Driving the people agenda through

standardized metrics

2nd November 2020

Context

Key Objectives: Towards standardized human capital metrics and transparent reporting

Increasing investment in the workforce is critical for employee well-being and enhancing business performance. To
bring about greater focus on the people agenda in organizations, a consistent & transparent set of human capital
metrics will help. While these metrics have been used for some time, they are often considered separately and lack
standard way of definition & Calculation and internal & external benchmarks.

While there is almost unanimous agreement from business leaders and investors alike that human capital is a key
driver of performance, the lack of a standard methodology (definition & calculation) of measures, as well as transparent
reporting, reduces visibility. There is a compelling case for establishing standard and viable measures of human capital,
requiring engagement and collaboration with various leaders across the business, coordinated by the HR and finance
functions. Additionally, such metrics must be better applied in tandem with financial and operational metrics to create a
clear business case for valuing human capital. Once the language of measurement is common – a Transparent
reporting of these metrics on a voluntary basis would help drive rigor and accountability of the people focus.

This study looks to develop standard Human capital metrics which will be used across the industry. The idea is that
companies report & benchmark these much like the financial metrics going forward.

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Process

High level approach

• Define & agree upon Standard HCM metrics to be used –
• Use the International Standards Organization standard ISO 30414 as a
starting point for the metrics
• Circulate a list of metrics amongst NHRD members and based on feedback
one to two metrics be agreed in some or all of the following areas : Costs ,
Diversity, Organization Health, Safety and Well Being, Productivity ,
Recruitment, Mobility & Turnover, Skills & Capabilities,.( via polling with
NHRD executive team )
• Pilot Data Collection & Approval for large scale rollout -
• Online collection of data on decided metrics for sample organizations ( 5-10
NHRD executive team member organizations )
• Reporting /Presenting data to executive team
• Approval for large scale rollout
• Report findings and establish governance for future –
• Sharing benchmark data with participating member organizations
• Reporting and analysis of data including benchmark creation
• Finalise the recommended ‘People Scorecard’ for inclusion in Annual
Reports

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Process for Pilot Data Collection & Reporting

Pilot Data Collection

• WTW /NHRD will send emails to companies that show interest . Email will have a detailed template with
the option to provide data for the agreed metrics.
• Response data will be collected by WTW with raw data access restricted to only WTW team members
• Companies are assured of confidentiality of their data as results published would be at an aggregate
level.

Data Analysis
• First step is Data Consolidation from all companies that have responded.
• Post consolidation, calculation of indicators such as Average, Median, etc. for each of
the recommended parameters would be taken up
• The indicators would then be aggregated (By Industry, Employee Strength, etc.) to
maintain confidentiality

Report Generation
• Analyzed data will be synthesized into 3 broad areas viz: Market Overview,
Insights & Recommendations
• This report with be complemented by WTW research around relevant areas

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What’s in it for you

Co-create the ‘Human Capital Quotient’ which can help set reporting standards for human capital.

Confidentiality of data and transparency in analysis. Results will be published at an aggregate level

Opportunity to compare with industry scores to identify strengths / improvement areas based on
standardized methodology, industry benchmarks and best practices

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Measures
 List of Measures

• Costs • Diversity
1. Total Workforce Costs 1. Workforce Diversity
2. Cost Efficiency 2. Diversity of Leadership Team
3. Affordability • Organisation Health, Safety & Wellbeing
• Productivity 1. Percentage of occupational accidents
1. EBIT/Revenue/Turnover/ Profit per employee 2. Absence due to wellbeing issues
2. Human Capital ROI • Employee Engagement / Satisfaction ( Recommended
• Skills and Development Questions )

1. Total training and development cost

2. Percentage of employees participating in
training
• Recruitment , Mobility & Turnover
1. Recruitment – Time to fill vacant positions
2. Recruitment - % of positions filled internally
3. Voluntary Turnover Rate

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 Costs
Total Workforce Costs
These metrics are a key indicator of the financial value given by an organization to managing, maintaining and
developing its workforce.

• DEFINITION - Total workforce cost can be defined as the Salary paid to

1. On Roll Workforce + Fixed Term Contracts and/or

2. Workmen as defined by the Factories Act, 1948 and/or
3. Outsourced Workforce –
• In a Manufacturing set up ,refers to a ‘Contractor’ as defined by The Contract Labour (Regulation &
Abolition) Act, 1970 and / or
• In a white collar set up, refers to manpower outsourcing firms that employ individuals to offer exclusive
service to a particular org.

Salaries + Wages = All emoluments paid in cash + perquisites. Income under Form 16 , is a good standard to
use. Regarding Long Term Payments which are equity based, the Black Scholes value should be added.
However in such a case, any gains from exercise of options should be removed from remuneration or else
there will be double counting. Cash based LTI payments can be computed on actuals and covered under
'emoluments' paid in cash in the Form 16.

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 Costs
Cost Efficiency
These metrics are a key indicator of the financial value given by an organization to managing, maintaining and
developing its workforce.

DEFINITION – Cost efficiency can be defined as the Total Workforce Cost/ Turnover

Total Workforce costs – as defined earlier

Turnover can be defined as the total sales made by the company in a particular period.

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 Costs
Affordability
These metrics are a key indicator of the financial value given by an organization to managing, maintaining and
developing its workforce.

DEFINITION – Affordability can be defined as ( Total Workforce Cost/ EBIT ) *100

Earnings before interest and taxes (EBIT) is a measure of a firm's profit that includes all expenses except interest
and income tax expenses.
.

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Productivity
EBIT/Turnover per employee
Productivity ratios per employee, such as turnover or profit per employee, are commonly used to compare the
productivity of an organization in the market. These ratios can be used as a simple metric for cost reduction and control
or the implementation of a system of performance-based compensation.

DEFINITION - Earnings before interest and taxes (EBIT) is a measure of a firm's profit that includes all expenses
except interest and income tax expenses. It is a measure of an organization’s ability to produce income on its
operations in a given time period (e.g. a year). The various productivity ratios we can use are

A. Turnover/total number of employees

B. EBIT/total number of employees
.

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Productivity
Human Capital ROI
Human capital ROI means the amount returned for every Rupee spent on human capital .It shows the ratio of
income/revenue to workforce costs.

DEFINITION - Human capital ROI={Revenue - [Expenses -(Pay+Benefits)]}/(Pay+Benefits)-1

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Skills & Development
Training and development cost per employee
Development and training costs are investments in development and training for the organization’s people provide, for
example, a means for analysts to focus on an investment that an organization is making in the future productivity of its
workforce

DEFINITION – Training and development cost per employee can be defined as - Total Training & Development
Cost/ Total number of employees
Total training and development costs can be defined as the total expenses an organization incurs for training and
development of its employees. It should be the sum of the direct and indirect training costs. Direct training costs
include faculty/ course fees etc. . Indirect training include Travel and Accommodation costs. In addition, any
infrastructure and equipment cost incurred to provide training which could include renting a classroom or
equipment or WIFI connection etc. can be classified under indirect training cost.

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Skills & Development
Percentage of employees participating in training
This metric helps in indicating if the accurate training modules are being made available to the employees / if availability
of the training was adequately communicated / if the best medium is being used for delivering the training.

DEFINITION - Training Participation rate can be defined as the ( the number of people who participated in the
training / number of people who were invited for the training) * 100

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Recruitment, Mobility & Turnover
Recruitment - Time to fill vacant positions
Time to Fill is frequently and widely used metric to measure the number of days it takes from the job requisition being
posted to when the offer was accepted
.

DEFINITION - Time to fill is the number of days from the time of commencement of search for a particular role to
the day an offer is accepted by the candidate. For a given time period , the average number of days for all filled
positions is calculated

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Recruitment, Mobility & Turnover
Recruitment – % Positions filled internally
The percentage of all vacant positions filled internally describes the internal recruiting for the reoccupation of vacant
positions.

DEFINITION – % positions filled internally can be defined as the number of vacancies filled by existing employees
( on roll) / total number of recruitments

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Recruitment, Mobility & Turnover
Turnover – Voluntary Turnover rate
This metric expresses the number of people that leave the organization voluntarily (resignations, planned retirements or
redundancies). This includes early attrition as well ( employees who have worked even for a day)

DEFINITION – Voluntary turnover rate can be defined as the ( Number of people who have resigned from the
organization in a particular time frame/ Average employee strength of the org during the year) * 100
Average employee strength = (Employee strength at the end of the year – Employee strength at the beginning of
the year) / 2

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Diversity
Workforce diversity
Workforce diversity covers diversity with respect to Age (age groups of 20-30, 30-40, 40-50 and over 50 ) , Gender (
Male /Female /Others- as defined by Transgender Persons (Protection of Rights) Act,2019 ), Disability (Number of
disabled employees divided by total employees. Disabled employee as defined by the Person With Disabilities Act
1995) or any other indicator of diversity

DEFINITION -Workforce diversity can be defined as the % of employees, belonging to a particular diverse group,
who form a part of the workforce at that given time

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Diversity
Diversity of Leadership Team
Diversity of leadership/management team with respect to, for example, Gender, Age, Disability and other factors. Age
bands to be taken as follows (a) Below 40 (b) 40 to 50 ( c) 50 to 60 ( d) Above 60

DEFINITION - Diversity of Leadership/management team can be defined as % of employees, belonging to a

particular diverse group, who form a part of the leadership at that given time, . In this case, 'Leadership' can be
defined as the members of the management committee of that particular org ( the composition of the management
committee will differ in every organization). In case of absence of a management committee, CEO/MD along with
CXOs of respective functions can be construed as a leadership team)

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Organisation Health, Safety & Wellbeing
Percentage of occupational accidents
This metric includes accidents that occur in the course of a person’s employment and are caused by the hazards which
are inherent in or related to it.

DEFINITION - An occupational accident is an accident suffered by an employee while under the authority of an
employer and, consequently, can be identified as an accident occurring at work, on a work-related journey or
during any kind of dealing with customers

Accident rate can be further classified into

1. Number of Reportable Accidents under the Factories Act per 1000 FTE in a FY
2. Number of Fatal Accidents in a FY per 1000 FTE
3. Number of total Accidents in a year against the number of total employee work hours per year

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Organisation Health, Safety & Wellbeing
Absence due to wellbeing issues
This metric measures the percentage of scheduled time that is lost because of absence due to wellbeing issues in a
particular time frame

DEFINITION – Absence rate can be defined as the ( Total number of hours of absence due to wellbeing issues/
Total scheduled work hours) * 100

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Employee Satisfaction / Engagement

Recommended Questions

Q. How likely is it that you would recommend this organization as a good place to work? ( eNPS)

Scale – 0 to 10

Q. I would prefer to remain with this organization even if a comparable job were available in another
organization.

Scale – 5 point scale

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Set of measures which would be recommended to be mandatory

1. Cost Efficiency

2. Human Capital ROI

3. Training & Development Cost per Employee

4. Voluntary Turnover

5. Workforce Diversity & Diversity of Leadership Team

6. Absence Due to Wellbeing Issues

7. Employee Engagement

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Thank You