnover: The ratio
of low and high performers who are leaving
the organization relative to everyone else
leaving the organization.
Performance Rating Distribution: How
performance ratings are distributed
throughout the organization. It is critical
this can be compared to compensation and
promotion data, and examined for different
populations in the organization.
By implementing workforce analytics related to these
five critical performance indicators and discovering
the connections inherent in these workforce topics,
HR leaders can arm themselves with the intelligence
necessary to understand their companys core people and
performance issues. Equally important, by moving away
from individual metrics to comprehensive workforce
topics, they can understand the contributing factors
that are impacting their organization and take the right
action to implement employee programs that will
enable them to outperform their competition.

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ACCORDING TO THE VISIER 2012

SURVEY OF EMPLOYERS
WORKFORCE ANALYTICS
PRACTICES, PREFERENCES
& PLANS
Participants ranked their top workforce
concerns for the coming 12 months as follows:
#1 Performance
#2 Cost control
#3 Skill growth
#4 Engagement
#5 Growth tied with retention
#6 Diversity tied with legal compliance
#7 Workforce reductions
#8 Reorganization tied

with vacancies
#9 Retirements

According to the Visier 2012 Survey of Employers:

Workforce Analytics Practices, Preferences & Plans,
more than three-quarters of the organizations that
participated responded that they currently use some
form of workforce analytics system to manage and
report workforce data, however:
34 percent indicated that they were
dissatisfied or very dissatisfied with their
current management of workforce analytics;

Source: Visier WFA Usage Survey 2012

34 percent planned to moderately or

significantly increase their investment in
workforce analytics;
30 percent said they would benefit from
easier-to-use analytics tools, and;

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When survey respondents were asked to specify

the areas in which they would like to expand their
workforce analytics capabilities, participants selected:

23 percent felt they would benefit from an

improved ability to interpret and present
workforce data.

53% Workforce
planning

Clearly, the survey indicates that there is an acceptance

of using workforce analytics in organizations to
manage and report HR data. However, the survey also
revealed that there is room for greater improvements
in the solutions they are selecting to manage and
report their workforce analytics.

43% Standardizing
HR dashboards/
reports
38% Delivering
workforce
analytics to
executives
37% Delivering
workforce
analytics to Line
Managers/
business leaders
26% Predictive
analysis

Source: Visier WFA Usage Survey, 2012

The challenges in todays business environment require

new approaches to remain competitive in an evershrinking world of global competition. Never have the
challenges faced by HR leaders been more diverse, yet
critical, to ensure the success of the business strategy.
To implement the necessary workforce strategies,
and to make confident decisions demanded in todays
business environment, HR leaders require better,
more insightful, and trusted information. This requires
leaders to be change agents to champion business,
process and technology innovation that can give them
the competitive edge. Change is the only constant
in todays business world. Workforce analytics is the
insight to make the right change.

50% Standardizing
HR metrics

24% More powerful

tools for HR
analysts
15% Unifying
different
workforce
analytics
solutions
13% Replacing/
upgrading
existing
analytics
systems
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About Visier
Workforce Analytics
Visier Workforce Analytics is a cloud-based,
comprehensive analytics application designed for
managers and HR professionals to easily obtain insights
into their organizations performance and improve
the return on their most important investmenttheir
human capital.
Visier is designed to help managers to reduce costs,
improve productivity, attract and retain top talent
and implement a workforce strategy that supports
their business objectives. Visier Workforce Analytics
is an intuitive, predictive and interactive solution that
uncovers key links between people and business
outcomes. By answering the most critical and
fundamental business questions, Visier leads the
managers and HR professionals through a best-practice
analysis that helps to predict and plan for their future
needs.
For more information, please visit www.visier.com

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WANT TO LEARN MORE?

Contact us at 1-888-277-9331 or [email protected]
Request more information at http://www.visier.com and see first hand how Visier Workforce
Analytics can help you make better decisions for your workforcestarting today.

Visier Inc. | +1-888-277-9331 | [email protected] | www.visier.com

2012 Visier Inc. All rights reserved. Visier and the Visier logo are registered trademarks of Visier Inc.
All other brand and product names are trademarks or registered trademarks of their respective holders.

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