Elaina DeHoratius HR Metrics Assignment 3

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1 It is important for KGW to use the information we have and make better informed decisions. How employees feel when they are at work, how they feel they are being treated, whether or not they see a future with the company, and how they interact with others are all paramount to the future success of KGW. KGW wants to create a better working environment for the employees, an environment that employees will enjoy working in and an environment they will want to remain in by focusing on KGW s newest strategy of Operational Excellence/Cost Reduction. Some drivers that will help KGW reach our goal of operational excellence/cost reduction are decreasing the time to fill a position, improving job enrichment, managing costs, improving communications, talent acquisition, talent development, job satisfaction, increasing competitive total rewards, and human capital productivity. Some human capital outcomes that are necessary to help achieve this goal are lowering turnover (improving/increasing retention), high return on investments, improved employee productivity, improved employee engagement, and increased talent management. As a healthcare provider, we want to be known as reliable, dependent, and available, and we want to maintain a bridge of trust between the company and the patients, which will help the company grow in a positive way, with a positive reputation in the community. This is only possible if the human capital that is our employees is cultivated. By focusing on human capital outcomes to achieve KGW s goal of operational excellence/cost reduction, we also perpetuate KGW as a positive, reliable, sought after place to work among healthcare employees, which will help the company achieve operational excellence. There are several data elements and metrics that are most important to connecting the value chain between people and operational excellence/cost reduction. For example, the average cost per employee, revenue per employee, the separation rate, the average tenure of current employees, turnover/performance relationships, whether people are leaving voluntarily, or involuntarily, and what their performance rating was, and the compensation expense percent. The formula for the average cost per employee is ECF=TC/FTC, where ECF is the employee cost factor, FTE is the average salary per full-time equivalent (number of FTEs), and TC is total compensation. Total compensation for KGW is salary + bonuses + benefits, and totals $34,214,295. There are 292 total employees in the company, and so it is $34,214,295/292, which means ECF = $117, The average cost per employee is $117, We can track this measurement and work to retain our current employees, to help reduce the costs of having to train new hires, and helping to lower turnover. This bar chart demonstrates the sum of total compensation (salary + bonus + benefits) of all of the employees, based upon where they work, or what region they are located in. Based upon this graph, we can see the average cost of the employees in each region. KGW wants to keep it the same, or possibly lower it, in order to keep with our goal of operational excellence/cost reduction. Region 1 has a higher amount, although not the highest, but we need to look into why the average cost of an employee in Regions 2 and 3 is higher than the average cost of an employee in Region (with 82 employees), or Region 1, (with 84 employees), when Regions 2 and 3 each have about 2 less employees (63 at both). By isolating the reasons why it is costing more, we can potentially alter/change practices to help lower costs in those areas, and thus align with our goal of cost reduction.

2 Average Cost of an Employee in Each Region $14,. $12,. $1,. $8,. $6,. $4,. $2,. $96, $124, $125,1.29 $126, $. Region Region 1 Region 2 Region 3 Revenue per employee is also an important metric to consider when connecting the value chain between people and operational excellence/cost reduction. The formula for revenue per employee is RF=TR/FTE, where RF is revenue per employee, TR is total organizational revenue, and FTE is the number of full-time equivalents. If this number improved over time, it would be a sign that gross productivity was increasing. A decrease in the number would indicate a deterioration in performance somewhere. In the case of KGW, the number improved over time, so gross productivity is increasing, meaning that our goal of operational excellence is being recognized, and we want to perpetuate this trend to align with our goal of operational excellence. As demonstrated by the line graph, in 211, the revenue was $5,,, and the number of fulltime equivalents in 211 was 294, which means that revenue per employee in 211 was $17,68.3. In 212, the total organizational revenue was $54,5, and the number of full-time equivalents was 295, which means that revenue per employee was $184, In 213, total revenue was $58,5,, and the number of full-time equivalents was 292, which made the revenue per employee $2, $25,. $2,. $195,. $19,. $185,. $18,. $175,. $17,. Revenue per Employee $17,68.3 $184, $2, $165,

3 Separation rate is also important to measure and track to see if we are developing our human capital. To figure out the separation rate in 29, 21, 211, 212, and 213, for different categories of jobs, such as s, s, and s, the metric separation rate was used. The formula for separation rate is SR=TT/HC, where SR is separation rate, TT is the total termination during the period, and HC is the average headcount of employees. This table shows the total amount of employees who were terminated each year, and what percent of those who left were s, s, or s. If one category has an extremely high percentage of people leaving, KGW needs to investigate to understand why our employees are not succeeding at our company, or choosing to leave, which increases cost and decreases operational excellence, both of which goes against KGW s strategy. Years s (51 Total) s (48 Total) s (39 Total) 29 (19 Terminated) 4/51 =.8 6/48=.13 2/39 =.5 21 (8 Terminated) 2/51 =.4 1/48 =.2 /39 = 211 (16 Terminated) 5/51 =.1 3/48 =.6 1/39 = (35 Terminated) 6/51 =.12 6/48 =.13 5/39 = (34 Terminated) 9/51 =.18 11/48 =.23 3/39 =.8 ***Making the assumption that the same number of active employees were at the centers each year, since we do not have the information for all of the years*** This graph demonstrates the percentages of each job position who left the company, depending on which year it was. So in 29, 8% of employees who left the company were s. 13% were s, and 5% were s. In 213, KGW had a very high amount of Nurse Practitioners and s leave. KGW needs to look at why the amount of employees leaving has increased, and what can be done to rectify or lessen these numbers, in order to improve operational excellence and reduce costs. Separation Rate s s s

4 KGW does not want to lose high performing employees, and it is important to understand why our employees left, and whether it was voluntary or involuntary. If it was voluntary, then KGW needs to look into how to develop the talent we currently have, to demonstrate our commitment to our employee s future, and remain competitive within the industry. If it was involuntary, then KGW needs to reevaluate how we are hiring employees, and the measures that are in place to evaluate performance because having to rehire/retrain increases costs and hinders the ability of the company to run and operate efficiently. We are clearly not managing our talent effectively if employees are choosing to leave, and if we are letting them go, then we need to evaluate why they were not successful. Perhaps our training practices need to be reevaluated, or perhaps there is a problem with management in that division, both of which hurt operational excellence, and increase costs. This stacked bar chart shows the rating of each person who left KGW in that specific year, and what job category they belonged to. For example, in 29, all of the s who left had a performance evaluation of 3. In 211, all of the s who left had a performance evaluation of 5, and in 21, all of the s who left had a performance evaluation of Retention metrics are also important because if a high number of high performing individuals are leaving the organization, then operational excellence will be inhibited. It is also necessary to understand which group the departing employees belong to because if a higher number of one group is leaving, then something may be wrong or not working efficiently within that employee group. KGW needs to discover what is causing employees of that group to leave, and work towards rectifying the situation. If employees of one group are leaving voluntarily, then they may feel that there is no opportunity for them to advance in the company, and a company that cannot offer its employees growth cannot hope to maintain operational excellence, since it is not putting the time or effort into developing its employees, which will hinder employee productivity, and hurt employee engagement.

5 Another important metric is the Average Tenure-Current Employees. The formula for this is AT/C = TY/C/HC, where AT/C is the average tenure of current employees, TY/C is total years of employment (of all current employees), and HC is the average headcount. This metric can be utilized for the different groups of s, s, and s as well. For Nurse Practitioners, it was 292/51, which equaled 5.73 years. For s, it was 292/48, which equaled 6.8 years, and for s, it was 292/39, which equaled 7.49 years. The longer employees stay with the company, the more likely they are to continue to stay, and by tracking this metric, KGW can see if certain job groups have a higher retention amount than others, and how long people in those categories tend to remain on average with our company. We can then take steps to rectify the situation if we discover that a certain category has an extremely low average tenure. Average Tenure s s s This metric aligns with operational excellence/cost reduction because if there is one category of positions who have a very low tenure with the company, then KGW needs to investigate why employees do not wish to remain with the company in that role for many years. The company s future will be inhibited because training and the cost of training new employees, as well as recruitment, has to occur more often for those positions, which goes against the goal of cost reduction. This is also an indication that perhaps recruitment methods need to be altered, since the employees that are getting hired are not remaining, or that there is a problem within the organization that it is not cultivating new employees, therefore hindering operational excellence from occurring. The final important metric is compensation expense percent, whose formula is CE=TC/TE, where TC is total wages and salaries paid out, and TE is the total operating expenses. From KGW s income statement, total operating expenses is $39,35,776, and total wages and salaries paid out is $29,81,828, so CE =.76. Organizations, including KGW, can compare our data to data from other companies of our size, type, region, or revenue growth rate, to establish an ongoing competitive analysis. This metric is important if the organization is focused on controlling costs, which KGW is. KGW can also utilize this information and compare it to what the compensation expense percent is during other years, to determine if the trend is negative or positive. If the percent is increasing, then KGW needs to take steps to lower this number, since we want it to either remain the same, or decrease over time. (Don t have information on total wages and salaries paid out during the other years, so can t create a comparison with a chart).