Repurposing metrics for HR: HR professionals are looking through a people-focused lens at the CFO's metrics on revenue and income per FTE

What if single or two metrics could help you plan time to come staffing needs, better motivate employee with compensation and provide support for various training initiatives? And what if the data were already being bring togethered for you?

greatest in quantity likely, in your CFO's files or spreadsheets is a wealth of information that you can analyze and interpret with a "people" point of view--if you know by what mode to apply the numbers.

That data--operations income per full-time employee (FTE) and income by means of FTE--can help human resource professionals gain an understanding of employees' productivity and better manage compensation, training and staffing.

To be positive these are not the solitary measurements that HR will want to use to gauge employees' productivity or to make significant organizational changes. single or two calculations alone won't provide definitive insight or an action plan.

When you analyze income and income per FTE, "generally what you achieve are not answers but better questions," says Steve McElfresh SPHR principal and originator of HR Futures, an HR consultancy in Palo Alto, Calif. "They'll point you a little closer to the truth"

Further, you will ne to gaze at these metrics with a careful organ of sight making sure you fully understand what these numbers represent

Nonetheless, measures of income and income per FTE, especially when viewed above time or in comparison with similar firms, can provide a credible indication of employee productivity.

"From our standpoint, receipts per FTE is the best metric to assess worker productivity," says Scott Pollak, director with PwC Saratoga, a human resource consulting firm headquartered in San Jose Calif. The measure, calculated by dint of dividing revenue by the number of FTE take an account ofs how effectively employees generate sales.

Income by FTE shows the portion of sales dollars left after costs are paid, divided by the number of employee It provides an indication of employees' abilities the pair to bring in sales and to manage expenses

While CFO monitor these measures with a financial organ of vision HR professionals can use these same metrics to help guide and manage their clan management processes.

Greater Focus upon Metrics

Employee productivity metrics have increasingly captured the interest of more HR professionals, readys note. "The whole area of metrics [within HR] has been single of great focus over the last not many years," says Bill Mackenzie, a Boston-based principal in the human capital consulting practice assemblage of Deloitte Consulting. He attributes it partly to HR departments' attempts to link their efforts with their organizations' overall business objectives. To do that, they ne a way to determine the value employee are adding and the impact of human resource initiatives upon employees' performance.

In addition, Mackenzie says, a growing number of forward-thinking executives are recognizing that succes be pendents on their management team's ability--in concoct with HR--to be competent stewards of their organization's human capital. (For single firm's example, see "Metrics in Practice," below.)

As a issue more HR and other executives are starting to pay greater attention to these metrics, however many haven't focused on them full McElfresh estimates that fewer than half of his clients have used these measures before he talks with them.

In part, this mirrors a need for education, says Rainer Strack, who is based in Dusseldorf, Germany, and is a director and vice president with Boston Consulting clump In short, many HR professionals ne to better understand in what manner to calculate and interpret of that kind metrics.

Crunching the Numbers

While calculating these metrics isn't overly complicated, getting data that is accurate and meaningful can be more involved than simply dividing the organization's income or income by the number of FTE oftentimes several matters need to be addressed to make sure the reliability of your metrics:

* Consider business marks Revenue and income per FTE are greatest in quantity helpful for businesses with knowledge and service workers, says Mackenzie. These metrics provide les insight in more capital-intensive industries, where the connection between employee productivity and income is not as direct. In manufacturing, for instance, the equipment used has a significant impact upon revenue.

Even a certain number of knowledge workers don't have a direct tie to sales or income, notes Scott Testa, chief operating officer at Mindbridge Software, an intranet software developer in Norristown, Pa. At Mindbridge, for instance, management has tried basing more [i]or[/i] less of the compensation earned by dint of its software programmers on the receipts generated by the project upon which they're working. However, a number of other variables, of that kind as the effectiveness of the marketing program supporting a throw out also influence sales. "It's hard to wrap our arms around this," Testa says.

* Tweak receipts calculations. For income, HR urgencys to ask if profits that aren't directly tied to employee productivity--such as investment earnings--should be exclud from receipts calculations. In some instances, McElfresh notes, HR may decide to gaze at what's referred to as EBITDA--earnings before interest, taxes, depreciation and amortization. The reason: These expenditures are extraneous to employee productivity and thus shouldn't be included in the calculation.