57

Revenue per employee (RPE)

Strategic perspective
Employee perspective
Key performance question this indicator helps to answer
How productive are our employees?
WHY IS THIS INDICATOR IMPORTANT?
Employees are not only our most important assets but also usually our most expensive
assets. Companies need to make sure that they are utilising their employees efficiently.
In general, companies aim to deliver more revenue with fewer employees. This would
demonstrate that a company is finding ways to squeeze more revenue out of each of its
workers. Therefore, by putting revenues in relation to the number of employees you
derive an important ratio of productivity.
Because labour needs vary widely between industries, the revenue per employee (RPE)
KPI is most useful when compared with other similar companies in the same industry.
Tracking the RPE ratio over time will provide managers with an insight into how well
they are able to improve productivity per employee. Comparing RPE between
companies allows investors and managers to understand the relative productivity of
companies.
HOW DO I MEASURE IT?
Data collection method
The data for the RPE KPI are easily collected from the financial statements of a
company or the financial management system which will give you revenue data. The
number of employees is usually readily available it might need a little adjustment
because you want to include full-time-equivalent employee numbers as part-time
positions can inflate the employee numbers and skew the ratio.
Formula
RPE is calculated by dividing a firms revenue by its total number of workers:

Where number of employees are full-time equivalent.

Frequency
It makes sense to align the measurement of RPE with the calculation of revenue figures,
with usually happens quarterly.
Source of the data
The data for this KPI come straight from the financial and HR systems.
COST/EFFORT IN COLLECTING THE DATA
The costs for collecting RPE are minimal because all the data are readily available.
TARGET SETTING/BENCHMARKS
Ideally, a company wants the highest possible RPE because the higher the number, the
more efficiently the company uses its employees.
Even though there are no general rules about what constitutes a good level of RPE, there
are some benchmarks available. To create benchmarks in your industry you can go to
any business database and look up revenue numbers for companies (e.g. fact sheets for
companies on www.hoovers.com). The employee numbers are often included, but if
not they can usually be found on a company website.
Here are some RPE numbers for different companies:

As benchmarks go, smaller companies usually average around $100,000 per employee
while Fortune 500 companies average around $300,000 per employee.
EXAMPLE
Lets look at the Software & Service Industry and compare Google Inc.
(GOOG) with Convergys Corp. (CVG), both listed in the S&P 500. Google
with its 20,164 employees generates annual revenue per employee of
$1,093,892 and annual profit per employee of $214,768. Convergys Corp.
(CVG) with its 75,000 employees, on the other hand, is only able to generate
annual revenue per employee of $36,855 and an annual profit per employee
of $1,344.
TIPS/WARNINGS
Taking the logic of this KPI slightly further, you could replace revenue with profits and
employee numbers with payroll to create an even more meaningful internal indicator of
Profit / Payroll ratio.
However, the problem is that the numbers for payroll are more difficult to obtain for
your competitors.
Another popular variation of RPE is a salesperson performance ratio of sales per
salesperson.
In Working With Emotional Intelligence, Daniel Goleman quotes a study of 44 Fortune
500 firms showing that the top 10% of salespeople had $6.7 million in sales compared to
the average salespersons $3 million. So, the best salespeople were over twice as
effective.

REFERENCES
www.investinganswers.com/term/revenue-employee-918
www.jbryanscott.com/2009/02/07/nasdaq-100-revenue-per-employee/
www.gazelles.com/columns/Revenue%20per%20Employee.pdf
www.cnbc.com/id/30888743/The_S_P_500_s_Leanest_Companies

58
Employee satisfaction index
Strategic perspective
Employee perspective
Key performance question this indicator helps to answer
To what extent are our employees happy in their jobs?
WHY IS THIS INDICATOR IMPORTANT?
Along with customer satisfaction (see KPI on page 97), employee satisfaction is perhaps
the oldest and most established of all non-financial indicators. Put simply, employee
satisfaction is the terminology used to describe whether employees are happy and
contented and fulfilling their desires and needs at work.
Few organisations do not measure employee satisfaction in some form, although an
increasing number prefer the more sophisticated measure of employee engagement (see
KPI on page 269). It has long been understood, and supported with convincing
empirical evidence, that employee satisfaction is a powerful leading indicator of
customer satisfaction, which is in itself a leading indicator of profit: indeed, the wellknown service profit chain is essentially based on this employeecustomerfinancial
causal linkage showing how happy employees deliver a better customer service, which in
turn improves customer loyalty and financial performance.
There are innumerable case studies on organisations that have successfully deployed an
employee satisfaction solution and there are equally large numbers of consultants
offering such solutions. Moreover, the measure is typically found with an organisations
balanced scorecard (which captures both financial and non-financial goals and

measures) or whatever performance management/measurement framework is being

used.
HOW DO I MEASURE IT?
Data collection method
Employee satisfaction (sometimes referred to as climate) surveys can be conducted by
an external consultancy or research organisation or carried out by an in-house team,
often from Human Resources.
Employee satisfaction is typically captured through some form of surveying instrument
that guarantees anonymity today usually online but sometimes still paper-based,
telephone-based or face-to-face with answers recorded using a Likert scale (from 1 =
very dissatisfied to 5 = very satisfied, or 1 = strongly disagree to 5 = strongly agree, or
some version thereof). Focus groups of employees are often used to provide a more
qualitative assessment of employee opinion: these might be to support or elaborate on
the findings from the survey or might be a spot employee satisfaction health
check/temperature check, which serves as a quick checklist of how employees currently
feel about the company and the work that they are doing.
Employee satisfaction surveys will normally cover the key areas impacting on the staff
experience. These are likely to include areas such as:

Leadership and direction

Communications

Local line management

Staff development opportunities

Company working culture

Facilities and environment

Conditions of service

Formula
There are many ways to measure employee satisfaction, but a simple Likert-scale
approach would look something like this:
1. Strongly disagree
2. Disagree

3. Undecided
4. Agree
5. Strongly agree
Then, add up the number of questions with answers against each response (1,2,3,4,5).
Identify total point of each response.
Identify total number of questions answered.

Each particular question and score will be analysed and reported in the form of mean
scores of satisfaction and the percentage of staff satisfied, examined across different
classifications of staff, e.g. age, level of responsibility, department, location etc.
Additional statistical analysis using correlations, regressions and Chaid analysis can be
carried out to identify issues which are driving satisfaction and loyalty, and the relative
impact of these issues on satisfaction.
Frequency
Employee satisfaction is normally captured through an annual survey. However, it
might be more useful to administer the survey to 10% of the employee base 10 times a
year as this will ensure that employee satisfaction scores remain current and show the
effect of any interventions launched to remedy areas of employee discontent unearthed
as part of the surveying process.
Source of the data
The employee base.
COST/EFFORT IN COLLECTING THE DATA
Employee satisfaction surveys are reasonably cheap to administer, irrespective of
whether they are conducted internally or externally, as they can be carried out online
and the employee does not usually need to spend too long answering the questions. They
also do not require significant effort to analyse.
TARGET SETTING/BENCHMARKS
Most external bodies that offer employee satisfaction survey solutions will have
performance benchmarks based on previous client scores these are typically available
universally (across all sectors or industries) or are sector/industry specific and even go

down to function levels. An organisation should use an initial baseline score to set
improvement targets year-on-year or period-on-period.
EXAMPLE
A leading North American financial services organisation had been running
an employee satisfaction survey for about 10 years (up until early in the last
decade). The survey was carried out every second year and consisted of
about 90 questions. This gave an overall employee satisfaction score and
feedback about the quality of leadership and management. However, we
found that the survey was too long and that we were trying to hold
managers accountable for everything on the survey when much of it was to
do with cultural issues, for example, which may well have been outside the
managers direct control, says the HR Vice President.
Consequently, this survey was refashioned into two separate surveys. The
first, called ViewPoint, captures employees views of working in their own
department, and asks for ratings on statements such as my department is a
great place to work, my department provides high-quality service to its
customers and I have a good understanding of my current job
responsibilities. A 15 scale is used, again from strongly disagree to
strongly agree. Importantly, departmental heads can be held responsible
for these scores.
A second survey was designed that asked questions around engagement.
This focuses on areas such as the employees willingness to recommend the
organisation to other people as a company to work for and willingness to
recommend the companys products to potential customers.
TIPS/WARNINGS
A measure of the success of an employee satisfaction survey is the percentage rate of
employee involvement. The response is normally higher when the employee knows that
their opinions count and can see action as a result of the survey. Simply put, the survey
has to trigger remedial action when low satisfaction levels are found. If nothing
happens, it is unlikely that employees will fill in the next survey. It is also critical that
the anonymity of the employee is guaranteed, which is one reason why an external
surveying body is often preferred to an in-house deployment.
For trending purposes, it is important to keep questions consistent over a multi-year
period, although of course questions that are found to be poorly understood, ambiguous
or that provide little information of value should be replaced.

As cited earlier, many organisations are moving more towards employee engagement
surveys, believing that employee satisfaction itself does not provide a rich enough
understanding of the employees connection to the organisation. An employee might be
satisfied because the job is easy, well-paid, etc. They may not give discretionary effort
in their day-to-day work.
REFERENCES
Best
Practices
in
Customer
and
Managementwww.benchmarkingreports.com

Employee

Satisfaction

Derek R. Allen and Morris Wilburn, Linking Customer and Employee Satisfaction to
the Bottom Line, ASQ Quality Press, Milwaukee, WI, 2002
For
a
list
of
books
on
employee
satisfaction
see www.humanresources.hrvinet.com/employee-satisfaction-books/

59
Employee engagement level
Strategic perspective
Employee perspective
Key performance question this indicator helps to answer
To what extent are our employees committed to delivering to the vision and
mission of the organisation?
WHY IS THIS INDICATOR IMPORTANT?
The level of employee engagement is one of the most important indicators of the
likelihood of an organisation succeeding financially and delivering to its vision and
mission statements.
Crucially, an employee engagement survey differs from the traditional employee
satisfaction surveying instruments that have been used extensively by organisations for
decades.
Indeed, engagement surveys emerged when leading organisations began to realise that
satisfaction does not tell the whole employee story. An employee might be satisfied

because he or she has an easy job, is not stretched (and doesnt want to be), is paid well
and receives an excellent benefits package. This does not necessarily mean that he or she
is committed to delivering to the vision/mission. The most dissatisfied employees might
well be the ones that are performance-oriented and really want to do all that they can to
deliver to the organisational vision and mission.
Employee engagement surveys emerged as a way not of measuring mere satisfaction
(which will likely still be measured but as a subordinate measure to engagement) but as
a mechanism for assessing the contribution of the employee to performance,
productivity and ultimately sustainable financial results. Indeed, in a well-formulated
engagement survey, satisfaction is not a focus area.
Yet for all the discussion around whether or not employees are engaged, a critical
question is what tangible difference an engaged employee makes to performance over
one that is disengaged (I explain the categories below in the Formula section). The
research findings are compelling. The US-headquartered Gallup Organisation (which
has what we can safely describe as the most mature and widely used of all the employee
engagement surveys deployed today, although this is not to say that we necessarily
recommend Gallup over the alternatives such as Towers Watson and Blessing White)
estimates that fully 73% of North American employees are disengaged from the
organisation for which they work (according to 2007 results, and we can expect similar
findings from other geographical regions). This means that they either just turn up at
work and go through the motions or, worse, do all they can to do as little as they can.
Gallup estimates that this disengagement collectively costs the US economy up to $350
billion per year in lost productivity, including absence, illness and other problems.
The bottom line is that if employees are disengaged the organisation will almost
certainly be haemorrhaging money, as well as losing key talent.
Moreover, research by the leading global HR consultancy Towers Watson found that
companies with highly engaged employees generate more marketplace power than their
competitors. Towers Watson analysed three years of employee data for 40 global
companies. The firm separated these organisations into high-engagement and lowengagement categories according to their employee engagement survey scores. The data
showed that over a period of 36 months those companies with a highly engaged
employee population turned in significantly better financial performance (a 5.75%
difference in operating margins and a 3.44% difference in net profit) than did lowengagement workplaces. In a separate analysis Towers Watson found that organisations
that consistently show higher engagement levels than average organisations produced
shareholder returns 9.3% higher than the returns for the S&P 500 Index from 2002
through 2006.

HOW DO I MEASURE IT?

Data collection method
The data are derived from online employee surveys.
Formula
The most famous employee engagement survey is probably the one devised and
deployed by the Gallup Organisation, although alternatives should be considered.
Gallups survey consists of just 12 questions. Gallup is interested in uncovering those
behaviours or characteristics that will make a quantifiable difference to performance in
the workplace.
Employees answer Gallups questions, through straight yes/no responses in order to
generate a score (www.gallup.com).
Based on the responses, organisations can see the percentage of employees that are
actively engaged, engaged, disengaged or actively disengaged and from the Gallup
analysis can get insights into the likely financial consequences.
Frequency
Normally done annually. However, in order to make data more actionable it is better
practice to sample the workforce, so a subset of them is surveyed every month. This
allows organisations to collect the full data set over a year. It means that individuals
receive a survey only once a year but the organisation will have valid data available every
month, which helps with spotting trends and overcoming bias.
Source of the data
The data are drawn from the employee engagement survey that is distributed to all
employees.
COST/EFFORT IN COLLECTING THE DATA
Costs and effort for collecting employee engagement levels can be very high. As with any
survey-type data collection, the costs can be reduced by minimising the logistics and the
administrative costs of collecting and analysing the data. Online tools and electronic
data collection and analysis can bring costs down considerably.
TARGET SETTING/BENCHMARKS
Employee engagement surveys are generally externally administered and therefore
providers typically have extensive databases of benchmarks of best practice

performance from which the client organisation can identify and work towards their
own targets.
EXAMPLE
The Toronto, Canada headquartered Scotiabank was a pioneer in using an
employee engagement survey (at the turn of the century). Historically, the
bank carried out an employee satisfaction survey that consisted of about 90
questions and provided an overall employee satisfaction score. However,
on recognising the limitations, this survey was redesigned to capture
measures of whether the employee is actively engaged in working for the
bank, rather than just passively satisfied.
So the engagement survey focused on areas such as the employees
willingness to recommend the bank to other people as a company to work
for and willingness to recommend Scotiabank products to potential
customers. The employee engagement survey is focused on understanding
what drives performance and measures commitment, loyalty, trust and
those behavioural traits which inspire employees to perform to their
ultimate capacity.
TIPS/WARNINGS
Employee engagement surveys should be short and focused, and the external provider
should be able to demonstrate a link between high engagement scores and superior
financial performance. Its also important to be able to drill down and see which parts of
the organisation have large numbers of disengaged employees so that corrective actions
can be launched. A single overall measure of engagement is not enough to drive
performance forward. Also, the employee engagement survey should trigger behavioural
change. If nothing changes as a result of the findings then it will only further demotivate
a disengaged workforce.
REFERENCES
www.gallup.com
www.towersperrin.com
www.blessingwhite.com
Marsh Makhijani and James Creelman, Creating Engaged Employees: The Role of
Employee Engagement Surveys, OTI Indonesia, 2010. www.otiinternational.com
60

Staff advocacy score

Strategic perspective
Employee perspective
Key performance question this indicator helps to answer
To what extent are our employees advocates of our business?
WHY IS THIS INDICATOR IMPORTANT?
Having employees that believe in your business is important as this shines through in
the way they interact with customers and deliver operations. Whats more, employees
that are advocates of your business refer your company to their friends and family
members, not only as potential customers but also as a potential employer.
Having your own employees on your side is critical in an era where personal views
spread like wildfire through the social media and online universe. In a world where we
compete for the best talent and where professionals connect through social media
platforms such as LinkedIn, it becomes very apparent whether a business is a good
employer or not.
Companies can basically look at their employees as internal customers with their own
wants and needs. Similarly to the idea of the customer KPI net promoter score (NPS)
(see Customer perspective), a staff advocacy score can be derived just by asking one
question: How likely is it that you would recommend this company as an employer to a
friend?
Understanding to what extent employees are advocates of the business they are working
for is therefore an important indicator for understanding not only staff satisfaction and
staff loyalty but the potential implications it has for your brand and the ability to attract
new talent.
Based on responses to this single-question approach, organisations can group their
employees into the following three categories:

Advocates

Passives

Detractors

The staff advocacy index is therefore a simple and direct metric that holds companies
accountable for how they treat their own employees.
HOW DO I MEASURE IT?
Data collection method
The staff advocacy score is collected using a survey, which can be mail-based or
conducted through the internet or phone.
Formula
Using a 0 to 10 scale, an organisation can calculate its staff advocacy score by taking the
percentage of advocates and subtracting the percentage of detractors.
Advocates (score 910) are loyal and enthusiastic employees who will promote you as a
potential employer.
Passives (score 78) are satisfied but unenthusiastic employees who are vulnerable to
competitive offerings.
Detractors (score 06) are unhappy employees who can damage your brand and impede
growth through negative word-of-mouth.
Staff advocacy score = (% of employees that are advocates) (% of employees that are
detractors)
Frequency
Most companies collect their staff advocacy data annually. However, it is much better to
create smaller sets of surveys that look at a sample of employees (e.g. 10%). This way,
data can be collected on e.g. a monthly basis to provide important trend information. It
means that over a year a company will have surveyed everyone but on a monthly basis it
gets data to identify trends throughout the year.
Source of the data
Data will come from surveys of your employees.
COSTS/EFFORT IN COLLECTING THE DATA
The costs for collecting data for the staff advocacy score can be high, especially if an
external surveying company is used to design, collect, analyse and report the data.
However, measuring the staff advocacy score is a lot cheaper compared to more complex
employee surveys, which are much more common practice.

Costs for the staff advocacy score also tend to spiral upwards for hard-copy surveys that
have to be printed, distributed and manually transferred into IT systems for analysis.
The more automated the data collection is, the cheaper it will become.
TARGET SETTING/BENCHMARKS
There are few existing benchmarks for the staff advocacy score to go by, so the best bet
is to look at some of the customer scores for the net promoter score. Here, good
companies can score between 30% and 90%.
EXAMPLE
Lets take this example of a company that employs 1,000 people. The staff
advocacy survey returned 976 responses with the following breakdown of
scores:

The staff advocacy index is therefore:

Staff advocacy score = (% of employees that are advocates) (% of
employees that are detractors)

Staff advocacy score 36.8% 34.4% 2.4

TIPS/WARNINGS
The staff advocacy score will give a nice, simple number; however, it wont give you the
reasons why employees are happy or unhappy. A very powerful supplement to the
single-question survey is a set of open questions along the following lines:

What do you particularly like about being employed here?

What or which areas could be improved?

This way, the company will get insight not only into how many employees are advocates,
neutrals or detractors but also into the areas that employees value or want to see
improved.
REFERENCES
www.netpromoter.com/
www.satmetrix.com (2008)
Fred Reicheld, The Ultimate Question 2.0: How Net Promoter Companies Thrive in a
Customer Driven World, HBR Press, Boston, MA, 2010
www.mattberent.net/Netpromoter_-_AAPOR.pdf
61
Employee churn rate
Strategic perspective
Employee perspective
Key performance question this indicator helps to answer
How well are we retaining our staff?

WHY IS THIS INDICATOR IMPORTANT?

Attracting, recruiting, training and developing talented staff takes time and costs
money. This is why you want to make sure that once you have found and trained
employees, you dont lose them too quickly.
Replacing employees is an expensive business. There is the cost of recruiting (in 2010
the US-based Society for Human Resource Management reported that it costs an
average of $7,123 to hire an employee) as well as training costs and, even for the best
educated or most professionally qualified staff, a cost associated with their getting up to
speed with the way the company works and their becoming optimally productive in their
new position There is also a sometimes sizeable, if hidden, cost associated with an
employee leaving an organisation and taking with them a large amount of know-how
that might, in some situations, take years to replace if at all.
Not surprisingly, therefore, organisations have become focused on retaining employees
rather than see them walk out the door.
Consequently, a measure of employee churn rate or employee turnover rate is used to
gain an insight into how many of your employees your business is losing in a given time
period in comparison to the overall number of employees.
HOW DO I MEASURE IT?
Data collection method
Analysis of HR records.
Formula
Most organisations simply track their employee churn using this simple formula:

The total figure includes all leavers, even people who left involuntarily due to dismissal,
redundancy or retirement.
Frequency
Employee churn rates can be measured to any period. It is not uncommon for the data
to be collected monthly and analysed by the HR team. However, it might be reported to
the executive team annually as the figure can then be considered in the light of an
understanding of wider economic, competitive and other influences that might influence

the figure and explain any significant deviation from the previous year, such as changes
to the economic landscape.
Source of the data
HR records.
COST/EFFORT IN COLLECTING THE DATA
The costs and effort to calculate employee churn rate are low as the data should be
readily available in most companies human resources systems. If manual data
collection is required (which should be rare), costs and efforts can increase quickly.
TARGET SETTING/BENCHMARKS
It is impossible to set a meaningful employee turnover rate that can be compared across
industries and sectors, as turnover rates vary considerably. Typically the highest rates
are found in retailing, hotels, catering and leisure, call centres and among other lowerpaid private sector services groups. Turnover levels also vary from region to region. The
highest rates are found where unemployment is lowest and where it is unproblematic for
people to secure desirable alternative employment. Furthermore, across the board,
turnover rates fall sharply in an economic downturn.
That said, there are many organisations that can offer industry- or sector-specific data
on employee turnover rates. The UKs Chartered Institute of Personnel and
Development (CIPD) has an annual survey of employee turnover rates across industries
and sectors (its 2010 survey found the overall turnover rate in the UK to be 13.5%), and
in the US the Society for Human Resource Management holds such information. Such
benchmark data provide valuable insights into how well other similar organisations are
retaining their staff when faced with similar economic and other challenges.
EXAMPLE
Consider this example for a monthly turnover rate and how this aggregates
up to an annual rate.
Starting with the formula for monthly turnover:
Five people leave in the month and the total number of employees is 250.
This makes a monthly turnover rate of 2%.

The annual employee turnover is then calculated by adding up the monthly

turnover figures or by recalculating it. In this example and for simplicity, if
we assume that each month 5 people leave over the 12-month period, this
gives us an annual employee turnover rate of 24%:

TIPS/WARNINGS
Given the problems regarding the cost of turnover cited at the beginning of this KPI
description, organisations might want to consider the employee turnover rate alongside
aligned metrics such as turnover cost (calculation of termination, new hire, vacancy and
learning curve costs).
It might also be worth considering replacing the straightforward employee turnover rate
calculation with one that reports on regretted turnover: that is, a measure of those
people who resigned whom the organisation would have liked to have kept. There will
always be departing employees that the organisation is happy to lose.
A useful insight is that in high-turnover industries in particular, a great deal of employee
turnover consists of people resigning or being dismissed in the first few months of
employment. Even when people stay for a year or more, it is often the case that their
decision to leave sooner rather than later is taken in the first weeks of employment. Poor
recruitment and selection decisions, on the part of both the employee and the employer,
are usually to blame, along with poorly designed or non-existent induction programmes.
Exit interviews, in which the departing employee is interviewed as to the reasons for
their leaving, can be a useful way to begin to understand the drivers of high turnover so
that appropriate interventions can be made.
REFERENCES
Employee
turnover
and
retention:
CIPD
factsheet,
2010.www.cipd.co.uk/subjects/hrpract/turnover/empturnretent.htm
http://blogs.payscale.com/compensation/2009/12/costs-of-employeeturnover.html
Society For Human Resource Management: www.shrm.org
62
Average employee tenure

July

Strategic perspective
Employee perspective
Key performance question this indicator helps to answer
To what extent do our employees stay loyal to our company?
WHY IS THIS INDICATOR IMPORTANT?
It is useful for companies to understand how long on average employees stay with their
organisation. Long average employee tenure usually indicates that employees are more
loyal and dedicated to the company. Long tenure will generally help to reduce
recruitment and training costs.
Aggregate tenure KPIs can give an insight into the satisfaction of employees with their
organisation. It can also be compared with average tenure for industry peers to assess
the companys competitive standing. The average employee tenure metric can be
calculated by total length of employment with the company or by length of employment
in each position occupied by the employee.
HOW DO I MEASURE IT?
Data collection method
The data for the average employee tenure KPI can be easily extracted from the HR
system, which should include the start date for each employee and the time in the
company.
Formula

Frequency
Average employee tenure should be measured on an annual or six-monthly basis.

Source of the data

The HR system.
COST/EFFORT IN COLLECTING THE DATA
The costs and effort for generating this KPI are low if the HR system is used to calculate
it. Alternatively, the data can be exported into a spreadsheet which can produce the data
with little effort.
TARGET SETTING/BENCHMARKS
Targets can be based on overall tenure figures. The latest figures (2010) from the US
Bureau of Labor Statistics show that the median number of years that wage and salary
workers stay with their current employer is 4.4. This tenure is 4.6 years for men (up
from 4.2 in 2008) and 4.2 for women (up from 3.9 in 2008). The data also show that
29% of wage and salary workers aged 16 and over had 10 years or more of tenure with
their current employer. However, there are industry differences and, for example, call
centres and the hospitality industry traditionally have lower tenure rates than others.
EXAMPLE
As an example calculation, lets take a look at this engineering company,
which employs 100 staff. The distribution of tenure follows the expected
bell curve (Figure 62.1), with: 4 people who have been there 1 year; 11
people who have been there 2 years; 19 people who have been there 3 years;
40 people who have been there 4 years; 20 people who have been there 5
years; 4 people who have been there 6 years; 1 person who has been there 8
years; and 1 person who has been there 10 years.

Average employee tenure is therefore calculated as

TIPS/WARNINGS
Long average employee tenure can also indicate that employees might be too
comfortable in their job and that maybe not enough fresh ideas and thinking are
brought into the company. This is why employee tenure needs to be viewed together
with employee churn to understand the situation in more detail.
Some employees return to the same employer after a spell at another company. In this
case you have two options: either start the counting again or add the previous years the
person has already spent with the company. Strategically, the latter makes sense.
REFERENCES
www.cipd.co.uk/hr-resources/factsheets/employee-turnoverretention.aspx
www.cio.com/article/153600/Average_CIO_Tenure_Slips_But_Still_More
_Than_Four_Years

63
Absenteeism Bradford factor
Strategic perspective
Employee perspective
Key performance question this indicator helps to answer
To what extent is unauthorised employee absenteeism a problem in our
business?
WHY IS THIS INDICATOR IMPORTANT?
When employees are absent from work it costs the business money and causes
disruptions. In terms of costs it is not just the direct costs that matter but the indirect

costs of absenteeism, such as the cost of replacing absent employees in critical positions
and possible overtime payments to these replacement workers, as well as the effect the
absenteeism has on workforce levels, medical aid costs, and group life and disability
premiums. It is estimated that the indirect cost of absenteeism can easily be 200% or
more of the direct cost of absenteeism. As a ball-park figure and depending on the
industry, worker absenteeism totals an average of between 5% and 9% of annual profits.
Absenteeism is traditionally defined as an employees unavailability for work. There are
different types of absenteeism: legal (such as public holidays), authorised (such as
approved holidays) and unauthorised. While legal and authorised absenteeism need to
be managed and costed, it is unauthorised absence that causes the majority of problems.
This is why most organisations strive to avoid unauthorised absenteeism and keep it to a
minimum.
There are many reasons why people take time off work. The main reasons include
personal illness, family issues and stress, as well as the attitude that people feel entitled
to a day off. Research finds that the level of disruption (and therefore costs to the
business) is particularly high when employees take frequent, short and unauthorised or
unplanned absences. This is where the Bradford factor comes in as a key performance
indicator that is used to help identify staff whose sickness absenteeism needs reviewing
in greater detail.
The Bradford calculation is believed to originate from the Bradford University of
Management which developed the KPI as a way of highlighting the disproportionate
level of disruption to an organisations performance that can be caused by persistent
short-term absence compared to single incidences of prolonged absence. The Bradford
factor measures an employees irregularity of attendance by combining measures of
absence frequency and duration and is designed to highlight employees who take many
short-term absences from work. It can be used to monitor trends in absence and
generate trigger points at which the absenteeism of individuals needs to be reviewed.
HOW DO I MEASURE IT?
Formula
The Bradford factor score can be calculated by looking at unplanned absence over a
period (often a year, but could be any time period) and counting the number of days
absent and multiplying them by the squared number of absence episodes.
Bradford factor = Dt Et Et
Dt = Total number of days of unplanned absence
Et = Total number of individual spells or episodes of absence

Frequency
In most cases it makes sense to calculate this Bradford factor annually (calendar year or
rolling 12 months), but some companies might want to measure it quarterly or even
monthly to identify issues in the short term and monitor progress against absenteeism
reduction targets.
Source of the data
Most HR systems will track absenteeism and break it down into unplanned or
unauthorised absenteeism. If this is not the case, sickness absenteeism can be used
instead.
COST/EFFORT IN COLLECTING THE DATA
The costs and effort of collecting the data depend on the level of available information. If
the HR system contains a good record and categorisation of the absenteeism data then
the costs of calculating the Bradford factor are small. The costs are reduced further if the
HR system allows you to calculate the score automatically (which quite a few do). The
costs will go up if manual data transfer and calculations are required.
TARGET SETTING/BENCHMARKS
Targets are best set in industry comparisons or in relation to your historic performance.
As an initial benchmark you might want to trigger reviews of individual absenteeism for
the following Bradford factors:
Annually: Bradford factor of 80 or higher
Quarterly: Bradford factor of 27 or higher
Monthly: Bradford factor of 12 or higher.
EXAMPLE
Lets look at a number of example calculations:
If you get a person taking 10 one-day unplanned absences in a given period
(say a quarter), then the Bradford factor would be: 1,000 = 10 10 10.
If you get a person taking one 10-day unplanned absence in a given period,
then the Bradford factor would be: 10 = 1 1 10.

If you get a person taking five two-day absences in a given period, the
Bradford factor would be: 250 = 5 5 10.
If you get a person taking two five-day absences in a given period, the
Bradford factor would be: 40 = 2 2 10.
In May 2001, Her Majestys Prison Service in the UK began using the
Bradford factor (which they call an attendance score) to identify staff with
high absenteeism due to short-term illness. They tied the factor to a sliding
scale of management action:

51 points in 6 months leads to a verbal warning;

201 points to a written warning, and

401 points to a final warning.

This provides a clear framework for tackling persistent short-term absence,

where a member of staff with an attendance score of 601 points in 12
months but with a final warning may be dismissed on the grounds of
unsatisfactory attendance. This approach has had a significant effect in
reducing short-term absence by an average of 0.4 days per person.
TIPS/WARNINGS
While the Bradford factor is a useful key performance indicator, there are often good
reasons for employees taking unplanned leave. This means that taking the score as the
only criterion is not recommended; instead, it should only be used as a trigger to prompt
line managers to investigate an individuals absenteeism further.
There is another danger, as with so many indicators. If staff are made aware of the
trigger points, the factor can be counter-productive because staff work up to their
limits.
REFERENCES
www.cipd.co.uk/hr-resources/factsheets/absence-measurementmanagement.aspx
http://camsolutions.blogspot.com/2007/11/calculation-of-absenteeismrates.html

Ministerial Task Force for Health, Safety and Productivity and the Cabinet
Office, Managing Sickness Absence in the Public Sector, Department for Work and
Pensions, London.http://www.hse.gov.uk/gse/sickness.pdf
www.teamseer.com/features/bradford-factor/

64
360-degree feedback score
Strategic perspective
Employee perspective
Key performance question this indicator helps to answer
How well are our people performing in the eyes of those who have a stake in
their performance?
WHY IS THIS INDICATOR IMPORTANT?
360-degree feedback provides an individual with a broad assessment of their
performance based on the views of those who have a stake in their performance, such as
supervisor/boss, reporting staff members, co-workers, customers, suppliers, etc. Most
360-degree feedback tools are also responded to by each individual in a self-assessment.
How they assess themselves can be easily compared with those providing the feedback
(or raters as they are often called), using a scoring method of, for example, 110.
Therefore, feedback allows each individual to understand how his or her effectiveness as
a leader, co-worker, staff member or supplier/customer is viewed by others. Such
insight is often used for training and development purposes.
Results are also used by some organisations in making administrative decisions, such as
pay or promotion, and are therefore more valuable than traditional top-down appraisal
systems which are very subjective and often based solely on whether or not the
supervisor likes the person being appraised. However, there is a great deal of
controversy as to whether 360-degree feedback should be used exclusively for
development purposes, or used for appraisal purposes as well.

HOW DO I MEASURE IT?

Data collection method
Data are usually collected through an annual survey of those that are rating the
performance of the individual employee being subjected to a 360-degree assessment.
The questionnaires today are normally web-based (although paper-based and even faceto-face interviews can be used to collect data).
Formula
There is no single formula used within a 360-degree assessment, as there are many
consultants in the field. That said, a 360-degree appraisal template typically contains
the following column headings or fields, also shown in the template example on the next
page:

Key skill/capability type (e.g. communications, planning, reporting, creativity

and problem solving, etc. whatever the relevant key skills and capabilities are
for the role in question).

Skill component/element (e.g. active listening and understanding [within a

communications key skill], or generates ideas/options (within a
creativity/problem solving key skill]). The number of elements per key skill
varies for some key skills there could be just one element, for others there could
be five or six.

Question number (purely for reference and ease of analysis).

Specific feedback question (relating to skill component, e.g. does the person take
care to listen and understand properly when you/others are speaking to
him/her? [for the active listening skill]).

Tick-box or grade box (typically using a Likert-scale rating of, for example, very
poor to excellent and on a 15 or 110 scale. Note that providing clarification and
definitions of a ratings system to participants and respondents is crucial,
especially if analysing or comparing results within a group, when consistency of
interpretation of scoring is important).

Consider this as a sample 360-degree feedback questionnaire.

See also the example on the following page.

Frequency
Usually measured annually.
Source of the data
Those raters providing feedback on the individuals performance.
COST/EFFORT IN COLLECTING THE DATA
Costs and effort of collecting 360-degree feedback scores can be very high as it will
require significant time commitment for scoring, evaluation and feedback. There are few
ways of bringing costs down other than simplifying data collection through the use of
software and electronic data collection.
TARGET SETTING/BENCHMARKS
It is possible to compare performance against others with the same or similar job
profiles. An overall performance score can be given for an individual (the average of all
scores) and the individual can compare this with others, with their past performance
and for setting future targets.
EXAMPLE
This example can be found on the www.360-degreefeedback.com website.
The following are extracts from the feedback reports for Steve Kane.

The report began with a category summary, which included overall score
(average, as well as from self, manager, peer and direct report) and then
high-level results for the categories of leading change, results oriented
and team leadership, amongst others. A 110 rating score is used.
This was followed by open questions that consider Steves strengths and
priority improvement opportunities.
Then there are a number of questions that provide a score from each rater
and that can be compared with the project average. Questions such as
Steves abilities in leading change, works toward team, departmental and
organisational goals in addition to personal objectives, communicates
respectfully during stressful times, and questions accepted practices and
assumptions are examples.
TIPS/WARNINGS
Since 360-degree feedback processes are usually anonymous, people receiving feedback
have no recourse if they want to further understand the feedback. They have no one to
ask for clarification of unclear comments or more information about particular ratings
and their basis.
For this reason, developing 360-degree process coaches is important. Supervisors, HR
staff, interested managers and others are taught to assist people to understand their
feedback. They are trained to help people develop action plans based on the feedback.
Confidentiality is important to both the feedback recipient and the respondents. If the
feedback recipient is not guaranteed that the results will remain confidential, they will
tend to feel anxiety about the purpose of the process and the use of the data. If the
respondents are not guaranteed that their names will not appear on the report or be
linked to specific comments or ratings, then they may not provide accurate responses
and be completely open. To ensure confidentiality:

Select a neutral administrator (e.g. an external consultant or human resources

representative).

Print only one report per person.

User-names and passwords should be required to access the survey and the
response data should be encrypted.

Ensure that online systems are encrypting the data and storing the results on a
secure server.

There is a checklist of seven criteria used in constructing a good 360-degree survey

(www.360-degreefeedback.com):

Does the item utilise an ACTION VERB?

Does the item describe an OBSERVABLE behaviour?

Does the item describe ONLY ONE behaviour?

Is the item described in CLEAR LANGUAGE?

Is the item described as a POSITIVE, desired behaviour?

Does the item describe an IMPORTANT behaviour?

Does this item, taken together with all of the other items, SUFFICIENTLY
DEFINE the category?

Finally, to ensure that people take an adequate time to consider each question and
provide positive and constructive feedback, the survey should contain as few questions
as possible. If survey items are carefully researched to ensure relevance, the number of
questions should not exceed 50.
REFERENCES
Susan M. Heathfield, 360 Degree Feedback: The Good, the Bad, and the
Ugly,http://humanresources.about.com/od/360feedback/a/360feedback_3.
htm
www.businessballs.com
www.360-degreefeedback.com
Richard Lepsinger and Anntoinette D. Lucia, The Art and Science of 360 Degree
Feedback, San Francisco, CA: Pfeiffer, 2009.
65
Salary competitiveness ratio (SCR)
Strategic perspective
Employee perspective

Key performance question this indicator helps to answer

To what extent are we offering a competitive salary to our employees?
WHY IS THIS INDICATOR IMPORTANT?
Competition for the best talent is fierce in most markets and offering an attractive salary
package is important in order to attract and retain talent. Just as businesses compete for
customers to whom to sell their goods and services, they compete for the best talent.
Understanding how the salary your company pays compares to the pay competitors
provide to their employees in similar positions in the same area or market gives you an
insight into the competitiveness of your company as a potential employer and the level
of temptation for existing employees to leave your company and take up better paid jobs
elsewhere.
I completely acknowledge that pay is not the only element that matters and many
argue not the most important but it is a good KPI to include. What companies want to
ensure is that they offer a salary that is fair and competitive, but without paying too
much. Comparing your salary rate with those offered by your competitors will provide
these insights.
HOW DO I MEASURE IT?
Data collection method
The way to collect data for this KPI is to gather data on competitor pay or industry
average pay and compare this with your own salary levels.
Measuring the salary competitive ratio is easier in some industries and markets than
others. Take supermarkets, hotels or call centres, for example, where job roles are well
defined and salaries are based on either hourly rates or salaries. In these environments
it is generally very easy to collect the salary rates from competitors and create the
competitiveness ratio. If competitor pay levels are not obtainable it might be useful to
conduct or pay for some market research to establish average pay levels for the industry.
Formula
When calculating the salary competitiveness ratio you compare the salary your company
offers to the salary offered by competitors. You can select either one or a number of
direct competitors or you can compare your salaries with the industry average.

Salary competitiveness can be calculated for specific job groups using the formula above
or a composite ratio can be produced across all job groups by adding the ratios together.
In industries with hourly wages the salary can be replaced by the hourly rates.
Frequency
As salary levels in most industries are fairly stable, it probably makes sense to measure
this KPI on an annual or six-monthly basis.
Source of the data
The data for the salary you are offering come from your own HR system or HR policy
documents. The data for the salary offered by competitors or across the industry are a
little harder to get and usually require some market research.
COST/EFFORT IN COLLECTING THE DATA
The costs and effort of collecting the data depend on the level of available information
about salaries in your industry. If your industry is open about salaries and if competitors
publish their salaries then the effort is quite low. However, if market research is
necessary then the costs of conducting this research have to be taken into account.
TARGET SETTING/BENCHMARKS
The target for your salary competitiveness rate depends on your remuneration strategy
(for
more
information
see,
for
example,www.salary.com/docs/resources/salarycom_wp_competitive_pay_
philosophy.pdf).
A general rule of thumb for companies in competitive labour markets is that you want to
offer equal or slightly higher pay than your competitors (but not too much), so a ratio of
1 or 1.1 is a good benchmark.
If your company is already very attractive (good brand, excellent non-financial benefits)
then you might want to aim for equal or slightly lower than average pay, so a ratio of 0.9
or 1 is a possible benchmark.

EXAMPLE
A supermarket realised that recruitment for junior management positions
for its stores was getting increasingly difficult. It realised that the talent
pool was becoming smaller and it wanted to ensure that it offered
competitive salaries (but not overpay unnecessarily). Simple research of
job ads in the local paper gave it a good understanding of the salary levels of
its competitors. The average salary among competitive positions was
$25,000 per year. The company was currently offering $23,000 for that
position.
The salary competitive ratio for this position was therefore:

This was too low and the company decided to offer a new salary for this
position of $26,000, which brought the ratio up to a more competitive 1.04.
TIPS/WARNINGS
In industries with a large proportion of commission payments and bonus payments it is
advisable to include these in the calculation to ensure accuracy. Just using the base
salary would provide a misleading picture of salary competitiveness.
REFERENCES
www.salary.com/docs//salarycom_wp_competitive_pay_philosophy.pdf
http://humanresources.about.com/cs/compensation/a/aasalaryrange.htm

66
Time to hire
Strategic perspective
Employee perspective

Key performance question this indicator helps to answer

How well are we able to fill vacant positions in our business?
WHY IS THIS INDICATOR IMPORTANT?
It is important for businesses to fill vacant posts. A failure to fill open jobs quickly will
have a number of negative consequences, which include reduced efficiency (e.g. not
enough staff to complete the work, existing workers having to cover the vacant job role),
lost revenue (orders cannot be fulfilled, business does not run at full capacity) and costs
(for e.g. hiring in temporary or agency staff).
By measuring the time it takes to hire employees, organisations will gain an insight into
efficiency in filling employee vacancies from advertisement to offer, acceptance of
position and start of work.
Traditionally, time to fill has been measured as an indicator of HR effectiveness and
calculated as the elapsed time between the initial approval or posting of a vacant post
and the final acceptance of a job offer from a qualified and approved candidate.
However, as a strategic KPI we are less interested in the effectiveness of the HR process
and more in the elapsed time between the initial approval or posting of a requisition and
the actual day when the newly hired candidate begins work in the position.
HOW DO I MEASURE IT?
Data collection method
If the HR system tracks the hiring process, the data can be captured and collected
automatically. If not, manual tracking will be required. While the start date is usually
available from the HR system, the day of posting of the vacancy is often not, and it needs
to be captured.
Formula
The formula is the time taken from the initial posting of a vacancy to the time the new
recruit starts.
Time to hire = Elapsed time between time of posting and time to start
This time can then be averaged for specific job roles and across the entire company.
Frequency
Time to hire should be measured on a quarterly basis.

Source of the data

The HR system and manual capture.
COST/EFFORT IN COLLECTING THE DATA
The costs and effort for generating this KPI can be relatively high if there is no
automated system that will capture and track the hiring process.
TARGET SETTING/BENCHMARKS
Time to hire rates vary by job role and industry. The benchmarks available for
commercial companies range from about 20 to 80 days. In the US public sector its 110
days as of October 2010 (dropped from a staggering 180 days). The US Office of
Personnel Management would like to see hiring time reduced to at most 80 days.
EXAMPLE
As an example calculation (taken from Creelman, 2001), take a company
that posts a job on 5 January, the successful candidate accepts on 20
January and starts on 10 February. According to our formula, the time to
hire is:
Time to hire = 36 days
Enterprise Rent-A-Car is a good example of a company that takes time to
recruit very seriously. Enterprise is the largest car rental business in North
America, with more than 7,000 offices in the United States and more than
900 in Canada, Puerto Rico, the UK, Germany and Ireland. In an effort to
track and reduce time to hire, the company is pushing applications through
its hiring website which is used to post vacancies and track progress.
A public sector example comes from the US government where President
Barack Obama, in his 2010 executive directive, Improving the Federal
Recruitment and Hiring Process, states: To deliver the quality services and
results the American people expect and deserve, the Federal Government
must recruit and hire highly qualified employees, and public service should
be a career of choice for the most talented Americans. Yet the complexity
and inefficiency of todays Federal hiring process deters many highly
qualified individuals from seeking and obtaining jobs in the Federal
Government.

TIPS/WARNINGS
Time to hire will vary between industry and job roles. It therefore makes sense to report
time to hire by similar job roles and not only as overall averages. If averages are used its
important to analyse and highlight variance and outliers that can skew average data.
REFERENCES
www.ere.net/2004/08/11/understanding-time-to-hire-metrics-separatingtime-to-fill-from-time-to-start/
www.bpir.com/recruitment-and-selection-bpir.com/menu-id72/measuring-success.html
www.whitehouse.gov/the-press-office/presidential-memorandumimproving-federal-recruitment-and-hiring-process
James Creelman, Building and Developing a HR Scorecard, London: Business
Intelligence, 2001.
67
Training return on investment
Strategic perspective
Employee perspective
Key performance question this indicator helps to answer
How effective is our training in driving business results?
WHY IS THIS INDICATOR IMPORTANT?
Training is often perceived as a soft measure and, as such, it is argued that it is
difficult to quantify the hard (especially financial) benefits to the enterprise.
Unfortunately, many from a Human Resources background, or function, continually
make this argument.
However, in recent years we have seen a growing library of best practices that do indeed
trace how training expenditure impacts financial performance; put another way, it
provides a measure of the return on investment (ROI) on the training dollar.

However, rather than being a new metric, a measure of training effectiveness the
Kirkpatrick model was first promoted and introduced into organisations as far back as
the 1950s (and is still used by companies across the globe see References). The fivestep Human Resource ROI model (which primarily looks at training) described in this
KPI, which was developed by Dr Jack Phillips of the ROI Institute, is essentially an
extension of the four-step Kirkpatrick model.
Using an ROI assessment approach is one powerful way for HR to begin the process of
talking to the business in the language of the business. HRs credibility can certainly be
enhanced, because by showing the business impact of an HR intervention in such
bottom-line terms, then HR can be said to be truly holding itself accountable for its
actions. This will go some way to repositioning HR as an investment rather than a cost.
HOW DO I MEASURE IT?
Data collection method
For the Jack Phillips ROI KPI, data are collected in several ways. Participants are
surveyed to ascertain their satisfaction with the training programme immediately after
the event, and questionnaires and surveys (of participants and their managers) are
deployed several weeks later to assess behavioural or performance change. Later, data
are collected from surveys/questionnaires to measure the training programme impact
on areas such as output, quality, cost, time and customer satisfaction. Data are then
collected to assess the benefit against costs (the ROI).
Formula
The five levels of the Phillips ROI model are as follows:
Level 1. Reaction and planned action
Level 2. Learning
Level 3. Application
Level 4. Business impact
Level 5. Return on investment
Level 1. Reaction and planned action
At this level, participants reaction to and satisfaction with the training programme are
measured. Also captured are the planned actions that the delegates intend to implement
back in the workplace.

Level 2. Learning
This level is where an assessment is made on what participants believe they have
learned in the programme (often through an end-of-class evaluation).
Level 3. Application
At Level 3, data are collected to determine if participants have implemented the HR
programme successfully. This measures changes in on-the-job behaviour or actions as
the programme is applied, implemented or utilised. Typically, questionnaire and survey
instruments will be used to access this information.
Level 4. Business impact
At this level, the actual business results of the programme are identified and a monetary
value applied to the behavioural/skills changes. Typical Level 4 measures include
output, quality, cost, time and customer satisfaction.
However, even though the HR programme may produce a measurable business impact,
there is still a concern that the costs for the HR programme may be too high.
Level 5. Return on investment
This is where the actual ROI is calculated. Essentially, the ROI calculation is identical to
the ROI ratio for any other business investment, where the ROI is traditionally reported
as earnings divided by investment. ROI is calculated as:

The return on investment is calculated using benefits and costs. The benefit/cost ratio is
the benefits of the HR programme or intervention divided by the costs:

The return on investment uses the net benefits divided by costs. The net benefits are the
programme benefits minus the costs. In formula form, the ROI becomes:

The BCR and ROI present the same general information but with slightly different
perspectives. An example illustrates the use of these formulas. An HR programme

produced benefits of $581,000, with a cost of $229,000. Therefore the benefit/cost ratio
would be:

As this calculation shows, for every $1 invested, $2.50 in benefits was returned. In this
example, net benefits were $581,000 $229,000 = $352,000. Thus the
ROI would be:

This means that each $1 invested in the HR programme returned $1.50 in net benefits,
after costs were covered.
Frequency
Applied to major training programmes.
Source of the data
The staff being trained and the HR department analysing the impact of the training.
COST/EFFORT IN COLLECTING THE DATA
Collecting and analysing the data for this KPI can be expensive and time consuming. For
this reason a full ROI calculation is usually applied to only a limited number of training
programmes typically those that are expensive and that are expected to be impactful
(see Tips/warnings).
TARGET SETTING/BENCHMARKS
HR process benchmarking organisations such as the Hackett Group will hold data on
the cost of HR functions/processes such as training. Also, specialised HR ROI
organisations, such as Kirkpatrick Partners and the ROI Institute, will be able to make
benchmarking data available.
EXAMPLE
In the early 2000s the US-headquartered Nextel Communications applied a
full ROI programme (which they labelled as a training scorecard) to highimpact training programmes. Here is an example of one programme.

Almost 400 managers/supervisors from throughout the organisation

completed a five-hour training programme on performance management.
Data collection: Levels 1 and 2
The data for the Training Scorecard Level 1 (reaction and planned action)
and Level 2 (learning) were collected through an end-of-class
questionnaire. This included a self-assessment evaluation (rated from 1 =
poor to 5 = excellent) against questions such as the following:

What is your ability to apply each of the following skills back on the
job?
o Coach employees on an ongoing basis to assure continuous
process.

The Level 1 and 2 analyses for the performance management course showed
that participants provided a 4 + rating against all key measures.
Level 3 (application) evaluation
Data for this evaluation were collected via a questionnaire distributed to
course participants by e-mail, about 90 days following the date of the
course. Crucially, it included questions that ask participants how much they
attributed their performance improvement to the training received through
the performance management class and how much to other factors.
Level 4 of the Training Scorecard looks at business impact. This is where
data are converted into monetary values to give a comparison with
programme costs. One participant was able to report savings of $16,200 per
quarter, which, multiplied by four, gives an annual figure of $64,800. This
was multiplied by a percentage of the savings attributable to the class (in
this case 20%) and multiplied again by a confidence factor of 100%, which
led to a final figure of $12,960 per year.
The analysis of the performance management course comprised all costs
related to the course, which were calculated at $283,267.
The Level 5 ROI ratio was calculated as follows:

THE ROI IS 643%.

TIPS/WARNINGS
Although almost all HR staff groups conduct evaluations to measure satisfaction, few
actually conduct evaluations at the ROI level. Perhaps the best explanation for this is
that ROI evaluation is often characterised as a difficult and expensive process (which is
typically the case). For this reason, organisations should select only a few interventions
for an ROI evaluation.
REFERENCES
For more on the Kirkpatrick Model see www.kirkpatrickpartners.com
For more on Jack Phillips, see www.roiinstitute.net
Jack Phillips, Return on Investment in Training and Performance Improvement
Programs (Improving Human Performance), 2nd edn. Oxford: ButterworthHeinemann, 2003.
Community
for
Human
Management www.chrmglobal.com/Replies/531/1/TrainingEffectiveness.html

Resources

James D. Kirkpatrick and Wendy Kayser Kirkpatrick, Training on Trial: How

Workplace Learning Must Reinvent Itself to Remain Relevant, West Babylon, NY:
AMACOM, 2010. Seewww.kirkpatrickpartners.com
James Creelman, Creating The HR Scorecard, London: Business Intelligence UK, 2001
www.thehackettgroup.com