The Most Important HR Metrics that you should be tracking

To really understand the health and performance of your human resources function, I have created a list of the most important HR metrics that will provide a clear picture of how the department is performing.

  1. Cost of Hire
  2. Ratio Compensation/Benefits to Revenue/Profit (compare each year to industry averages)
  3. Employee turnover rate of new hires within their first 24 months
  4. Percentage of new hires that rate training and educational opportunities among the top 3 reasons they accepted and still love their job – compared with the % who rate training and educational opportunities as excellent 12 months into the job
  5. Quarterly turnover % of high performing employees
  6. Turnover % of low performing employees within one year of receiving low rating
  7. Percentage of employees with superior performance ratings against salary levels
  8. Monthly turnover rate
  9. Revenue per employee: total revenue/total number of employees
  10. Percentage of women promotions to top level positions
  11. Promotions Rate: Promotions/Headcount
  12. Number of raises
  13. *Compensation Analysis to ensure competitive market salary is offered

Multiple Hats Office Administration Hacks

Whether you are a Startup or an established small business a well run office is critical to the health and culture of the business. As in these types of businesses, wearing many hats is a given but with the simple hacks I’ve noted below you’ll run a smooth operation:

  1. Say no to Apple’s (5-10%) discount! Consider comparison shopping on BestBuy, Walmart, Newegg and Amazon. (I found Amazon to have the best deal most of the time).
  2. Create a visual office supplies inventory system. See how to create one here
  3. Develop HR templates for every possible scenario or activity (e.g., new hire email, potential hire interview request, harassment complaint form, et cetera.)
  4. Invest in an external hard-drive/USB to back up all your data and make sure you keep it in a fire/water proof box.
  5. Label and organize all office supplies and periodically review with team where all items are kept.
  6. Create different calendars with tiers, Tier 1 Calendar (Critical Meetings includes office and client meetings), Tier 2 (Office/HR related notices, such as, deliveries), and Tier 3 (PTO requests).
  7. Actively record all office assets with their skus, model, upc, location and employee information in an Excel sheet.
  8. If your office offers snacks and beverages, buying bulk is the way to go. Amazon and Ebay are your best bet!
  9. If your company uses Quickbooks online, utilize the recurring transactions feature to automate fixed invoices and bills.
  10. Deposit at the office! Ask your bank if they offer a check scanner as this will reduce the time it takes for you to deposit checks as you will be able to do it right from the office!

Tricks for driving growth and revenue

To drive growth and increase revenue a company must understand current and potential customers and identify uncontested opportunity in the industry. Below are a few tricks for driving growth and revenue:

  1. Gather more information from customers that hate you, are apprehensive about you, or don’t know you to identify opportunities to enter into new markets.
  2. Talk to more customers and answer more customer emails.
  3. Have more lunches with customers.
  4. Focus on products, services or solutions currently not being offered in the industry because realizing an opportunity in this aspect will prompt first-to-market revenue opportunities.
  5. Invest in your most profitable products, services or solutions and do away with the ones that erode profitability. For example, Southwest Airlines differentiated itself by not getting into the food business (low-cost business design) like its competitors instead it focused on providing customers with a great experience instead.
  6. Gain strategic dominance in atleast 2 or more of the following  (e.g., branding, patent, copyright, value chain control, 2 year product lead, 20% cost advantage, control distribution, supply control, customer information flow, unique organizational culture, et cetera) “The Profit Zone by Adrian Slywotzky”
  7. Stay abreast of industry and customer behavior and purchasing changes for the purpose of redesigning your business design to meet these new demands.

A Visual Management Approach to Accounts Payable

Purchase order approval audit trails and visual bill entry controls can be an effective way to reduce the time it takes to resolve Accounts Payable errors and keep your vendors happy.

Visual management allows for standardized visual controls that are visible to all Accounts Payable (and also accounting team) on how approvals should be obtained for a purchase order, how to document these approvals, and how to enter bills into the accounting software. Visual controls are effective because the accounting team will see them everyday and there should be a constant review of them and essentially they should all be processing Accounts Payable the same way.

Visual controls are like visual checklists for your Accounts Payable team. These controls should be placed in high traffic areas where your accounts payable team will see them. A copy should be placed by each members desk as well and update them of course accordingly to business changes.

For recurring fixed bills, automation is a given. For example, lets say company HBN gets billed from Microsoft $17.95 for a productivity application every month a recurring transaction can be created in Quickbooks that will automatically create the bill every month. This significantly reduces manual entries and overall cycle time.

To reduce manual entries of non-fixed expenses you can create templates in Quickbooks (or other accounting software) in which they can be duplicated and make the changes needed per your company’s data entry controls and new bill specifications (purchase order, invoice #, et cetera).

Critical KPI metrics that your company should be tracking and analyzing in regards to Accounts Payable are the following:

  • Total Cost of an AP invoice
  • Overall time to complete the AP process
  • Overall time to resolve an AP error
  • Percentage of manually entered invoices
  • Number of full-time employees that perform the AP process, per 1 million (billion) in revenue
  • Percentage cost to perform the AP process as a percentage of total process cost

You should periodically compare these metrics with industry and competitor data to see where you stand and where you need to improve.

In conclusion, standardized visual controls for Accounts Payable is a great way to ensure the AP process is done the same way by all AP personnel.

The Paid vs Unpaid Internship Conundrum

To be paid or not to be paid. That is the question. The debates are fierce in regards to internship compensation. Some consider since interns are learning they are not contributing value to the bottom line but that all depends on the company’s internship program.

For example, lets say company ABC prides itself on a well-rounded on-hands internship experience, meaning interns actually work on high priority projects and actually meet with clients or work on product/service optimization efforts. Suppose these interns are specifically chosen for their entrepreneurial spirits, intelligence and grit. Reasonable compensation would be warranted in this instance.

On the other hand, company THG rarely involves interns in projects or meetings with clients and mostly has them run errands. This would not be beneficial for the intern as they are not learning anything but when you take intern economics into consideration reasonable compensation is also warranted.

What is intern economics? Companies must consider the intern’s transportation, professional work wear expenses, lunch expenses, et cetera. Some companies may consider this not their problem but what if they find a great smart intern that has great potential but is not able to afford the transportation costs? A great mind is a terrible thing to waste.

To ensure there is a balance between value received and experience gained employers need to create internship programs that engage interns in projects where they will learn new skills but also make significant contributions to the success of the project. For example, say company THG starts to include marketing interns in data analysis and KPI reporting while being groomed by a seasoned Data Analyst and quickly learn to assess critical variables that can drive campaign optimization efforts. Value is achieved and experience is gained here.

Intern compensation should be reasonable and by no means extravagant ($200-$500/mo). Companies should value their interns just as they value their employees because they might find a “super intern” that they won’t be able to let go.

Contact me now to create your own Value Focused Internship Framework here

Lean Wednesday Tip

“Did you know that if your company leases its space from a multiple office building you can have your key financial representative analyze how utility charges are distributed amongst all tenants. This can help you realize savings and offer a negotiation opportunity based on your company’s utility use.”

On-boarding Employees: Where are the supplies?

 Onboarding a new hire is stressful enough. Paperwork needs to be done, work area needs to be set up, et cetera. But no one remembers about supplies. Utilizing Lean Six Sigma methods and tools like 5S, visual management and Kanban to remove office waste is a great way to have a supplies inventory system that ensures all employees know where each item is kept and are aware of what is considered to be low inventory. This will ensure an order is placed in a timely manner to avoid any impairment in daily business operations or having to run out to your local supplies store and grossly over-pay.

When all supplies are cataloged, organized, labeled, tracked in Excel and this information is readily available to employees; waste is reduced in terms of time looking for supplies, productivity time wasted and money wasted. Ensuring employees know where all supply items are kept will significantly reduce time and productivity wastes. They should also be aware of what is considered to be low inventory (Zero is not acceptable) because this will allow immediate and timely replenishment.

For example, you would start by creating an inventory tracking Excel sheet like the one below (you can personalize it as you wish). You can set it up in Google Sheets and share with your team. You can encourage employees to make notes on whether items should be made more accessible to them (move printer closer to marketing team, et cetera) or add additional items to the list that will help them enhance their productivity.

In short, those that prepare and organize their office supplies inventory systems effectively reduce the most critical waste which is time and then of course, money.

Continuous Budgeting & The What Ifs

It is always good to be prepared. In business being unprepared for the unexpected could lead to loss of clients, reduced profits, damaged reputation, et cetera. Small business are not exempt from this either. Budgets and Forecasts need to include a reserve for the What ifs, such as, what if the office gets flooded?, what if a machine breaks down and a replacement is required ASAP?!, What if our supplier’s plant gets flooded?

Many companies use historical budgets (utilizing and analyzing past expenses from 3-4 past fiscal periods) to see revenue and expenses trends and using this information to create the current budget. The problem with this budget method is that it does not consider the future, therefore, it is impaired by the unforeseen. To minimize this risk, companies should assess all business operation risks and add reserves for the accounts that have “high budget risks”.

For example, let’s say your business is growing and you just finalized a big contract deal, but this is now the 2nd quarter of the fiscal year. Now you have to analyze sales, hiring and purchasing forecasting data and update the budget accordingly. This is also true when you lose a big client, you have to be prepared to revise your budget despite efforts to replace the lost client to ensure profitability at the end of the year; meaning cutting costs. budget-clipart-587364-ze-budgeting-and-savings-in-your-p-Stock-Photo

Continuous budgeting ensures that your company is abreast of all risks, revenue and expenses trends that are and could affect the company. Companies that have a frugal mindset (e.g. Apple, Microsoft, Google) and hoard their cash are always prepared for the worst. Historical budgets essentially just demonstrate the past and provide a budget amount base for all your accounts but you have to ensure sales demand, hiring, purchasing and risk data is taken into account to finalize the budget properly and update accordingly per any changes in the business.

 

The Customers that HATE you bring in the most valuable insights

 When utilizing the Voice of the Customer to glean insights don’t just target the customers that love you. When you take the time to really listen to the customers that hate you and turn their pains into solutions that is when you actually drive growth for your company.

Why target customers that hate you, you may ask? They have valuable insights on how your product or service can improve and can inspire you to create solutions that are currently not offered in the industry (first to market opportunities).

cust-service1Companies that are customer focused stay on top of customer pains and actually listen to them. They take more meetings with customers and work to turn client requirements into products, services or solutions.

The questions are:

Why do you hate us and what can we do to change that?

What are we doing wrong?

What are your pains?

When you acquire the answers to these questions then you can brainstorm ideas for products, services or solutions that will solve these pains. As a customer focused company you can’t be afraid to ask the hard questions. By turning customers who hate you into customers that love you will not only increase your client base and revenue but also make your competitors run for their money.