We all know just how important your finances are when it comes to running your business.
Endless cost analysis, keeping track of a healthy cashflow and monitoring your KPIs are all part and parcel of the job.
No matter how important your financial figures are, you’ll also need to pay attention to your ‘soft’ KPIs – that is, your team.
People metrics are an integral part of understanding your figures. If you’re not sure what this means, we’ll happily explain.
What are people metrics?
People metrics are a way of monitoring and measuring data on the people in your business. From sick days to training and even staff turnover, all of these factors will impact your business financially – so it’s essential to know how to manage them.
This way, you’ll be able to strengthen your internal processes and hopefully minimise some costs along the way.
How to measure people metrics (and why)
There are several major metrics that you, as a business owner, should be monitoring – not least because of the cost of replacing an employee should they leave.
According to the British Business Bank, the average cost for the first year of hiring a new employee is around £62,890. This figure doesn’t just include their salary. It also covers:
- recruitment costs
- pension contributions
- employer’s National Insurance contributions (NICs)
- training costs
- office space and equipment
- staff morale (Christmas parties, perks etc)
- any potential bonus scheme
- sick pay.
But it’s not just about the upfront costs: proper management of your people metrics can also help you to improve morale (which in turn impacts productivity), as well as boosting your reputation and supporting your recruitment efforts.
So here are the top five metrics, how to calculate them and ways to prevent them from costing your business further.
The higher a business’s staff turnover, the more it’ll affect your bottom line. When employees do leave, you should analyse the reasons for the turnover and how you can minimise it.
One of the main calculation methods used for staff turnover is:
Number of leavers per year / average number of employees a year x 100.
Now, it’s unrealistic to think that your employees won’t feel under the weather from time to time. It’s a natural part of life. You’ll need to monitor absences carefully (in tandem with your HR department).
A useful formula for calculating the cost of staff sick days is as follows:
Sick days in one month / (average # employees per month) x (# workdays) x 100.
Although your employees cannot help being genuinely sick, there are steps you can take to ensure no one abuses the system and you don’t suffer financially.
One of the best ways to measure employee absence is by using the Bradford Factor. Commonly used by HR departments, the Bradford Factor uses numbers to represent unplanned employee absences during the working year and is calculated as such:
E² x D = Bradford Factor
- E = the number of instances of absence
- D = the total number of days absent in a 52-week period.
If you have an employee, or employees, rating high on the Bradford Factor, we’ll include this in a financial report which you can share with your HR department. This way, you’ll be able to find the best course of action to help improve your business.
Staff satisfaction surveys
Staff satisfaction surveys are an effective way of measuring your team’s happiness in the workplace.
Job satisfaction can have a substantial impact on your business as a whole. If a team member is unhappy in their work, this might impact their quality of work and customer service, and in turn, your bottom line.
Unsatisfied staff might also decide to leave, creating extra recruitment costs.
By using staff satisfaction surveys, you’ll gain further insight into the effects an unhappy team can have on your finances.
We’re here to listen
There’s more to people metrics than meets the eye, so it’s essential to have a firm understanding of how they can affect your business.
At Spark, we help our clients to stay on top of these all-important metrics, providing regular information on them as part of their regular financial reports.
We can show you how each of your people metrics affects your bottom line, giving you the tools you and your HR department need to tighten your operations and address any issues.
Get in touch to talk to one of our team.