This article sheds light on key elements of the offer letter and employment contract and their differences, helping businesses make better decisions when hiring.

Contents
What is an offer letter?
What is an employment contract?
Differences between offer letter and employment contract
Best practices for writing offer letters
Best practices for drafting employment contracts
FAQ

What is an offer letter?

An offer letter is a written document that an employer provides to a candidate chosen for a job position. It indicates the employer’s intent to hire in a formal way, outlining the main job details.

Organizations typically extend offer letters to prospective employees via email before providing a detailed employment contract.

The offer letter has multiple purposes in the hiring process:

• Clarity and confirmation: The primary purpose of an offer letter is to provide a formal written acknowledgment of a job offer to the selected candidate, clarifying the company’s intent to hire them.
• Setting expectations: It establishes the groundwork for the employment relationship, offering a snapshot of what the candidate can expect in their new role and what the company expects from them.
• Facilitating decision-making: By presenting the key terms of the job offer in writing, the candidate is better equipped to make an informed decision about accepting or declining the position.
• Indicating professionalism and branding: An offer letter reflects the company’s professionalism, potentially reinforcing the company’s reputation, employer brand, and employee value proposition (EVP).

Employees who have received a highly effective offer letter are 17x more likely to report feeling emotionally connected to their organization.

Source: BambooHR

Common elements of an offer letter

A typical job offer letter includes the following:

• Job details: Job title, department, and a brief description of the role and its responsibilities.
• Compensation: Outlining the salary, potential bonuses, benefits, and other perks or allowances.
• Employment type: Specifying whether the role is full-time, part-time, contract-based, temporary, etc.
• Reporting structure: Information about to whom the candidate will report.
• Terms and conditions: Brief mention of essential terms of employment, such as probationary periods, if any.
• Response due date: A timeframe within which the candidate should respond, either accepting or declining the offer.
• Contact information: Details of a point of contact for any queries regarding the offer.

Legal implications and enforceability of offer letters

While the offer letter may contain terms that both parties agree upon, it typically doesn’t hold the same legal weight as a formal employment contract. Its enforceability is, therefore, limited.

Unless specified otherwise, the employer can usually revoke offer letters without notable legal consequences as long as no discriminatory or unethical practices are involved.

If an employer makes false promises or misrepresents terms in an offer letter, their reputation can be at risk.

What is an employment contract?

An employment contract is a formal, legally binding agreement between an employer and an employee. It outlines the rights, responsibilities, and obligations of both parties during the employment relationship.

The contract:

• Aims to protect the company’s interests as well as the employee’s rights
• Serves as a documented agreement that outlines mutual expectations and terms that both the employer and employee agree upon
• Ensures transparency and sets a clear framework for the entire duration of the employment

There are different types of employment contracts, such as permanent, part-time, and temporary contracts.

Common elements of an employment contract

A standard employment contract covers:

• Job details: This includes the job title, duties, responsibilities, and to whom the employee reports.
• Duration of employment: Specifying the start date and potentially an end date, particularly in the case of temporary or contract positions.
• Compensation: Details on the salary, wage rate, benefits, bonuses, and any other compensation-related items.
• Working hours: Information about regular working hours, breaks, and overtime provisions.
• Benefits: Descriptions of health benefits, retirement plans, paid time off, and other employee perks.
• Confidentiality and non-compete clauses: Clauses to secure company data and restrict employees from working with direct competitors for a certain period post-employment.
• Termination provisions: Guidelines on how either party can terminate the employment contract, including notice requirements and grounds for immediate termination.
• Dispute resolution: Methods agreed upon for resolving any disputes related to the contract, such as arbitration.
• Jurisdiction: Specifying the legal framework and location for any contractual disputes.

Legal implications and enforceability of employment contracts

An employment contract is a legally binding document that carries significant weight for both the employer and the employee. Once agreed upon and signed, If someone doesn’t follow the agreement, they might face legal problems.

This contract not only safeguards an employer’s proprietary information and sets clear job expectations but also assures employees of their compensation and protects them from unjust termination or job changes. However, the contract’s terms must be lawful; courts could deem any unfair or overly restrictive clauses unenforceable.

Differences between offer letter and employment contract

Both an offer letter and an employment contract are formal documents used in the hiring process that outline key aspects of a job position, such as the role, compensation, and conditions of employment.

These documents establish a clear understanding between the employer and the prospective employee regarding the key aspects of the employment relationship.

However, they’re not interchangeable. Let’s look at the main differences between an offer letter and an employment contract.

In essence, while both documents are integral to the hiring process, they serve different strategic purposes. The offer letter attracts and engages, while the employment contract establishes, protects, and formalizes.

By understanding these nuanced strategic differences, organizations can better navigate the delicate balance between enticing potential employees and ensuring all legal bases are covered once the candidate decides to join.

From a strategic product management lens, the offer letter can be seen as the “Frontend” of the hiring process, the part that users (candidates) see first and interact with.

The employment contract is more like the “Backend”, the infrastructure that ensures everything runs smoothly and maintains the integrity of the relationship.

When to use offer letter vs employment contract

After interviewing a candidate, use an offer letter to present the job opportunity. Once they accept the offer, use an employment contract to officially set up the employment terms.

Remember, an offer letter is often the first official document a candidate receives from your organization. Investing time and thought into its creation can lay the foundation for a long-lasting and positive working relationship.

Best practices for writing offer letters

You can improve your offer acceptance rate by creating offer letters with the following best practices in mind:

• Use clear language: Ensure the offer letter is written in easy-to-understand language, outlining the job overview, start date, salary, and compensation package. Use the official company letterhead and signature in the document.
• Mention additional benefits: Beyond salary and basic compensation, include other perks such as health benefits, retirement plans, stock options, workplace amenities, and learning and development opportunities. This gives a more complete picture of what the candidate can expect.
• Treat your offer letters as a marketing tool: Use the offer letter to showcase the unique aspects of your company and the role. Emphasize your company’s unique selling points, like exciting projects or great team culture. This will make the offer more appealing and help candidates see the value in joining your team.
• Highlight contingencies: Include any necessary contingencies like background checks or drug tests, and set a clear response deadline.
• Provide contact information: Offer contact details from HR or the hiring manager for any queries, and personalize the greeting by addressing the candidate by their name.
• Include company culture: Your company culture and values should shine through your offer letters, helping candidates understand your work environment and see if they fit within your corporate ethos.
• Offer a warm closing: Use a warm closing in the offer letter, expressing excitement about the collaboration.

Best practices for drafting employment contracts

As employment contracts come with legal obligations, it’s essential to get them right.

• Detail the role and compensation: In your employment contract, outline the roles, responsibilities, and performance expectations of the positions. Clearly define the compensation package, including bonuses, allowances, and benefits.
• Include terms and policies: Specify probationary periods, leave policies, conflict resolution methods, and the process for making changes to the contract.
• Outline work environment: Describe the working hours, hybrid or remote work policies, and contract renewal and extension terms. You can also highlight your code of conduct policies and employee handbook.
• Address asset management: State policies regarding using equipment for work and the return of company assets upon termination.
• Include the essential clauses: Ensure that clauses like NDA and non-compete are outlined in your contracts where relevant.
• Specify termination processes: Your employment contracts should include notice periods, final settlements, and other end-of-contract procedures.
• Consult legal counsel: Engaging with legal professionals ensures that your employment contracts comply with current labor laws and regulations. Legal counsel can also help tailor the contract to meet specific needs while safeguarding against potential legal issues.
• Ensure flexibility for future changes: Design the contracts with provisions that allow for adjustments or amendments as necessary, reflecting changes in company policies, job roles, or legal requirements. This flexibility ensures that the contract remains relevant and applicable over time, adapting to evolving circumstances.

Key takeaway

Offer letters are preliminary, outlining job details and the employer’s intent to hire, with limited legal enforceability. They set initial expectations and facilitate the candidate’s decision-making process.

Employment contracts, in contrast, are detailed, legally binding agreements that formalize the employment relationship, specifying comprehensive terms like job responsibilities, compensation, and termination conditions.

While offer letters serve to engage and confirm employment interest, employment contracts provide a clear, enforceable framework for the entire employment relationship, protecting both the employer’s interests and the employee’s rights. Understanding the distinct roles of these documents is crucial for businesses to effectively manage hiring and maintain legal compliance.

FAQ

The post Offer Letter vs Employment Contract: 10 Key Differences appeared first on AIHR.

This comprehensive guide will help break down the nuances of different types of employment contracts.

Contents
What is an employment contract?
Benefits of using employment contracts
Types of employment contracts
FAQ

What is an employment contract?

An employment contract is a formal legal agreement between the employee and the employer. It details the conditions of employment and the responsibilities of each party.

Employment contracts enhance an employee’s understanding of their role and expectations while also mitigating future risks for the organization.

Benefits of using employment contracts

Written employment contracts protect against legal risk in cases where the conditions laid out in the contract are not upheld. Having formalized agreements can assist in resolving disputes amicably and swiftly, minimizing disruptions to the business.

Moreover, they act as a guard against confidential information leaving the company and guide compliance with federal and local regulations.

An employment contract may also provide a sense of job stability and clear expectations of success in the role for the employee.

This structured approach to employment helps promote transparency and trust in the employee-employer relationship.

Types of employment contracts

Written employee contracts are the most common form of work agreement. The written format is necessary for an employment contract to be recognized as formal. Other formats include oral and implied contracts.

Further, employment contracts can be categorized based on their duration, nature of work, and legal status. Each type of employment contract has its own unique purpose and legal standing, a blueprint for how and when work is performed.

Let’s have a look at the most commonly used contracts.

1. Permanent employment contract
2. Part-time employment contract
3. Fixed-term employment contract
4. Temporary employment contract
5. 1099 employment contract
6. Casual employment contract
7. Internship contract
8. Apprenticeship agreement
9. Remote work agreement

1. Permanent employment contract

Permanent employee contracts are the most common type of employment contract in the United States, which includes about 60% of the workforce. They are used for ongoing, continuous employment unless the employer or employee decides to terminate the relationship.

These contracts can be used for salaried, hourly, part-time, or full-time employees.

Most contracts within the US are so-called at-will employment contracts in which either party can terminate the employment relationship for any reason, with or without notice.

A permanent employment contract typically includes the following elements, which are also present in most standard employment contracts:

2. Part-time employment contract

A part-time employment contract is a type of permanent or fixed-term employment contract that is used for employees scheduled to work fewer hours a week than what is considered a full-time employee.

Most companies consider less than 30 hours a week, on average, to be part-time. Working hours can vary week to week (e.g., 10 hours one week, 20 the next).

3. Fixed-term employment contract

Contrary to permanent contracts, fixed-term employment contracts have a fixed end date or conclude based on the completion of a project. In other words, fixed-term contracts must include the duration of employment.

Typical uses of this contract include seasonal business needs, covering parental leave, or specific project work.

Employees with fixed-term contracts usually have similar conditions, wages, and policies as permanent employees.

Organizations may choose to renew, extend, or terminate the contract once expired.

4. Temporary employment contract

A temporary employment contract is used for the flexibility of filling a role. These contracts are short-term in nature (up to one year in the US) and have a specific end date. They exist between a company and an individual, or more commonly, a staffing or employment agency on behalf of an individual. 

Temporary employment contracts differ from fixed-term contracts due to their short-term nature. Although both have a duration limit, fixed-term contracts can still be long-term. Temporary contracts usually do not need a notice to terminate the relationship on either side. 

When creating these contracts, it’s important to include:

• That the engagement is temporary in nature
• The length of employment
• The work that is expected.

Unlike part-time or fixed-term contracts, temporary employee contracts do not usually receive benefits as part of the work agreement. Some companies may add a temp-to-hire statement if they intend to transition the temporary worker to a permanent employee.

5. 1099 employment contract

A1099 employment contract is a signed legal agreement between the independent contractor and the company that hires them for work; however, they are not considered employees in the true sense of the word.

This type of contract is also referred to as “1099 Agreement,” “Independent Contractor Agreement,” or, for freelancers specifically, “Freelance Employment Contract.” 

1099 employment contracts differ from other work contracts because the contractor is not an employee of the company, and it acts simply as an agreement of work. This means the contractor has control over how the work will be done. There are no limits to the duration or number of hours within the contract.

The 1099 contracts should describe the non-employee relationship, ownership of work, scope of work, timelines, payment, conditions and terms of agreements, confidentiality, liability and insurance, and termination notice.

Examples of 1099 workers include freelancers, consultants, gig workers, sole proprietors, or self-employed workers.

6. Casual employment contract

A casual worker is a less common form of employment within the US. It’s someone who works on an as-needed basis. This type of employment arrangement is also known as flexible work.

A casual employment contract is an employment contract without a guarantee of hours or intention of full-time employment, and the employee is not obligated to accept the work once assigned. 

Casual employment contracts differ from part-time employment contracts in that the workers are not considered ‘regular’ employees and do not usually receive associated benefits. Unlike temporary contracts, casual employees are paid and hired directly by the employer, without third-party involvement.

Although not required, casual employment contracts can include a duration or kept indefinitely and should clarify the casual relationship. 

7. Internship contract

An internship contract is a mutually beneficial employment agreement between an intern (usually a student providing the labor) and an employer in which the intern gains skills, training, and exposure to a field.

Internships are intended to support learning experiences, are short-term in nature, and can be paid or unpaid.

Even though this contract includes a start and end date, it is conceptually different from other short-term employment contracts (e.g., temporary or fixed-term agreements) because the contract intends for the worker to learn skills and connections during the engagement and is usually meant for students.

Internship contracts also differ from fixed-term contracts in that interns are not generally eligible for benefits if they work under 120 days.

8. Apprenticeship agreement

An apprenticeship, a foundational form of training in history, is a structured program that combines on-the-job training with classroom learning, typically aiming to build expertise in a specific trade or profession through hands-on learning and development.

Regulated by the US Department of Labor (DOL), an apprenticeship agreement is a written agreement between the apprentice and the sponsor/employer and outlines the terms and conditions of the apprenticeship. This agreement usually lasts one to six years.

In contrast to internships – apprentice agreements have specific regulations and are formally registered with the DOL. They are more detailed about the program due to regulations, are longer-term, require a “sponsor,” and focus on trade occupations specifically.

As a regulated program, a comprehensive apprenticeship agreement is crucial to compliance. HR professionals should include the apprentice and program details, the salary/wages and criteria for increases, contact information, terms and conditions, duration, working hours, and the trade specific to the apprenticeship.

9. Remote work agreement

With the growing popularity of remote work, remote work agreements have become a common addendum to employment contracts.

A form of flexible work arrangements, remote work agreements document an employee’s right to perform work outside of an employer’s worksite. The employee does not have to live locally to the employer’s worksite, and the employee is not expected to be onsite in any regular capacity.

Common inclusions for remote-work agreements are:

• Job details
• Changes in compensation or benefits
• Expense policies
• Equipment and technology information
• Internet or connectivity provisions
• Expected working hours
• Any other stipulations, such as out-of-country work or travel.

Key takeaways

HR professionals should have a foundational knowledge of different types of employment contracts to ensure compliance, protect employee rights, and minimize risks for the organization.

Equipped with this expertise, they can tailor contracts to specific roles and circumstances, enhancing the effectiveness and legal soundness of every employment relationship.

FAQ

The post 9 Types of Employment Contracts You Should Know appeared first on AIHR.

In this article, we’ll explore how to measure employee experience, evaluate the results, and turn them into meaningful action.

Contents
What is employee experience (EX)?
Why measure employee experience?
How to measure employee experience
Best practices for measuring employee experience
FAQ

What is employee experience (EX)?

Employee experience (EX), in its simplest form, is how employees perceive their stay at your organization from when they apply for a job to after they leave.

It encompasses various dimensions – ranging from the physical workspace and technological tools being used to the organizational culture, professional growth opportunities made available, and social interactions they have with colleagues or superiors.

It’s more than just a collection of daily experiences at work; EX profoundly shapes an employee’s perceptions about their employer and impacts their decision to stay or leave. 

Why measure employee experience?

87% of employee experience experts say that a great employee experience helps retain and attract talent. However, only 51% of employees feel that their organization is delivering on the experience they promised.

By measuring employee experience, you can uncover and fix issues and discrepancies to reap the benefits of a satisfied and engaged workforce.

Let’s break down the reasons why you should measure employee experience.

Enhanced productivity and performance

Research shows that superior employee experience (EX) may lead to enhanced productivity. 

Employees who feel satisfied, empowered, and valued are more motivated to perform at their highest level. They significantly contribute to organizational goals, which can result in an over 50% increase in revenue.

By focusing on optimizing the employee journey – from end to end – companies can foster a work environment that stimulates both individual and team performance.

Retaining talent

Monitoring and enhancing EX levels significantly contributes to improving retention rates. Employees who resonate with their company culture and find meaning in their work stay longer in their organizations.

Examining facets like workplace habits or preferences provides employers invaluable insights related to employee experience – which ultimately feeds into long-term staff retention strategies.

Making informed decisions related to HR practices

A robust method of measuring employee experience offers in-depth insights into how employees perceive things such as career development opportunities or even intricate details like office seating arrangements.

This helps HR shape policies and practices strategically and make smarter decisions that maximize the workforce potential while actively minimizing discontentment factors.

Enhanced customer experience

A happier workforce equals happier customers. Companies with great employee experience report 2X as high customer satisfaction levels compared to businesses scoring low on employee experience.

A well-executed EX strategy will aid your organization in delivering higher standards of service, creating a ripple effect that extends far beyond merely measuring employee experience for internal benefit.

Innovation, growth, and improved organizational performance

As we’ve already alluded to, keeping your finger on the pulse of EX can set the scene for broader innovation and growth within an organization.

Employee experience goes hand in hand with employee engagement, which helps foster an innovative culture and a passionate commitment to ongoing improvement—an infallible recipe to drive the company performance northward.

To sum it up, measuring employee experience isn’t simply good practice, but it can bring numerous strategic benefits that make a profound impact on organizations and their competitive standing in the market.

How to measure employee experience

Employee experience is a multifaceted and intangible concept, which is not easy to quantify at first sight. Successfully measuring it involves defining relevant employee experience metrics and methods of measurement to collect the data.

Let’s take a closer look.

1. Define and track employee experience metrics

Employee experience metrics allow organizations to gain insight into the wellbeing, satisfaction, and productivity of their teams. The following metrics serve as good indicators of the employee experience levels at your organization:

2. Administer surveys

Once you know what insights you’re hoping to gain, you can start collecting data. Surveys are an indispensable tool for measuring employee experience.

There are a couple of types of surveys that you can utilize.

Employee experience surveys

Employee experience surveys provide an avenue for employees to confidentially share views about their workplace, its leadership practices, and its culture. Organizations typically conduct employee experience surveys annually, bi-annually, or quarterly.

Including both quantitative and qualitative questions in your survey will provide you with comprehensive data on your respondents’ perspectives.

Quantitative questions, usually closed-ended, help gather structured data that you can do a statistical analysis of, revealing patterns and trends in responses.

On the other hand, qualitative questions, typically open-ended, elicit descriptive and narrative responses that dive deeper into the nuances and complexities of participants’ experiences and feelings. These responses shed light on the ‘why’ and ‘how’ behind the numbers, uncovering the underlying motivations, beliefs, and emotions that drive behaviors and opinions.

By incorporating both types of questions, you can capture the breadth of information and the depth of insights.

Employee experience survey questions examples

Next to the eNPS question “On a scale from 1 to 10, how likely are you to recommend our organization as a place to work to your friends and family?”, examples of quantitative employee experience survey questions include:

On a scale of 1 to 10, with 1 being “Not at all” and 10 being “Extremely”:

• How satisfied are you with the opportunities for professional development within the company?
• How confident do you feel in your current role and responsibilities?
• How supported do you feel by your direct supervisor or manager?

Qualitative questions you can consider covering in your survey are:

• In your opinion, what 2-3 changes could be made to improve the overall work environment and culture?
• What aspects of our company’s culture do you value the most?
• If you could recommend one thing to improve team collaboration, what would it be and why?

Pulse surveys

Pulse surveys are short, frequent surveys designed to quickly capture employee feedback and continuously gauge overall sentiment about their workplace experience.

Focusing on a few key questions, they are less burdensome for employees, leading to higher response rates. These surveys can help organizations zoom in on current events or specific workplace issues that impact employee experience.

However, regularly collecting data can lead to an abundance of information. Organizations must have the capacity and tools to analyze and act on this data to prevent it from becoming overwhelming or underutilized.

It’s crucial to use pulse surveys strategically and in combination with other feedback mechanisms to ensure a comprehensive understanding of the employee experience.

New hire surveys

New hire surveys help you capture insights about one of the most crucial “moments that matter” in an employee’s journey: their onboarding. This initial phase sets the tone for an employee’s tenure with the company, shaping their perceptions, expectations, and overall sentiment toward the organization.

You can glean valuable feedback about the effectiveness of your onboarding processes, the clarity of role expectations, and the cultural immersion experience.

This feedback not only provides a snapshot of the new employees’ experience but also offers actionable insights for organizations to refine their onboarding processes so that they create a positive and lasting first impression.

3. Conduct qualitative interviews

One-on-one dialogues with employees afford a deeper understanding of the intricacies at play regarding the overall employee experience.

By conducting employee interviews, you can complement and enrich your survey data. They provide you with an excellent opportunity to ask open-ended questions and give your employees space to express their opinions and perceptions.

Two common types of interviews to gather qualitative data are stay interviews and exit interviews.

Stay interviews

These discussions aim to find out why employees opt to remain with an organization. HR professionals can then identify the positive aspects of their working experiences that should be reinforced or replicated.

Exit interviews

Exit interviews help you assess why employees leave your organization and how they see their time spent working for you. These discussions allow you to better understand the challenges our employees face at work, providing insights into potential corrective measures.

By adopting these varied approaches blending both quantitative and qualitative employee experience measurement methods, businesses can effectively gauge worker sentiments – thereby improving employee experiences and driving organizational success. 

Best practices for measuring employee experience

Measuring employee experience effectively goes beyond defining relevant metrics and conducting surveys and interviews.

To get a comprehensive view of employee experience at your organization and put your findings into action, you need to follow these five best practices.

Setting clear objectives

Begin with a set of distinct objectives that align with your company’s overall business strategy. This is crucial for accurately evaluating the employee experience.

Why exactly do you want to assess employee experience? Are you aiming to increase productivity or retention rates or encourage higher creativity levels across teams? 

Your end goals play an indispensable role in determining which part of the employee journey needs focus and what type of feedback you need from the employees.

Conducting research across different employee groups

When you’re measuring employee experience, you need to recognize diversity within your workforce. That helps you accurately capture different facets of the work experiences of diverse groups in your organization.

Make sure to survey or interview employees from diverse backgrounds, different job levels, departments, and lengths of service to understand the unique challenges they might face.

Overcoming survey fatigue and ensuring participation

It may be tempting to send surveys left and right for comprehensive data collection when measuring employee experience. However, you should really avoid doing so. Survey fatigue can quickly pile up, draining previously enthusiastic participants’ eagerness to provide valuable insights.

To keep engagement high and maximize response rates, make sure your surveys are succinct yet thorough. Carefully plan your survey schedule to not overwhelm your team. For example, you can send out a comprehensive survey quarterly or bi-annually, with a couple of shorter pulse surveys in between.

It also helps to effectively communicate the purpose behind these assessments, so employees see them not as tasks but as avenues towards improving their work lives. You can, for instance, share examples of initiatives you implemented based on employee feedback.

Guaranteeing confidentiality

Nothing squashes honesty quicker than a sense of insecurity surrounding responses’ anonymity, which makes maintaining confidentiality critical to effective employee experience measurement. 

If you use external applications for gathering feedback, emphasize their confidentiality features.

You should also invest in fostering an environment where employees feel they can honestly express thoughts and concerns without fear of retribution. Doing so will not only amplify trust but also provide you with more authentic data to work on.

Acting on employee feedback

Once you’ve gathered and analyzed employee feedback, it’s time to take action. Prioritize high-impact initiatives and create a plan for how to implement these.

Employees need to believe that their input sparks real change; otherwise, they might lose engagement in such processes altogether. Recognize employee contributions and communicate plans about future improvements based on their input clearly. Transparency here fosters a sense of responsibility among the staff and improves morale during periods of change.

Ultimately, measuring employee experience is a cyclical process. It starts from setting clear objectives leading up each step to enacting feedback-led changes and then identifying newer areas for improvement continuously.

Key takeaway

Staying on top of your employees’ experiences at work allows companies to detect dissatisfaction early enough and tackle issues before they develop into bigger problems. It’s a great way to improve HR practices and design employee experience that promotes productivity, talent retention rates, and ultimately a better workplace environment.

Relevant employee experience metrics help you quantify the concept and solidify your measurement process. Surveys and qualitative interviews give voice to your employees, offering rich insights into the workers’ perceptions of the workplace.

However, it’s the organization’s responsiveness to feedback that significantly impacts the effectiveness of measuring employee experience. It is key to not just listen but also take action based on employees’ feedback for positive changes.

FAQ

The post Measuring Employee Experience: A Practical Guide for 2024 appeared first on AIHR.

Contents
What is employee experience?
What is employee engagement?
4 key differences between employee engagement and employee experience
How to measure employee experience and engagement
How to improve employee experience and engagement
FAQ

What is employee experience?

Employee experience refers to the employee’s journey within your organization, from their very first interaction through onboarding and daily work routines until after their eventual departure.

Many aspects impact employee experience, such as the quality of interpersonal relationships within the workplace, leadership style, and opportunities for professional development. However, there are three key components that form the overall employee experience:

• Physical experience: The physical experience relates to the work environment’s sensory aspects, from office layouts and noise levels to furniture comfort. All of these directly influence how employees feel about their work and the organization, impacting their productivity and energy levels.
• Digital experience: Digital experience centers on the technology and tools that employees use to carry out their tasks and collaborate with their team members. Intuitive and efficient tools for communication, accessing resources, and maintaining team connection are paramount for all employees.
• Cultural experience: Cultural experience embodies the company’s personality, including its values and daily behaviors. It’s the intangible elements that dictate the feel of the work environment. A positive cultural experience fosters creativity, collaboration, and empowerment, enabling employees to innovate, embrace new systems, and work to achieve the organization’s goals.

Each component contributes to how employees perceive working for your organization, directly influencing feelings, motivations, and attitudes toward work. It’s worth noting that even seemingly minute elements within these areas might tip the scales for your employees dramatically.

78% of EX experts say that senior management is paying more attention to EX than ever. And it’s for a good reason – organizations that deliver top employee experience report double the return on sales compared to their lower-rated counterparts.

What is employee engagement?

Employee engagement is the level of an employee’s dedication, commitment, and enthusiasm toward their work and the organization.

The key aspects that fuel employee engagement are:

1. Emotional commitment: Central to understanding employee engagement is acknowledging emotional or affective commitment. Engaged employees typically have a sense of affection for their roles, thereby investing not only their time but also their heart into their tasks.
2. Effective management: Research shows that 70% of team engagement is attributable to the manager. The more effective your managers are, the higher employee engagement your organization will have.
3. Aligned goals: Engaged employees share a clear vision of the organization’s goals, reciprocating them within their daily tasks. They feel that their individual efforts contribute to the larger mission, fostering a sense of purpose and belonging within the company.
4. Autonomy and active participation: When individuals feel trusted and empowered to make decisions and take initiative, they inherently feel more invested in their roles and the outcomes of their work. Highly engaged employees have opportunities to bring fresh, innovative ideas even to routine tasks, consistently pushing for excellence.

Developing an effective employee engagement plan that covers these elements helps businesses boost engagement and ultimately perform better. Highly engaged business units are 23% more profitable than teams with lower engagement levels. What’s more, Gallup estimates that globally, low employee engagement costs $8.8 trillion, accounting for 9% of global GDP.

4 key differences between employee engagement and employee experience

While the terms “employee engagement” and “employee experience” have different definitions, they are intricately connected. Understanding the differences between the two concepts can help your business strategize better approaches to foster both stellar employee experiences and high levels of engagement.

Think of it like this: Imagine that your organization is a ship. As such, employee experience could be seen as the entire journey embarked on by the crew—beginning when they first step onboard (the recruitment process) until they touch dry land again (their exit). It encompasses every interaction, emotion, and event experienced in between.

On the other hand, employee engagement refers to how passionate, dedicated, and vested the crew members are during that voyage.

In other words, employee engagement is an outcome of employee experience. However, engaged employees contribute to a positive work environment, which, in turn, helps improve the employee experience for everyone.

McKinsey found out that people who report having a positive employee experience are 16x more engaged than employees with a negative experience. They’re also 8x more likely to want to stay at the organization.

Recognizing this relationship is crucial for any organization aiming to build a productive workforce. Successful organizations understand that fostering an excellent working environment can lead to more engaged employees. That, in turn, transforms into greater productivity and improved business performance.

Let’s summarize the differences between employee experience vs employee engagement.

Employee experience and employee engagement feed into one another. Consequently, neither aspect should be overlooked or undervalued in an organization.

How to measure employee experience and engagement

As an organization, it’s essential to know how engaged your employees are and understand their overall experience at work. Only then can you make improvements to the employee journey that will result in increased employee engagement and, ultimately, better organizational performance.

There are a number of methods you can use to evaluate employee experience and engagement at your organization.

• Utilize employee engagement surveys: These are designed to gauge how invested employees feel in their roles and the organization’s shared visions and goals. Key areas to explore include job satisfaction, manager effectiveness, support opportunities, recognition, and alignment with company values. Opt for anonymous surveys. Anonymity often encourages more honest feedback, especially from disengaged employees.
• Examine the entire employee life cycle: For a comprehensive view of employee experience, you need to understand how your workers perceive its different stages, from the onboarding process to becoming alumni. For example, you can conduct new hire satisfaction surveys, usability assessments of work tools, stay interviews, exit interviews, and other types of evaluations to gain insights into how employees feel at various touchpoints of their journey with the company.
• Analyze relevant HR metrics: For instance, high retention can indicate that employees feel valued and are inclined to stay with the organization long-term. Conversely, high employee turnover might signify that your employees’ experience isn’t that great.
• Conduct frequent measurements: Instead of just annual reviews, regular analysis of different aspects of employee experience and engagement allows for timely interventions. That way, you can continuously improve the work environment for your employees.
• Engage in open dialogues: Foster an environment where employees feel comfortable sharing their thoughts, concerns, and suggestions. Regular feedback sessions, town hall meetings, or one-on-one discussions with managers can provide invaluable insights into the employee mindset.

Creating a workplace where employees genuinely enjoy their roles requires consistent and thoughtful efforts across various areas.

By consistently analyzing data and engaging in meaningful conversations, organizations can gain an accurate understanding of employee sentiments and identify areas for improvement. This approach enables the development of effective strategies that enhance both employee experience and engagement within the company.

How to improve employee experience and engagement

What exactly you need to improve in the areas of employee experience and engagement will depend on the needs of your employees and your organization.

However, there are some general best practices that you can follow to boost employee experience and engagement and enhance business performance. Here goes.

1. Seek feedback and act on it

While gathering feedback and analyzing the data is essential, acting on it is even more crucial.

When employees see their feedback being implemented, it reinforces trust, shows that their opinions matter, and demonstrates your commitment to improving both engagement and experience.

Let’s say that your analysis showed that your onboarding process doesn’t provide new hires with a good idea of what’s expected of them. Acting on this feedback could involve revamping the onboarding process to include an additional session with the manager to discuss the roles, responsibilities, and goals of the new employee, and a follow-up session after the first 30 days to clarify any ambiguities.

This not only addresses the immediate concern but also sets a positive tone for new employees, showing them that the organization values their success and is proactive in ensuring they have the tools and knowledge needed to thrive.

2. Recognize good work

Recognizing employee achievements plays a vital role in improving both employee engagement and experience. An “Employee of The Month” initiative, other employee recognition programs, or simply acknowledging quality performance during Monday morning briefings boosts morale in all quarters – from top-most executives to the ground-floor staff.

Remember, appreciated workers are often engaged employees.

3. Equip your workforce with the right tools

Digital employee experience has become an integral part of how employees feel about their working for you. Equipping employees with the right tools and technology is now a necessity with a profound impact on efficiency and productivity.

Make sure to utilize tools that are user-friendly and tailored to workers’ specific job functions. For example, your frontline employees will require different tools than the team members at the headquarters.

Beyond just individual tasks, it’s also essential to invest in tools that promote collaboration. This is especially important in a world where remote work is becoming more prevalent. Platforms that facilitate seamless communication, file sharing, and project management can significantly enhance productivity. They also help foster a sense of unity among teams, regardless of their physical location.

Employees who feel they have the resources to do their best work have a positive employee experience, resulting in higher levels of engagement and increased job satisfaction.

4. Promote work-life fit

Work-life fit refers to balancing work and life in a way that leads to satisfaction in both.

Different employees have different preferences. While some might want to climb the corporate ladder and are willing to put extra effort into that, others might prefer working shorter hours and dedicate the rest of their time to activities outside of work.

You need to design your HR practices with deep consideration of employee preference and go beyond a one-size-fits-all model. Consider offering sufficient days off, remote working opportunities (where applicable), flexible schedules, compressed workweeks, and other initiatives that enable employees to shape their work-life fit.

5. Ensure psychological safety

Employees should feel safe to take risks, voice their opinions, and make mistakes without fear of punishment. A culture of psychological safety encourages innovation, open dialogue, and a sense of belonging.

In a safe environment, individuals are more likely to share unique ideas, collaborate across teams, and actively participate in discussions, even if their views differ from the majority.

When employees believe their contributions are valued and that they won’t face retribution for expressing dissenting opinions or making honest errors, they become more invested in their roles and the organization’s success.

By actively promoting and maintaining a culture of psychological safety, companies enhance employee wellbeing and drive innovation and growth from within.

6. Offer professional development opportunities

Access to training and development opportunities helps equip your team members with the skills and knowledge required to excel in their roles and within modern work environments.

For example, you can offer workshops, courses, or even tuition reimbursement for further education and show you’re committed to your employees’ professional and personal growth.

Furthermore, employees are more engaged when they see a clear path for career progression within the organization. Regularly discuss career goals with your employees and provide them with opportunities for advancement or lateral moves to areas of interest.

7. Implement health and wellbeing programs

Physical, mental, and financial wellbeing directly impact employee experience and engagement. Yet, stress and burnout are common challenges for many employees.

Offering programs such as health check-ups, mental health and financial wellness resources, or fitness memberships can help mitigate these issues and show employees that the company cares about their total wellbeing.

Employees with high levels of wellbeing are more productive. Research indicates that higher wellbeing at work is positively correlated with increased business-unit level profitability.

Investing in the health and wellbeing of their employees essentially means investing in your organization’s own long-term success and sustainability.

Key takeaway

While employee experience and employee engagement are different workplace concepts, they are deeply interconnected. Creating a positive employee experience lays the foundation for high levels of employee engagement.

A positive employee experience, characterized by a supportive work environment, open communication, and opportunities for growth, naturally leads to higher levels of engagement. 

Conversely, engaged employees who are deeply committed and invested in their roles contribute to a more positive and collaborative workplace, enhancing the overall experience for everyone. 

For organizations, understanding and nurturing this symbiotic relationship is key to building a motivated, productive, and loyal workforce that drives sustained success and growth.

FAQ

The post Employee Experience vs. Employee Engagement: 4 Differences To Know appeared first on AIHR.

What is Human Resources?

Human Resources is both a function and a department within an organization. 

As a function, HR covers the processes, practices, and strategies to attract, develop, and retain employees who contribute to the company’s overall success.

As a department, it is responsible for managing HR activities from recruitment and onboarding, compensation and benefits, learning and development, performance management, and employee relations to separation or retirement.

HR is vital in aligning the organization’s business objectives and employees’ needs and aspirations. Through workforce planning, talent management, succession planning, and applying other HR best practices, HR professionals ensure that the organization has the required talent to keep operating and meet its long-term goals.

They maximize employee capabilities that will help drive organizational success by identifying the skills gaps, creating L&D programs, and implementing performance management systems.

Human Resources also refers to the workforce or people employed in an organization. In this view, HR recognizes that employees are a company’s most critical asset. Hence, they execute an HR strategy to create a supportive and engaging work environment that values employees’ contributions and wellbeing.

What is HR Management?

Human Resources Management (HRM) is a systematic approach to managing the company’s workforce to help meet organizational goals. Managing Human Resources involves overseeing all aspects of HR, such as hiring, training, compensating, engaging, promoting, and retaining employees. 

For example, your HR would look into hiring people who are a good culture fit for the organization so they stay longer and be more productive. Or implement various employee engagement strategies to motivate employees so they perform better.

Overall, HR Management’s role extends beyond administrative functions. It is instrumental in shaping the company’s strategic direction and fostering a thriving, inclusive, and high-performing work environment.

Strategic Human Resources

Strategic Human Resources, or Strategic Human Resources Management, refers to a more advanced approach to aligning HR strategies with the organization’s overall strategy and objectives. 

In HR strategic planning, the HR department works closely with the management team and business leaders to study current and future staffing requirements, determine skill gaps, and enforce HR tactics that will attract, grow and retain the most talented individuals.

It includes reviewing organizational and HR metrics to measure HR initiatives’ effectiveness on business results. It could also involve staying updated with the latest technology developments and market trends to ensure the company stays relevant and competitive.

What does HR do? HR functions

HR performs numerous Human Resources functions in an organization. Let’s go over the 12 key HR functions: 

• Human Resources planning – The systematic and data-driven practice of optimizing the company’s workforce. The goal is to ensure the company is adequately staffed with the right people to avoid surpluses or shortages. 
• Recruitment and selection – Attracting and hiring applicants that are best for the job, which involves many steps: writing job descriptions, screening resumes and shortlisting candidates, conducting job interviews, creating job offers, and onboarding the selected candidate.
• Performance management – The ongoing process of managing the employees’ performance and development in alignment with the company goals. It includes communicating and clarifying job responsibilities, expectations, and priorities.
• Learning and development – Providing opportunities to develop the employees’ skills and knowledge to improve performance, which ultimately leads to both the individual and company’s success.
• Career planning – Also called career pathing, HR provides guidance and ongoing support to help employees progress in their career, whether vertically (promotion) or horizontally (lateral transfers). Internal mobility helps organizations improve employee engagement and retention while reducing hiring costs. 
• Function evaluation – HR staff compares the different teams of the whole HR operation, which includes the quality and the availability of employees, job location, working hours, the economic situation, other job responsibilities, and how much value a job contributes to the organization.
• Rewards – An integral part of Human Resources duties, rewards are an essential motivator for employees. They can sometimes be the primary reason employees choose one company over another. Rewards include salary, perks, and benefits like health insurance, remote work, and performance-based bonuses. 
• Industrial relations – Maintaining good relationships with labor unions and other collectives and their members help in detecting and resolving potential conflicts before it escalates, especially during challenging situations like layoffs.
• Employee participation and communication – HR delivers relevant and timely information to employees. Maintaining open and honest communication fosters an environment of trust and support, which is vital to employee retention.
• Health and safety – A critical part of HR responsibilities is ensuring employees work in an environment compliant with health and safety guidelines to avoid injuries, illnesses, and deaths. 
• Wellbeing – Another key function of HR is looking after their staff’s mental, physical, and financial wellbeing because people work best when they feel best. This may include implementing wellness initiatives to address mental health, for example. 
• Administrative responsibilities – Performing administrative work like maintaining the HRIS where employees’ information is stored.

Why is Human Resources important?

The Human Resources function plays a pivotal role in the organization for various reasons. Let’s take a look at some of them. HR:

• Facilitates strategic workforce planning to align talent with business objectives.
• Executes effective talent acquisition processes to hire the best talent for the right position. 
• Helps foster a positive organizational culture by implementing practices that improve employee engagement and retention.
• Administers employee benefits and compensation that enhance employees’ satisfaction and financial security. 
• Can roll out initiatives to boost employee productivity by launching learning and development programs, performance management tactics, and incentive programs to motivate employees to do better.
• Can help the organization save money by optimizing recruitment processes or decreasing employee absenteeism or turnover. 
• Can boost employee morale by effectively managing conflicts, concerns, and grievances. 
• HR ensures compliance with employment laws and regulations to protect employees’ rights. 
• HR supports organizational development by building organizational capabilities and improving processes and strategies.

But how exactly does HR help the organization achieve its goals and objectives?

We can illustrate this with the HR value chain. Simply said, the HR value chain demonstrates the connection between HR Management activities and processes, HR Management outcomes, and the organization’s strategic goals.

Carrying out HRM activities results in positive HRM outcomes, which leads to achieving corporate objectives. Let’s break this down.

• HRM activities and processes – Daily tasks performed by HR, such as recruitment, training, and talent management. How well these activities are done indicates the efficiency of HR, and the goal is to achieve certain outcomes.
• HRM outcomes – HRM activities and processes aim to improve employee engagement, retention, competency levels, and performance, as well as decrease absenteeism. These are the HRM outcomes.
• Organizational objectives – Success in achieving HRM outcomes positively impacts the company’s ability to attain its strategic goals the company. These goals add value to the business and put the organization more viable in the long run. 

By understanding how HR creates value for an organization, HR professionals can ensure that their practices align with organizational objectives, ultimately contributing to the overall success and competitiveness of the business in the long run.

Human Resources examples

What does the Human Resources function look like in practice? Here are two examples of what HR does in two well-known organizations:

Google 

Google is renowned for its innovative HR practices that have earned it a reputation as one of the best places to work globally: 

• Flexible work arrangements – The company offers flexible work hours and remote working. They even permit their workforce to work on their projects for 20% of their time. These work arrangements promote work-life balance and increase creativity and innovation. Moreover, Google evaluates their employees’ productivity not by the number of hours worked but by results and contributions. 
• Data-driven HR – Google uses people analytics extensively in its HR practices to make informed decisions. They leverage data to gain insights into their workforce, identify trends, and tailor HR strategies accordingly. Google’s People Innovation Lab (PiLab) conducts research around “making work better in and outside of Google” and shares their findings with the world. For example, the company’s Project Oxygen analyzed massive amounts of internal data and determined what makes great managers, incorporating the findings into the company’s manager development programs and sharing their recommendations publicly.

FedEx

FedEx designs their HR strategies, policies, and initiatives to align with the principles of their ‘People-Service-Profit’ philosophy, ensuring that employees’ well-being and development are prioritized to drive excellent customer service, contributing to the company’s profitability. The company defines the three components as follows:

• People: Putting people first means valuing employees as the company’s most valuable asset
• Service: The focus on delivering exceptional customer service and ensuring that customers’ needs are met with efficiency and excellence
• Profit: By caring for its people and delivering outstanding service, FedEx believes it will generate long-term profitability and sustain business success

Prioritizing employee development and satisfaction has enabled FedEx to maintain an engaged and motivated workforce, leading to higher productivity and lower turnover rates.

The focus on customer service resulted in higher customer satisfaction levels, strengthening FedEx’s reputation in the logistics industry. By emphasizing long-term profitability through a well-supported workforce and exceptional customer service, FedEx has experienced steady growth and financial success.

Additionally, the PSP philosophy has helped shape a positive company culture where employees feel valued and committed to giving their best for the customers and the company.

The HR department

What does the HR department do?

HR department carries out HR functions like recruitment, rewards, and HR planning within an organization. The structure and responsibilities depend on the company’s size, structure, and industry.

Here’s a sample HR organization chart for a mid-sized business:

Who is above HR in a company?

The HR department usually reports directly to the CEO or other members of the C-suite, like the COO.

Sometimes, there might be multiple management levels, such as department heads or Vice Presidents, that lie between the HR department and the top executives. This varies based on the organizational structure.

Regardless of the structure, the ultimate authority remains with the executive leadership team at the top of the company hierarchy. 

HR roles

Depending on the structure and responsibilities of an HR department, the team will define what roles they need to effectively manage all aspects of Human Resources. By determining the right roles and responsibilities, the HR department ensures it can effectively support both the employees and the organization’s broader objectives.

Let’s take a look at some common HR roles.

HR Generalist

HR Generalist performs a broad range of HR responsibilities rather than a specialized HR function. They’re involved in activities like recruitment, compensation and benefits, performance management, training and development, and employee engagement. 

Typical responsibilities are:

• Assisting in recruitment and onboarding, like screening candidates, performing job interviews, conducting reference checks, sending employment offers, and handling company orientation and logistics for new hires
• Updating and maintaining employee files, benefits, and attendance records
• Assisting in payroll processing, which includes sick/vacation pay, bonuses, and benefits changes 
• Generating and submitting HR reports
• Producing internal documents like offer letters, appointment letters, salary slips, and warning letters
• Helping in the development and implementation of HR policies

HR Generalist salary

HR Generalist salary varies based on industry and location. According to Glassdoor, the average annual wage for an HR Generalist across all industries is around $64,800. On average, HR Generalist working in the telecommunications sector earns $62,086 annually, while those employed in financial services receive $71,818 annually.

Meanwhile, PayScale reports the average annual salary of HR Generalists to be $73,207 in New York and $61,899 in Dallas, Texas.

HR Specialist

Human Resources Specialists usually concentrate on a specific HR function. Their responsibilities also include assisting with other HR tasks, but their main focus is their area of specialization.

For example, an HR Specialist could be responsible for recruitment and onboarding in that case, their duties would include:

• Posting job openings
• Resume and phone screening
• Conducting background and reference checks
• Preparing onboarding kits for new hires
• Organizing job orientation for new employees

HR Specialist salary

HR Specialists can earn anywhere between $21,000 and $87,000. In Chicago, HR Specialists are paid $64,805 annually, while their New York colleagues take home $70,260 annually. The US Bureau of Labor Statistics predicts that the employment of Human Resources Specialists will increase by 8 percent by 2031.

HR Manager

The Human Resources Manager oversees (part of) the HR department. They have other HR employees reporting directly to them.

Common HR Manager responsibilities are:

• Managing HR activities like recruitment, learning and development, compensation and benefits, employee relations, and other HR functions
• Developing and implementing HR programs and policies that support organizational goals
• Working with other department heads to address workforce needs, from staffing shortages to skills development 
• Managing the HR budget – Reviewing past HR budgets and analyzing and forecasting the company’s workforce requirements to manage the cost of human capital and ensure the department’s operational efficiency 
• Report on HR metrics to senior management – These metrics include workforce headcount, turnover, cost per hire, training cost per employee, eNPS, human capital ROI

HR Manager salary

According to Glassdoor, Human Resources managers in Chicago are paid $83,722 annually, while New York-based HR managers based receive $111,857 per year.

The average salary also varies by years of experience. HR managers with 1-3 years of experience earn $85,788 yearly. Those with 10-14 years get $112,034 annually.

In a report by the US Bureau of Labor Statistics, the employment of Human Resources Managers is projected to grow 7 percent by 2031. 

HR Business Partner

A Human Resources Business Partner provides guidance and assistance to line managers in implementing HR best practices that support the company’s business strategy.

Some of the typical responsibilities of an HR Business Partner include:

• Providing strategic advice in workforce planning, upskilling, and succession planning
• Advising business leaders in HR areas of expertise like employee relations, performance management, learning and development, and compensation. 
• Assisting in HR policies development and implementation
• Helping organizations tackle current business challenges using HR strategies 
• Help line managers address issues related to organizational design and people management 
• Analyze HR metrics to identify trends and areas for improvement and create action plans to resolve them 
• Stay updated on employment laws and regulations to help leaders ensure compliance

Salary

Payscale estimates that the average HR Business Partner salary in the United States is $78,931 annually. Pay depends on years of work experience, education, certifications, industry, and additional skills.

The average income also depends on location. Payscale states that the yearly salary of an HR Business Partner in Chicago is $83,135, while their New York counterparts receive $95,536 per year.

There are also many other roles in Human Resources, which are often more specialized. They can focus on, for example, people analytics, DEIB, or talent acquisition.

Human Resources career

A career in Human Resources can be gratifying as it opportunity to make a strategic impact on an organization and its people. HR professionals also have the chance to continuously develop their skills and play a key role in shaping an organization’s culture and growth.

There are over 805,000 HR professionals in the US, and the demand for HR services and software continues to grow. By 2030, the market will grow at a rate of 12.7% annually.

How to get into HR

Whether you are a new graduate eager to pursue an HR job or an experienced professional interested in switching careers, here are some tips to kick-start your HR career: 

1. Get certified – An HR certification program is a great way to learn about the fundamentals of Human Resources and get formal credentials in the field. Look for online training programs suitable for beginners, which you can start anytime at your own pace. 
2. Learn basic HR skills – Focus on developing relevant HR skills like communication, administrative expertise, coaching, and recruitment.
3. Use free HR resources – Plenty of resources are available to stay abreast of the latest HR trends and developments. Subscribe to newsletters, listen to HR podcasts, and read HR blogs to learn more about what’s happening in the world of Human Resources.
4. Join HR network and industry groups – Gain insights from seasoned HR professionals of all levels and industries. You may even land your next job from friends or colleagues within these associations.
5. Volunteer or apply for an internship – Your company may have an HR or recruitment project drive you can participate in to get hands-on experience of what it’s like to work in HR.

HR career path

HR offers professionals various possibilities to design their career paths, change between different specializations, and continuously develop their skills. With HR’s growing strategic importance, individuals can find meaningful career options that align with their interests and abilities. 

Mapping one’s HR career path involves identifying the desired skills and professional experience and aligning them with different HR positions and profiles.

At AIHR, we’ve identified four career tracks. While each HR career path requires specific core skills and behavior, you can also plan what you need to learn and gain experience in to move onto a different path. These are the four HR career paths:

• Advisory – Acting as a trusted HR expert by delivering solid and sound advice relevant to the organization’s current business environment and needs. This track includes positions like HRBPs, Senior HRBPs, and HR Consultants.
• Solution Provider – Responsible for designing practical and sound HR practices that address the company’s business needs. Roles in this career path include Learning and Development Consultants, Industrial Relations Specialists, or OD Specialists.
• Service Provider – Responsible for delivering fast and quality service. Roles are usually more junior or middle-management levels: HR Administrator, Payroll Manager, Benefits Manager, or HR Scrum Manager.
• Strategic – Key contributor to the business strategy and partner by planning the company’s future direction. These are experienced HR leaders who work across a variety of HR functions. Positions include HR Director, Shared Services Manager, or Chief Human Resources Officer.

FAQ

The post What Is Human Resources? appeared first on AIHR.

Contents
What is a skills audit?
What are the types of skills audits?
When should you conduct a skills audit?
Why do organizations conduct skills audits?
10 tips for a successful skills audit

Digitization disruption, the recent changes in how we work, and how businesses are structured impact how organizations encourage innovation while also ensuring business-as-usual continues. This requires organizations to maintain and enhance their current workforce skills and bring in much-needed new skills needed to adapt to these shifts. 

What is a skills audit?

A skills audit assesses an employee’s skills and capabilities to identify potential knowledge gaps or growth opportunities for an individual. On an organizational level, a skills audit assesses the skills of everyone in the organization to act as a ‘heat map’ for areas of strengths and weaknesses of the existing workforce. There are two types of skills audits, which we will explore later in the article.

Typically, HR conducts a skills audit via a questionnaire or an interview. However, you can use various other sources for information (such as historical documents, learner management systems, certificates, performance history, etc.). 

A skills audit offers tremendous benefits for an organization in identifying which skills are available in the company and which aren’t. Often, employees have skills that the organization isn’t even aware of and might not have been harnessed. 

A skills audit is also helpful when the company is changing, such as during restructuring. Consider a bank that is adopting a new technology that will replace the role of bank tellers. The bank teller skills will no longer be needed. However, the bank will need employees with technology skills in the future.

A skills audit can help assess what skills already exist and whether these skills are relevant to other business areas. Similarly, new skills are needed if a company expands its offering or enters new markets or regions.

View the skills audit as a continuous process, not a once-off exercise, as organizations are constantly in flux. This essential tool should be a part of any HR team’s strategic focus instead of being conducted merely for the sake of it. Additionally, always align your skills audit with the business objectives and strategy. 

Note for HR professionals: Make a clear distinction between your skills audit and the training needs analysis to avoid duplication of work.

What are the types of skills audits?

As mentioned earlier, HR can conduct 2 types of skills audits: 

A personal skills audit is used to understand the individual’s level for a specific or general skill. It highlights any skills gap an employee may have. 

Personal skills audits are helpful for individuals when identifying what job is best suited for them, with a career change, or as part of a personal development plan. You can also use information from a personal skills audit in a group skills audit.

A group skills audit involves auditing all employees within a team or the organization. It is generally used to create an inventory of employees’ skills in the workplace. 

When should you conduct a skills audit?

Your team is not the same as it was 5 years ago; or even 1 year ago. Exits, new hires, and changes in ways of work influence skills acquisition or needs. So it is ideal to conduct a skills audit when:

1. A new role is created: HR will need to identify and clearly define new skills for a position and the optimal characteristics for the new hire.
2. An employee changes their role: A personal skills audit can identify an individual’s strengths or weaknesses to help them succeed in their new role.
3. An employee changes departments: A skills audit should also be conducted when an employee makes a lateral move to a different department to ensure the skills are still relevant.
4. A new project requires special skills: Identify what skills are needed to execute a new project and whether project members have the required skills. 
5. As part of performance management: A good performance management program seeks to develop employees.  A skills audit will be beneficial to evaluate whether an employee is underperforming or exceeding expectations.

A skills audit requires time, effort, and good coordination. For the best result, use technology to summarize and analyze the data of a skills audit.

Why do organizations conduct skills audits?

To understand the skills that your organization has

Gain a better understanding of what skills your employees’ skills, where the various skill sets sit within departments, etc. 

Employees may have a range of skills unknown to the organization, such as additional skills acquired during studies, previous work experience, or outside areas of interest in which they may be involved. The organization can leverage these untapped resources. 

To uncover skills gaps 

 87% of organizations know they have a skills gap, or will have one within the next few years. A skills audit helps you identify whether skills are lacking within specific employees, teams, departments, and the organization. HR and management are better equipped to make improved strategic decisions when deploying projects or budgets for particular projects and teams. 

A skills audit is also helpful when forecasting. For example, a business will utilize artificial intelligence in their products within the next 5 years. The organization can begin earlier to identify skills gaps related to AI, such as data science, data management; machine learning; coding, etc., and deploy programs to reskill employees.

To assist in your training and upskilling initiatives

Information obtained from a skills audit can be highly beneficial in informing HRs training and upskilling programs. Use this data to improve your existing initiatives or focus on designing priority skills training programs. 

To improve hiring 

One of the benefits of the information obtained from a skills audit is in improving your hiring. HR will be better informed about who to hire to complement the team based on these insights. 

This data enables you to make your hiring more targeted. It won’t make sense to hire more of the ‘same’ if you need someone with a different skill set.

To build organizational capabilities

Each organization has developed its unique organizational capabilities (OC) – those intangible but strategic assets that enable it to deliver on business strategy and continue to satisfy its customers.  

Employee skills and capabilities are essential to organizational capabilities, particularly within its operational capabilities, where a company can align skills and processes to operate within its markets. These attributes work in combination and emerge over time to become the company’s competitive advantage. 

Identifying the skills that contribute to these operational capabilities is key to building and maintaining a business’s competitive edge.  

To align individual and team goals

In the past few years, organizations have experienced rapidly changing business environments resulting in skills once relevant last year becoming obsolete or nonessential the next. Take, for example, an events manager hired at the end of 2019, faced with the sudden need to set up and run online events.

A skills audit will enable HR to identify the skills required for the adapted role and provide the necessary training to upskill the individual or team in line with the new business urgencies. 

10 tips for a successful skills audit

1. Be clear about your objectives

The time, energy, and resources needed to conduct a skills audit are considerable. So, treat the skills audit as a project with stakeholder input, a project manager, clear key responsibilities, a budget, and well-defined objectives. 

Take your business’s challenges, opportunities, and goals into consideration: 

• What challenges are you facing now and in the near future? 
• What are your organization’s opportunities for growth? 
• What do you want to achieve? 

Knowing the answer to these will enable you to determine which skills to focus on in your audit.

Involve the right stakeholders when developing objectives to ensure buy-in and involvement from the very beginning. This is not an HR project but rather a business imperative supported by HR. Engage with stakeholders in all departments and sub-departments within the organization (not only front line but also back-end such as operations, IT, finance, etc.)

2. Define the scope

Avoid defining a broad scope for your skills audit. There is no benefit to auditing every single skill within your organization. Knowing which employees can use a typewriter will probably not be of any help to your business. Instead, define the scope of your audit based on your organization’s strategy and then break these down into categories. For example:

• Technical skills (broken down into subcategories)
• Leadership skills (based on your leadership pillars)
• Interpersonal skills.

Include in the scope the type of information you will collect, for example:

• Certificates
• Performance review information
• Managerial reviews.

 3. Use a competency framework

Use a competency framework to assess skills, as this ensures consistency across the organization and over time. A competency model is the aggregate of competencies relevant to a specific role or function. This competency model gives HR a framework for your skill gap analysis and upskilling.

Creating a competency matrix (or skills matrix) will also assist in mapping the needed skills for a team or project. This grid lets you visualize the available skills and competencies versus those required in a team.

4. Decide on an assessment method

You can use various ways to collect the information for the skills audit. Use a combination of the following to gain good insights:

• Conduct one-on-one interviews – Ask employees set questions to understand where their strengths and weaknesses lie. Use a consistent approach for every employee so that you can have a group-wide understanding of the skills. This can be time-consuming but effective.
• Provide a self-assessment survey – You can send this to employees to complete. Employees rate themselves on a scale to assess their level of skills. Provide definitions and examples so that employees can answer honestly. A self-assessment survey relies on employees to answer honestly.
• Collect historical information – You can collect existing information about employees, such as previous training completed, history of performance, certificates, college or university degrees, etc.
•  Give a formal skills test – Conduct a skills test to assess required skills in the organization.

5. Start small

If you’re unsure about how helpful a skills audit would be, or you don’t have much time, start small, e.g., in one department or team. You can expand the audit to other departments and teams based on these results.

6. Ensure you’re legally compliant

Ensure that you have the right to collect data and the necessary infrastructure to protect employees’ personal data. Data should only be collected under strict conditions and used for its purpose in accordance with region-specific laws. Organizations that commit to a skills audit must ensure that the information gathered won’t be misused and must always protect employees. As a minimum standard:

•  Only use the data for the purpose it was collected
• Don’t collect unnecessary information
• All data must be up to date
• Accessible to employees and allow them to correct information if it is incorrect
• Check all country regulations if you’re doing this outside your region or country.  

 7. Collect and analyze the data

There’s a logical sequence you can follow when collecting employee data:

•  Inform employees about the skills audit.
• Collect the data in the agreed collection methods. If you’re using interviews, train interviewers in the correct techniques.
• Train employees and managers to use the system if you’re using a continuous data collection method. For example, a learner management system that needs to be updated by employees if they acquire a new skill.

8. Use the insights to create hiring, training, and upskilling plans

Skills audit results help you design short- and long-term hiring, training, learning, and upskilling interventions. In the short term, you can enroll your employees in, for example, a workshop to upskill software skills. In the longer term, you can develop ways to better test for the required skills in the selection process when hiring or improve your new employee training. 

Additionally, an assessment report can be created as part of the skills audit. This report could summarize:

• Any unused skills (and if they’re valuable for now or into the future)
• Potential redeployment of employees because of their skills
• Note any glaring skills gaps organization-wide
• Any urgent skills.

Filter this information to hiring managers and the recruitment team to ensure that any current interviews and recruitment processes also fill the need for the skills gaps identified during the audit.

 9. Build and maintain a skills inventory

An up-to-date skills inventory provides a better overview of how your employees should develop and grow and can help you to create a succession plan, and bridge skills gaps before they become a problem.

 10. Audit the HR department’s skills

Don’t skip over the HR department when conducting your skills audit. Auditing the existing HR skills will help you spot and fill the gaps within your HR team to strengthen the core competencies, and future-proof HRs skillsets.

Your HR team will be at the forefront of conducting the audit, so it is the ideal team to start your audit with before rolling it out to the rest of the departments. This will ensure that the team conducting the audit has the necessary skills to perform a successful audit (e.g., interview skills, data collection, and analysis, conflict management, etc.). 

To conclude

A skills audit helps you make data-driven hiring, training, and upskilling decisions. The tool will help you develop skills relevant to your employees and your organization, helping your business build the operational capabilities needed to establish its competitive advantage.

The post How to Conduct a Skills Audit at Your Organization appeared first on AIHR.

Let’s look at what VTO is, why you should consider it, and 6 tips to help you get started with creating an effective VTO policy.

Contents
What is Volunteer Time Off (VTO)?
Examples of VTO
Voluntary Time Off vs. Volunteer Time Off
Why you should consider providing VTO
6 tips to create an effective VTO policy

What is Volunteer Time Off (VTO)?

Volunteer Time Off, or VTO for short, is a type of benefit where employees get paid time off to do volunteer work. This typically ranges from 8 to 40 hours per year. VTO is a great way for employees to give back to their community without sacrificing a full day’s wages. 

VTO is a relatively new employee benefit that has become particularly popular in recent years. In 2009, SHRM reported that only 15% of organizations offered VTO as part of their benefits package. Less than a decade later, nearly 1 in every 4 organizations offered VTO. 

Salesforce, for example, gives their employees seven paid VTO days each year as a part of their Citizen Philanthropy program. Patagonia has its own VTO policy in the form of the Environmental Internship Program, where each employee is allowed to take up to two months of paid days off to work for an environmental group of their choice.

Examples of VTO

The options for volunteering activities are endless. Your employees can start locally, such as helping out at community service projects or food banks, participating in a neighborhood clean-up, or supervising one’s child’s school trip.

Skill-based volunteering or pro-bono services are popular options to spend VTO as well. Your employees can also sign up to volunteer for large nonprofits such as Habitat for Humanity, the Red Cross, or the United Nations. 

Going off for a volunteer trip for a month or even a week might not be an easy option for some of your employees. If that is the case, online volunteering could be a good alternative.

Paper Airplanes, for example, is a nonprofit organization that provides conflict-affected individuals with online classes in English or programming. Volunteers can sign up to teach English or coding or to be a part of Paper Airplanes’ operational team. Everything is done online, so your employees can volunteer from home!

Voluntary Time Off vs. Volunteer Time Off

Besides volunteer time off, there is another benefit known by the acronym VTO, voluntary time off. As voluntary time off and volunteer time off seem almost identical, it can be easy to confuse them. Understanding how these two concepts differ from one another is crucial to building an effective leave policy. 

Voluntary time off, unlike volunteer time off, has nothing to do with volunteer work. It is a leave category where employees can take unpaid time off while maintaining their full-time employment status.

Companies like Amazon, an online retailer, often utilize voluntary time off policies to reduce labor costs and prevent layoffs or downsizing, particularly when more employees are available to work than needed. This type of time off is common for shift and warehouse workers.

Why you should consider providing VTO

VTO, like most benefits, comes at a financial cost to the company. More paid time off means your organization will have to spend more money. This doesn’t mean that VTO doesn’t benefit your business, financially or otherwise. In reality, providing VTO has numerous advantages for your organization. Let’s take a look. 

Increased employee engagement

75% of Millennials expect their employers to contribute to social good, be it donations or volunteering. Giving employees extra paid days off to dedicate to causes and initiatives they feel strongly about is an excellent way to show them that the organization is serious about corporate social responsibility. It also demonstrates that the employer understands and shares the same values as their people. This makes employees more motivated, engaged, and, ultimately, productive.

Better employer branding

In a tight labor market, being able to attract and hire people who look for purpose-driven organizations can make all the difference to your business. One way to do that is by offering VTO, which helps you build a reputation as a socially responsible employer willing to extend resources to give back to the community. In fact, 90% of businesses report that partnering with reputable nonprofit or nongovernmental organizations (NGOs) enhances their brand.  

Higher retention

Living through a global pandemic has caused almost two-thirds of US workers to rethink their purpose in life. Many employees no longer just want to make a living but also make a difference while they are working. According to Glassdoor, 51% of workers expect to be able to use work time and resources to support positive social change. 

Providing VTO is a way to help the talent within your organization make a positive impact, which, in turn, will increase employee engagement. Engaged and motivated workers are likely to stay at your organization longer. That means you save resources on recruitment and can keep expertise and skills on board. People who are satisfied with their organization’s societal impact are more likely to stay at the organization beyond five years.

More skilled employees

Offering VTO goes beyond branding, recruitment, and retention. Volunteering at a food bank or a national park might seem irrelevant to the regular work of your employees, which can be product marketing, employee relations, or IT support. However, 65% of HR executives consider VTO a valuable part of employee development.

Through volunteer efforts, employees have another avenue to employ their existing skills and develop crucial soft skills such as empathy, resilience, leadership, and public speaking. As more and more tasks are automated and taken over by AI, these skills will prove vital for those who want to become future-proof in their career path.

Improved overall wellbeing

Doing good for others can help your employees feel good about themselves. A United Health Care Study reported that 93% of the respondents who volunteered in the past 12 months said their mood had improved. 79% of volunteers had less stress.

Not only is volunteering beneficial for your employees’ mental wellbeing, it is also good for their physical health. Volunteer work often requires varying degrees of physical activities — from carrying boxes and cleaning to helping build houses. According to a 2014 study, volunteering can help lower high blood pressure risk in older adults by 40%!

6 tips to create an effective VTO policy

There is no one-size-fits-all process when creating a Volunteer Time Off policy. It will depend on the size and scope of your organization, the availability of your budget, the direction of your branding strategy, and even the institutions that you partner with. Here are a few tips that can help ensure that your VTO policy is suitable, effective, and successful. 

1. Start small 

First of all, you need to gauge if there’s enough interest in a VTO program. There is a possibility that not all or not even the majority of your employees would want something like that. To find out, you can include a question about VTO in one of your employee engagement surveys and see what people think.

If there is interest, you can start on a small scale with a trial, for instance, one day a year, and then evaluate the impact. If your organization operates across multiple locations, you can start offering volunteer hours or days in one of them and see how it goes.

2. Be specific 

Describe how your VTO policy works and what it entails. Having a written policy will make managing the VTO at your organization easier. 

Here are a few questions to help you decide what you need to include in your policy: 

• Who is eligible to participate? To answer this question, think about the requirements your employees need to satisfy in order to qualify for VTO. This can include employment status (full-time or part-time), duration (how long they’ve been working at your organization), and union membership.
• How many hours of VTO do you allow?
• What kind of organizations can employees volunteer for? You can create a list of criteria for acceptable organizations or a short list your employees can choose from.  
• How can employees request VTO? Is there a dedicated form? 
• How long in advance should VTO be approved, and by whom? 
• What kind of record-keeping is needed and by whom? 
• What is the auditing procedure to check that VTO was used appropriately and within the allotted time?

3. Align your VTO activities with your organizational goals

The type of activities and institutions your employees choose to volunteer for can reflect on your organization’s overall brand. That is why a VTO policy should be aligned with what your organization wants and is trying to achieve. 

Depending on the situation of your organization, you can give free rein to your employees to choose the type of activities they want or limit where your employees can volunteer. For example, if your organization works closely with many nonprofits in your area, it makes more sense to present those institutions as the top volunteering opportunities for your employees. This is how you can help your organization maintain and strengthen the existing relationships with those nonprofits. 

If you don’t limit the volunteering choices of your employees, it is still necessary to state a few criteria, as you want to minimize any potential negative backlash as much as possible. Political institutions, for example, can be considered a controversial choice when your employees volunteer in their capacity as a part of your organization.

4. Use formalized time tracking

Tracking the time your employees spend on VTO is an integral part of a VTO policy. Having an established process in place minimizes the chance of abuse. You can set up a time-tracking system for VTO like you do for general paid time off (PTO), vacation time, or sick leave. Be sure to keep the time in a separate bank so it is not mixed up with other leaves.

You should also decide in advance how you are going to allow your employees to take out VTO, whether it is in hours, days, or weeks.

5. Educate your workforce

Explain to your employees:

• what you’re implementing,
• why you’re implementing it,
• and what the goal of this benefit is.

You can hold information sessions where you instruct how they can use their VTO or record a quick video so that your employees can watch it asynchronously. The latter is especially useful if you work for a multinational company with offices spread across the globe and operate in different time zones.

You should also create an official document containing all the information on VTO and make it accessible within your organization.

6. Get seniors to lead by example

Leaders play an essential role in sustaining the culture of an organization. When senior leaders make use of their VTO and share what they did with their employees, it motivates the workforce to use the benefit.

Leaders involved in the community also help build your employer reputation and create a sense of purpose and meaning in their workforce. 68% percent of employees would consider leaving their organization for an employer that takes a stronger stance on cultural and social issues.

Over to you

Volunteer time off is a great way to engage and retain your employees while helping them use their skills and time in a meaningful way. It complements your employee’s benefits and perks package, and you can also use it to attract candidates, particularly those who are looking for work with a purpose. 

Beyond the business benefits, VTO also allows your organization to make a positive impact on society. It is also not the only way to do so. Many organizations dedicate a small portion of their profits to charitable causes they support. Donation matching, which is when companies match the donations from their employees, is also a popular option.

The post Volunteer Time Off (VTO): All You Need To Know appeared first on AIHR.

Contents
What are productivity metrics?
Organization-wide productivity metrics
General productivity metrics
Customer service productivity metrics
Sales productivity metrics
Software development productivity metrics

What are productivity metrics?

Productivity metrics are a way to quantify the productivity of employees. They measure the various activities of employees related to the company’s goals and help highlight opportunities for improvement and maximize efficiency.

Productivity metrics can be either quantitative or qualitative. A common way to track productivity is to use key performance indicators (KPIs) to understand how product employees are relative to their goals.

It can be tough to measure productivity in many jobs. For example, how do you measure the productivity of a marketing manager? Or an events planner? It’s not as simple as a manufacturing job where the input and output are quite straightforward. 

While the objective of measuring productivity is to increase efficiency, setting unreasonable productivity metrics can actually be harmful to motivation, engagement, and, ultimately, productivity. It’s not always possible to achieve 100% quality as you’re pushing productivity levels. Instead, finding the right combination between productivity and efficiency helps maximize output while maintaining quality. 

The general formula for productivity is: 

Productivity = Total output / Total input

However, this formula presents a very simplified view of productivity and does not apply to all jobs.

Let’s take a look at various ways to calculate productivity in different sectors. Because it’s impossible to have common productivity metrics for every job, we give examples of productivity metrics for different departments, as well as organization-wide metrics and generally applicable metrics.

Organization-wide productivity metrics

1. Revenue per employee

Revenue per employee (RPE) is a ratio that roughly estimates the total revenue a company generates divided by its current number of employees. RPE is a useful metric to evaluate productivity. The more productive an organization is, the less likely there will be losses (e.g., decreased turnover, no sales), and it increases the likelihood of profits.

Ideally, a company strives toward a very high RPE ratio because this indicates a greater level of productivity, which usually means more profit. An increase in revenue also allows an employer to pay employees better.

The formula for revenue per employee is:

2. Employee utilization

Employee utilization refers to the amount of an employee’s working time that is used for billable work, expressed as a percentage. It’s often used in professional services (e.g., for accountants, consultants, etc.). Utilization varies from job to job as no employee will spend all their time on work classified as “billable work .” Every project requires other activities, such as admin tasks, emails, billings, and meetings.

Tracking employee utilization helps make sound hiring decisions, for instance, if you need more employees in a certain role. It also enables you to understand if employees are being over- or underutilized. When each employee is fulfilling their job description, they’re helping the organization achieve revenue increases. When calculating employee utilization, ask yourself: How many hours of an employee’s working week need to be billable for your business to remain profitable? 

The formula for employee utilization is: 

Utilization Rate = Billable Hours / Eligible Working Hours

3. Total cost of workforce (TCOW)

As the name indicates, total cost of workforce (TCOW) measures the total amount of money a company spends on its workforce. This includes all costs of the workforce, including salaries, onboarding, recruiting, training, HR operation expenses, and development costs. Labor costs, in many instances, make up the majority of expenses for an organization. So, measuring TCOW is paramount to understanding the overall productivity.

Having an accurate understanding of your TCOW answers questions such as: 

• How is the total cost of workforce developing over time relative to the revenue and to total expenses of the company?
• What are the components of our TCOW, and how can we optimize them?

To calculate TCOW, add up all your variables (e.g., HR expenses, training, salaries, etc.). Importantly, be sure to include all expenditures outside of your fixed expenses, such as freelancers and contingent workers – especially if they make a big part of your workforce. 

General productivity metrics

4. Self-rated productivity

Depending on the maturity of a team, team members can self-rate their productivity and present it on a productivity scorecard. Although rating one’s own productivity can seem to be an ambiguous task, it becomes clearer by asking the right questions, such as: 

• On a scale of 1 to 10, how confident are you that you will finish your goals this month?
• How many hours of focus work did you get done this week?
• How many interruptions did you experience this week?

Based on the outcome of this, managers can coach employees to improve productivity over a period of time. Team members can share their productivity scorecards. Then, managers and coworkers can make suggestions for increasing productivity – as many team members may be experiencing the same issues. 

5. Planned-to-done ratio

The planned-to-done ratio is a measure of how much work is assigned to an employee and how much of it gets done. It looks at dividing the number of tasks assigned and comparing it to what has been completed, presented as a percentage:

Planned-to-done Ratio = # of Tasks Assigned/Planned / # of Tasks Completed

This is a good measure of employee productivity as you’re able to compare % from employee to employee. Let’s say that two employees receive the same number of tasks. One has a planned-to-done ratio of 30%, and the other has it at 95%. Then you know there’s something to look into. This is also useful to track over time and see what initiatives have increased or decreased productivity. 

In addition, it puts a spotlight on the complexity of tasks and highlights if there are any constraints such as scope or budget holding back productivity.

6. Focus hours per day

Focus hours per day look at completely uninterrupted work time. It’s dedicated work, focusing on a task with undivided attention. It’s a productivity technique to eliminate distractions and unnecessary noise. The recent shift to an increase in remote work has brought focus hours per day to the forefront, as there have been discussions about whether the office or work environment is more distracting.

Focus hours per day fall into two categories: 

1. Deep work – This relates to the time employees focus on tasks without interruption. One way to determine this is by looking at an employee’s calendar and the number of interruptions. If an employee has meetings with only 30-minute breaks in between, it’s likely they’ve not engaged in focused or deep work. 
2. Operational work – This is the work done to ensure you can be productive. This can be addressing emails or small tasks that take up to 15 minutes (or 2 hours if not addressed immediately!). To measure this, add up on a daily basis how long these tasks take and average it over a month. 

Now, let’s dive into some industry-specific productivity metrics.

Customer service productivity metrics

7. First-call resolution

First-call resolution or first-contact resolution, as the name indicates, refers to a company’s ability to resolve a customer query at the first point of contact. This means that after the customer contacts an employee or the company the first time, there is no need for a follow-up.

Increasing the number of first-call resolutions increases productivity, as customer service agents are able to take more calls and, therefore, service more customers. 

The formula for first-resolution is:

First-Call Resolution = 100 x (Issues Resolved the First Time / Issues Handled by Customer Service Agents)

The calculation result is a percentage, and the goal is to increase this over time. 

8. Ticket creation to full resolution time

Unlike the first-call resolution metric, full resolution focuses on quality instead of immediacy. It looks at the time in which the customer’s issue was actually solved. In a well-run company, these two metrics work well together to improve customer service quality over time.

To understand full resolution time, analyze each ticket (and look at the stats, dashboard, etc.) to see if it has been resolved and what’s not working vs. what’s working well. Full resolution time is measured in hours (or days). 

The formula is:

Average Resolution Time = Total Resolution Time for All Tickets Resolved / Number of Tickets Resolved

9. Support ticket response times

A ticket response time indicates the time between a customer submitting a ticket and a customer service agent responding to it.

However, each ticket should have its own unique measurement metric. For example, if you worked for an airline and a customer asked a complex and urgent question about changing a ticket vs. if a customer wanted readily available information around baggage allowance, these are different scenarios that would have different response times.

To calculate support ticket response times, take the average time to respond to the ticket per type of classification and level of complexity.

Sales productivity metrics

10. Sales growth

Sales growth looks at a company’s ability to generate revenue over a fixed period of time through sales. It’s vital to understand sales growth to improve productivity and implement various initiatives to stimulate sales growth. 

The formula is: 

Sales Growth Rate = (Current Period Sales – Prior Period Sales) / (Prior Period Sales * 100)

11. Revenue per sales representative

On an individual level, revenue per sales representative clearly indicates each sales rep’s productivity. It helps evaluate an individual’s or team’s ability to generate revenue. Having a clear understanding of this metric helps foster a healthy competitive team environment if done correctly.

However, it’s essential to establish a baseline. Not all employees are equal. Some are more senior; others operate in more favorable locations.

You can calculate the average revenue per sales rep and then compare it with the revenue per each employee in the sales team.

The formula for average revenue per sales representative is: 

Average Revenue per Sales Rep = Revenue from Sales / Number of Sales Reps

Software development productivity metrics

12. Defect escape ratio

This is a software development-specific productivity ratio that looks at how many defects are found in software before it gets to production. A higher defect escape ratio means there is an issue with testing the processes, thus slowing down productivity. A lower defect escape ratio indicates that the software is of a higher quality and, therefore, further down the line, ready to go live.

The formula is:

Defect Escape Ratio = (Bugs Found in Production / Total Number of Bugs) * 100

A final word

When putting productivity metrics in place, discuss with your employees what they think should be tracked and how. That way, you’re ensuring that the metrics you’re measuring are relevant and truly help the team perform better, instead of making them feel pressured and micromanaged.

The post 12 Productivity Metrics Examples for Working Effectively appeared first on AIHR.

Let’s dive into all you need to know about employee turnover data analysis!

Contents
What is employee turnover data analysis?
Why conduct employee turnover data analysis
How to conduct employee turnover data analysis

What is employee turnover data analysis?

Employee turnover data analysis is an HR analytics or people analytics process that involves collecting data, analyzing, and reporting HR data to help understand a company’s turnover rate. Employee turnover data analysis helps you break turnover data down and get insights into what turnover looks like in your company.

A company’s employee turnover rate is the percentage of workers leaving an organization and then being replaced by new employees within a specific period. You can calculate it on a monthly, quarterly, or yearly basis. Below is the general formula:

With a thorough employee turnover data analysis, you can determine, for example:

• The number and rate of employees that leave
• The financial impact turnover has on your organization
• The turnover risk among your existing employees

The term employee turnover is often used interchangeably with employee attrition and employee churn; however, there are some differences. Employee attrition happens every time an employee stops working for an organization and isn’t replaced for a long time. On the other hand, employee churn can be defined as the percentage of employees leaving a company within a specific period.

Typically, it’s the HR department or a dedicated people analytics team who conducts the analysis or owns the process. 

Why conduct employee turnover data analysis

There are several reasons carrying out an employee turnover analysis is a good HR practice. They include:

Understanding employee turnover in detail 

Conducting a turnover analysis will help the HR department know who is leaving. For example, they can quickly know which department has the most employees leaving. Furthermore, they will know when most employees leave the company. For instance, do they go after a salary review or after receiving their bonus? That would be a signal for you to reevaluate your compensation strategy.

You can also dive into the demographic to find out if there are any specific demographic groups that leave more often than others. That might indicate that your organization has a lot of work to do when it comes to DEIB.

Creating targeted employee retention strategies

Based on the information gained from the analysis, you can design targeted retention strategies that will help you keep your top talent on board.

If many sales employees leave after a salary review, it won’t help much to roll out a company-wide L&D initiative as your new employee retention strategy. Instead, you might need to change your sales compensation structure. In fact, a survey shows that 65% of employees said that a salary increase is the main reason they look for a new opportunity.

Reducing the cost of turnover

Getting to the root causes of turnover and preventing unwanted turnover helps reduce the costs associated with turnovers, like the recruiting costs and loss of productivity. Estimates say that losing a worker can cost a company up to 1.5-2x a worker’s salary. Therefore, understanding the leading cause of turnover can help plan and better manage the HR budget.

Predicting turnover

A comprehensive employee turnover data analysis helps you uncover predictors of employee turnover. You will know who is most likely to leave and when, which is often referred to as flight risk. With this information, you can work on the targeted retention strategies we mentioned above and also prepare contingency plans for when employees leave.

A financial services company Credit Suisse built a turnover model that helped them identify turnover risk factors. They trained their managers on how to retain high-performing employees with these risk factors, which ultimately saved them $70 million per year in turnover costs.

How to conduct employee turnover data analysis

Employee turnover rate is something every HR department should measure. Knowing the percentage of employees who left your organization, you can create effective hiring plans and calculate hiring costs.

However, by drilling deeper down into your turnover data, you gain more valuable insights that will help you retain top employees a build a robust workforce to help you achieve your organizational goals.

1. Gather your data and tools 

Generally, you’ll find the data you require to conduct an employee turnover analysis in your HRIS. Depending on the goals of your analysis, you might want to collect the following information:

• Department
• Age
• Gender
• Salary
• Length of employment
• Months/Years in current role
• Performance rating

Your exit survey data are another valuable source of information that you could include in your analysis.

Excel is the most accessible tool to perform your calculations, especially if you’re just starting to build the people analytics capabilities at your organization. Check out the common Human Resources formulas and functions for Excel.

2. Distinguish between voluntary and involuntary turnover

Your turnover data will include people who’ve left voluntarily, as well as those who were let go. Understanding voluntary and involuntary turnover helps you get a more accurate picture of the state of turnover at your organization.

Voluntary turnover occurs when workers leave a company by their own choice. Generally, this type of turnover is more expensive for a company since it mainly involves the loss of a better performer. It usually leads to a knowledge and skill gap within a company that you have to fill with an external or internal candidate. Replacing these positions, if they are at the senior level, can be time-consuming and costly. Examples of voluntary turnover are:

• Internal transfer
• Taking another job
• Retirement
• Extended sabbatical
• Personal reasons
• Relocation 
• Going back to school
• Job dissatisfaction

Involuntary turnover happens when a company terminates an employee and then replaces them. This turnover can either be good or bad for the company.

For example, terminating a candidate who violates the company’s policies can positively impact the company in the long run. On the other hand, layoffs are often a sign of financial difficulties or poor management. Terminations, layoffs, and workforce reductions are all examples of involuntary turnover.

3. Go granular 

Of course, you can calculate your overall employee turnover and compare it to the previous period (e.g., quarter or year). However, going into more detail will help you understand the specific issues. Below are some examples of what you can analyze:

• What’s the average tenure? For instance, if you see many people leave after two years, it might have to do with a lack of career progression opportunities at your organization. If you see new hires leaving in their first year, onboarding might be an issue.
• Demographics – You can compare different demographic groups in terms of their turnover rates, for example, older vs. younger employees, women vs. men, White vs. people of color, and different intersectionalities among the groups. A high employee turnover rate in underrepresented groups may indicate that the company policies have a disparate effect on these groups.
• Reasons for leaving – E.g., if many workers leave for family reasons, the company might need to adopt more family-friendly policies.
• Departments/roles – E.g., is there a specific department or a position with high turnover?
• Date of birth – Analyzing this data might help you know trends specifically to Baby Boomers, Gen X, Millennials or Gen Z that you may need to address.
• Date of termination – This may help you know if you have a seasonal departure trend. For example, some workers leave a company after receiving their annual bonuses.
• Annual salary – You might uncover that your company’s compensation plan doesn’t attract and retain the right talent.
• Yearly/quarterly trends – Analyzing this data might help you anticipate when to expect high staff turnover. This way, you can plan for recruiting budget and effort. You’ll also know whether your annual turnover rate is decreasing or increasing.
• FLSA status – E.g., high turnover rates in non-exempt roles might indicate you need to restructure jobs. At the same time, a high turnover in exempt positions may seriously drain company productivity and financial resources.

4. Enrich your data 

While you might be able to make pretty accurate assumptions about why people are leaving based on your quantitative data, you might want to gather more information to ensure your hypotheses are correct.

For example, use qualitative data from exit interviews and surveys to understand why people leave in more detail. While developing, exit interviews ask employees whether they are leaving because of a career change, dissatisfaction with the management, or for a better opportunity. This will give you specific reasons why people are leaving your organization.

5. Understand the root of the problem

You have to understand the company’s leading cause of the turnover problem. The following are several areas to look at:

• Management: Have you ever heard the saying that people don’t leave the business; they leave managers? Although this may not always be true, it plays a significant role in employee turnover data analysis. Employees are likelier to leave an organization if the senior management or direct manager doesn’t meet their expectations. For instance, you must assess the manager’s performance if you see a high turnover from one manager or department.
• Hiring and onboarding: Are employees leaving within the first year? Then this is a key indicator of a flawed hiring process and/or ineffective onboarding. New workers should stay with the organization much longer when you hire the right talent for the right reasons. Otherwise, you need to revisit the selection process to be sure you are hiring the right people. You should also review how you onboard your employees.
• Compensation: Is your salary competitive for a specific skill, industry, and geographical area? Even if money is not everything, it is a significant motivator when workers get offers for new jobs.

6. Look into the cost of turnover 

Turnover is an expensive problem, with voluntary turnover costing US businesses as much as $1 trillion every year. Translating turnover data into monetary value will help you convey the urgency of the turnover issues to the company leadership.

As you calculate the cost of turnover, you need to consider multiple factors. According to research, a direct replacement can cost companies up to 50%-60% of a worker’s annual salary, and that’s without the indirect costs associated with losing an employee. These include missed or delayed revenue, and loss of productivity and knowledge.

By calculating the turnover cost, you could showcase how much your company can save if you managed to reduce turnover, for example. 

7. Prepare an employee turnover report 

Once you are through with the turnover data analysis process, you should create a report. An employee turnover report is a comprehensive summary of your findings, including visual elements and monetary terms.

From the report, the company leadership gets a good understanding of the specific reasons why workers are leaving. This report can help you get the leadership buy-in for investing in strategies to mitigate turnover and increase retention.

8. Take action

Use the insights from your analysis to drive action to decrease the turnover and get it to the levels you want. You can develop a plan aimed at the specific issues you’ve uncovered. You need to make an effort to retain well-performing workers. This is because they are the company’s most vital assets. So, taking actions that make them happy and content is necessary.

Examples of the actions you can take include:

• Offer better compensation and benefits: In addition to a comfortable, inclusive working environment, workers seek companies that value their presence and contribution. Therefore, making an effort to recognize them and their successes is crucial. Compensating your workers fairly, rewarding them, and enhancing their benefits can boost employee loyalty.
• Ensure a work-life balance: Maintaining a balance is critical in any workplace. Workers who have a lot of work on their plates mostly feel they don’t have enough hours to complete their tasks. For such people, having too much work is not something that makes them motivated and satisfied. Instead, it may lead to higher stress levels or employee burnout.
• Implement pulse surveys to get feedback: How can you know your workers are genuinely happy and satisfied? The best way is to use pulse surveys to get relevant feedback.
• Invest in your employees’ careers: For instance, offering your staff members good career development opportunities will show them that you care about their growth. Also, promoting learning and development will enhance your workforce’s skills, thus increasing productivity.

What’s more, your data can help you predict employee turnover and prepare for different scenarios.

Bottom line

Like most company issues, employee turnover generally has clear causes and symptoms. Performing employee turnover data analysis, considering the associated costs, and knowing the causes will help your company stay ahead of potential issues and mitigate them early. 

However, analyzing employee turnover data doesn’t end with taking action. You must conduct your employee turnover data analysis regularly to keep turnover within your organization. By doing this, you can be sure that your retention strategies stay relevant and practical.

The post Employee Turnover Data Analysis: 8 Tips for Success appeared first on AIHR.

And amidst all the emotions and experiences a new hire goes through, a robust employee onboarding program ensures they can reach the highest level of productivity as fast as possible. To measure and track this along the way, employee onboarding metrics help you understand your new hires’ experience, how fast they are onboarded, and what excites them about their job and the organization. 

Let’s have a look at onboarding metrics you should track.

Contents
Why use onboarding metrics
How do you measure onboarding success? Common onboarding metrics

Why use onboarding metrics

Only 12% of employees strongly agree that their organization provides a great onboarding experience. Poor onboarding is a major driver of employee turnover. Implementing onboarding metrics helps you take a data-driven approach to your onboarding process and:

• Uncover issues in your employee onboarding process – Data helps you understand what the problems are in the onboarding phase of the employee life cycle, and you can develop actions to fix them. Research by Sapling HR shows that the average new hire onboarding process consists of 54 activities. If you’re able to identify the critical issues through analyzing the data of these various activities, it will go a long way in elevating your onboarding processes.
• Improve the effectiveness of your onboarding process – You can enable and empower your employees to do a great job from the beginning. An effective onboarding process is iterative. Depending on the frequency of employee onboarding, you’re able to improve ‘in the moment’ with the available metrics. 
• Prevent unwanted turnover – A good onboarding program reduces the likelihood of early turnover. On the contrary, a poor onboarding experience can lead to detrimental outcomes for your company. Data and onboarding metrics help track issues to reduce new hire turnover.

How do you measure onboarding success? Common onboarding metrics

You can measure the quality and effectiveness of your onboarding process by tracking several onboarding metrics. That allows you to get an accurate picture of how solid your onboarding picture is and how you can improve it.

1. Time to productivity

Time to productivity is a useful metric to track how fast it takes for an employee to be operational and productive. The graphic below demonstrates where an employee becomes productive:

The shorter it takes till a new hire can be productive, the greater the experience will be for everyone involved, leading to reduced costs.

There is no clear-cut time to productivity formula like other HR metrics. Instead, you would base time to productivity on the KPIs for each role. For example, if you are calculating it for a sales role, productivity would indicate when the salesperson has all the tools and knowledge to make a sale.

An easier way is using a manager’s estimate of the time a new hire needs to fully contribute to the organization and comparing it to what the employee has actually achieved.

To calculate the average time to productivity for your company overall, you can calculate the total number of days for new hires to be productive, divided by the total number of new hires. 

2. Cost of getting to Optimum Productivity Level 

The cost of getting to the Optimum Productivity Level (OPL) is the total cost involved in getting someone up to speed. This includes costs of recruitment, training processes, salary of the employee (and the trainers), and more. It is a useful metric to track, with the objective of decreasing costs over time.

Research by Oxford Economics lists OPL cost in retail at £ 16,240 (approx. $ 20,200), in media £ 21,633 ($ 27,000), and in legal £ 35,307 ($ 44,000).

3. New hire turnover

New hire turnover is an important onboarding metric that calculates the number of employees who leave their job within the first year (or another period defined by the organization). A low new hire turnover rate can affect your employer’s brand and team morale.

Reducing new hire turnover is a must-track metric to keep as low as possible because it can take up to 8 months to have a new hire productive. 

A negative onboarding experience is one of the main reasons new hires leave. It leads to a disengaged employee and can also lead to poor performance.

There are two ways to calculate new hire turnover.

The first is new hire turnover as a percentage of total turnover. If a high number of new hires leave compared to all employees, this formula will reveal that:

The second way to calculate it is new hire turnover as a percentage of all new hires:

So, if you hired 100 people, and 25 of them quit, your new hire turnover would be 25%.

This data should readily be available within your HRIS to keep track of every month. To ensure accuracy with calculations and to compare over time, the organization must determine what they say as a reasonable period to call an employee a “new hire.” Usually, it is one year, but some positions or companies have different requirements.

4. Retention threshold

In line with turnover, you can look at your new hire retention threshold, which is the point at which new employees exit the organization.

For example, you might find that 20% of new hires leave within 90 days, and 35% of them leave within 270 days. If there is a trend where your company loses new hires, then that is a key area to focus on the cause and implement the necessary interventions. 

5. Onboarding satisfaction

An onboarding satisfaction survey, also called new hire satisfaction survey, is an effective way to gather feedback from new hires. It’s a good practice to keep track of the sentiment of new hires in their first month, after three months, after six months, and after a year. This is a way to measure the outcomes of any onboarding initiative.

Questions to ask could include:

• How would you rate your onboarding experience?
• How valued do you feel at work?
• How welcomed do you feel in the company?
• I have all the resources I need to do my job
• My goals are defined clearly

And some close-ended questions you might want to include are: 

• Is the job you’re doing what you expected it to be?
• What is the biggest challenge you have faced during your first few weeks?
• What would you improve about your onboarding experience?
• What are other tools you need to perform your job better?
• Did you meet all the stakeholders you needed to perform your job successfully?

Consistent questions for all new hires allow you to accurately measure your company’s onboarding program. And then, you can also measure the outcomes of specific initiatives to improve your onboarding processes over a period of time. 

6. New hire retention rate per manager

A low new hire retention rate for a particular manager could indicate that something is wrong in the team or they might need additional help. If a manager has a known low retention rate, it’s a good idea to investigate why.

Similarly, for managers with a high retention rate, you can analyze what they’re doing right and implement those learnings to other teams. 

7. Training completion rate

This metric indicates how many new hires have completed their required training. The training for new hires is usually made to make them productive as soon as possible.

A low completion rate could indicate there is a problem with the quality of training. But it could also indicate how training is rolled out – the new hires’ schedule might not be optimal in the first few weeks to complete the training.

To calculate the training completion rate, divide the number of new hires that haven’t completed their training by the total number of new hires. 

8. 360-degree feedback

Insights provided by people that a new hire interacts with are a great way to gather feedback on the effectiveness of your onboarding program. This is referred to as 360-degree feedback, where a new hire’s peers, managers, and anyone else with oversight of their performance can provide input as to what might have been missing from your onboarding processes.

Then, after 3 to 4 months, enough information from a new hire’s manager and peers will be available to assess the obstacles preventing productivity or performance. This might be resources or training that could have been in place during the onboarding process to make life easier for the new hire. 

9. Informal feedback

An effective way to gather feedback is to conduct small focus groups or new-joiner interviews. You can ask open-ended questions expanding on the new hires’ level of satisfaction. Ask them to be open and honest about their experience with the onboarding processes. As they would have been the most recently involved, they might have some fresh ideas and insights on how your organization can improve the process.

While informal feedback is hard to quantify in a dashboard or a specific number, it is essential to gather supplemental information to all the other metrics you’re collecting. It provides an explanation as to why the onboarding experience was great, good, or really bad. This information enables you to boost employee experience and engagement right from the start.

To conclude

Onboarding metrics provide you with a lot of information about your onboarding process and what you can do to improve it. That way, you’re ensuring that you’re setting up your new employees for long-term success within your organization.

The post 9 Onboarding Metrics to Track at Your Organization appeared first on AIHR.