3.5.3 - Human Resources
Human resource decisions affect cost, output, service quality and workforce stability. In this lesson you will learn how to calculate the main workforce measures, how to interpret them for business decisions, and why strategies such as rewards, share ownership, consultation and empowerment can improve productivity and retention while cutting turnover and absenteeism.
Human resource measures
Human resources
The people who make up the workforce of a business. Human resource management covers activities such as recruitment, training and redundancy.
Managers do not just ask whether they have enough staff. They also ask whether employees are producing enough output, whether too many people are leaving, whether absence is disrupting operations, and whether the business is keeping experienced workers. These measures matter because labour is a major cost and a major source of customer service quality.
Labour productivity
A measure of how efficiently a business uses its employees to produce output, expressed as output per employee per time period.
If labour productivity rises, each employee is creating more output in the same period. That can reduce labour cost per unit, which may improve profit margins or allow the business to compete on price. If it falls, managers may need to investigate training, motivation, work organisation or equipment.
Human resource measures
A strong interpretation goes beyond saying "high" or "low". Managers usually compare each figure with previous periods, targets or similar sites in the same business. That is how the measure helps a business decision rather than becoming just a number on a report. The numerator and denominator must describe the same workforce and period. For a shift absence rate, divide staff absent by staff scheduled for that shift. Longer-period absence is often measured by working days lost divided by available working days; do not mix that with a headcount measure. For retention, count employees who stayed through the period, not new recruits simply present at year end. State the workforce base used; the supplied examples use average staff.
| Measure | What it is really showing | What a higher figure usually suggests |
|---|---|---|
| Labour productivity | Output per worker in a time period | Employees are producing more per person |
| Labour turnover | Percentage of staff leaving | More people are quitting or being lost |
| Labour retention | Percentage of staff staying | More experience and continuity are being kept |
| Absenteeism | Percentage of staff absent | More disruption to labour supply in that period |
Interpreting the measures
Labour turnover
Measures the percentage of employees leaving a business over a period of time.
Labour retention
The number of employees that remain in the business over a period of time.
Managers interpret turnover and retention together. High turnover usually means the business is losing experience and must recruit again. Because recruitment, induction and early training all cost money, high turnover can raise costs and lower service quality at the same time. High retention is usually a positive sign because experienced employees stay in post, know the systems well and need less supervision.
Absenteeism
The number of staff who are absent as a percentage of the total workforce.
Absenteeism matters even when employees do not leave permanently. If many staff are absent on a shift, output can fall immediately, overtime costs may rise and remaining employees may feel overstretched. If that pressure continues, the business can then suffer even more turnover, so the measures often connect rather than moving separately.
A retailer such as Tesco can compare labour turnover and absenteeism across stores. If one branch has much higher absence and staff departures than similar branches, managers would investigate workload, local supervision or pay because unstable staffing can damage shelf availability and customer service.
This is why interpretation must be practical. A business with strong labour productivity but very high turnover may be pushing staff hard in a way that is not sustainable. A manager deciding whether to expand, change pay, recruit more people or redesign jobs should look at the measures as a group, not in isolation.
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