Article: Productivity - The Key to Profitability: Kronos: People Matters Survey

Technology

Productivity - The Key to Profitability: Kronos: People Matters Survey

Workforce productivity holds the key to profitability. Hence the need to identify the parameters governing workforce productivity.People Matters – Kronos survey delves into workforce management practices in Indian organisations
 

Manpower planningplays a very important role tocomplement business planning for higher revenues,better profits and efficient execution

 

Automation can be a lever forincreasing workforceproductivity,while digitizing canease execution of these activities

 

Workforce productivity holds the key to profitability. Hence the need to identify the parameters governing workforce productivity. People Matters – Kronos survey delves into workforce management practices in Indian organizations.

The critical parameters determining profitability of any business organization are workforce productivity and effective workforce management. For a vast majority of businesses, the single largest cost of doing business is their workforce and thus, workforce productivity and effective workforce management can improve the return on the organization’s largest single asset, its workforce. Thus, the importance of an efficient as well as effective workforce planning becomes all the more critical. If workforce planning is duly taken care of, it will increase productivity by having adequate talent with the right skills, in the right place, and at the right time. As a critical organizational process, workforce planning involves proactive planning of talent to ensure that the organization is adequately staffed for optimal organizational productivity. In its business partner role, it is important for HR professionals to fully understand business cycles and how to align the talent pipeline with the business needs. The dynamics of the marketplace and the shortage of talent, further imply that attraction and retention of talent is all the more important to increase organizational productivity. If workforce planning is mastered, it will increase productivity by having adequate talent with the right skills, in the right place, and at the right time. This in effect will become a source of competitive advantage.

Workforce Management System (WMS) is an essential tool when it comes to business planning. As far as business cycles in any industry is concerned, manpower planning plays a very important role to complement business planning for higher revenues, better profits and efficient execution of growth plans. A workforce management system can help in manpower planning on the basis of demand drivers, forecast human resources plans, and then automatically support in allocating optimal workforce against such plans. Once allocated, WMS systems then help track and analyze workforce performance and practices to manage labor costs, minimize compliance risks and enhance people effectiveness.

HR functional heads need to become more transformational in today’s age of the ‘Knowledge Economy’. If markets like India are going to emerge as bulwarks of the global economy and be in the forefront in the years to come, the people functions need to become more transformational to business by placing the right people, at the right place, at the right time to get the best value from their deployment. Over-scheduling or under-scheduling of people will only harm organizations with either a cost issue or a quality issue. As a matter of fact, HR leaders are increasingly working and taking ownership of these aspects along with business and going beyond the administrative second fiddle with routine chores of recruitment, performance appraisals and payroll. HR is transforming itself to play a constructive business impact role of a different magnitude. This changing paradigm is expected to help enhance employee productivity and bear a positive impact on organizational performance – the key drivers for HR success.

In this light, People Matters – Kronos survey aims to assess the current maturity of workforce management practices and processes, while understanding their impact on organizational performance in Indian organizations. Improving productivity of the existing workforce follows as the most important challenge chosen by as many as 84 percent of the respondents. It is interesting to observe that the area of productivity has gradually moved on towards HR’s area of influence. Workforce productivity has become an important lever for organizations to improve their overall performance and hence, comes under the radar of the complete CXO team. Companies are increasingly focusing on leveraging the different “people” areas, which can improve organizational performance and productivity.

Along with this, the survey also focuses on data collection and information on overall challenges the HR fraternity is facing today, with specific reference to the issues related to managing workforce and productivity. This is intended to help organizations look at measures to ensure that people are enabled to drive organizational performance.

KEY FINDINGS

90 percent respondents believe hiring and retaining talent is the most important challenge
84 percent respondents believe that improving productivity of workforce is a key challenge
Inaccurate manpower planning is the most significant factor that affects employee productivity for 76 percent respondents
70 percent of respondents do not have a system to track absenteeism
82 percent respondents assert that they have a formal process to measure productivity
28 percent agree that they have an automated system in place to measure productivity and track its improvement
Workforce planning and scheduling is the least digitized area with 60 percent of respondents either using desktop office software or a manual system to manage it

Factors affecting employee productivity

There are a range of factors that influence productivity in an organization. First being the nature of the industry and the maturity of the business. For example, there are different factors to consider when it comes to tracking productivity in cyclic/seasonal and non-cyclical businesses. The second element that can affect productivity is how stable and automated are the processes. The third element is the working conditions that affect the overall quality of work and the output. And finally, the level of employee engagement that drives how much of discretionary effort people are willing to put in their jobs. This discretionary effort is usually determined by the morality, motivation and level of enthusiasm that people working in the group have.

Beyond factors that are external to the organization, there are a few factors that are unique to India, like infrastructure and commuting challenges amongst others. Internal aspects like inaccurate manpower planning; lack of relevant training and skills from the workforce; lack of visibility and control; and employee absenteeism are the key factors that affect productivity in organizations today. A productive environment is also the result of organizational basics like allocating the right people with the right skills, ensuring that there is clarity in terms of what is expected from them as well as having the right tools and processes to deliver the expected.

Manpower planning - key to productivity

Manpower planning decisions are taken at the business level, wherein it is aligned to the culture and approach of the organization, whether the company wants to invest in technology or in people or a mix of both. According to the survey, inaccurate manpower planning is the most significant factor that affects employee productivity, as revealed by 76 percent of the respondents. This data point is further corroborated by qualitative responses too. Manpower planning is an important factor to drive and improve productivity and the absence of it can have a negative effect on the overall business performance. Interestingly, the results of the survey indicate that 75 percent of total respondent organizations, who have contractual workers, face higher business impact from inaccurate manpower planning and deployment. Not having the right people for the right roles, at the right time can severely affect the execution of business plans. Most organizations that participated in the qualitative feedback shared that their manpower is linked both in terms of timing and in terms of strategic importance to the business plan.

Employee absenteeism and its impact

Employee absenteeism negatively affects employee productivity in an organization and this fact is well corroborated by the survey findings. In fact, 45 percent of the respondents agreed that employee absenteeism negatively affects employee productivity. Even though 28 percent of the respondents claimed that they track absenteeism to measure productivity and productivity improvement, the reality is that more than 70 percent of respondents do not have a system to track absenteeism.

Absenteeism creates a disruption in the execution plan and it can affect the productivity of the group. In the case of a planned absenteeism, 68 percent of the respondents utilize a co-worker to fill in for the absent colleague. Only 14 percent have the supervisor or an outsourced temporary staff to replace the absentee. In case of an unplanned absenteeism, the scenario is altogether different where 21 percent of respondents use the supervisor to fill in for the team member who has not come to work. This has a great implication both in terms of the work, that gets affected at the supervisory level and also in terms of the additional load that the supervisor needs to fill in for people in his/her team not turning up at work. Interestingly, when absenteeism is planned, 8 percent of respondents do not fill in for the absent staff while for an unplanned absenteeism, 17 percent of the respondents do not fill in. The number of respondents who do not fill in for a position that is vacant is due to lack of systems and processes to track that absenteeism in the first place with the required speed to meaningfully replace the person.

The impact of absenteeism seems to be correlated with the understanding of the business’s nature and cyclicality, the systems and process in place and the ability to interiorize absenteeism in manpower planning.

Measuring productivity

Organizations across industries track and measure their productivity in terms of goal setting and achievement of individual targets and key results. As survey results show, 62 percent of respondents use adherence to time and deadlines for tasks assigned as a metric to track and improve employee productivity. Other metrics at the organizational level used to track productivity are employee cost to revenue or employee cost to profit generated. Unplanned absenteeism as a measure to track workforce productivity is used by 24 percent of respondents.

It is interesting that though organizations have a process to track productivity, a minority of them have an integrated system underlying this process. Automation can be one of the levers for increasing workforce productivity in organizations, while digitizing can ease the execution and improvement of these activities.

Challenges in measuring productivity

Lack of integration of processes and systems to provide consolidated information are major challenges along with lack of coordination between different departments, when it comes to having in place an effective metrics/process to measure productivity. Respondents also cite lack of processes and limited use of technology, which constrain the ability to collect information, consolidate data and process the same to measure productivity. The challenge is further compounded by the fact that the data collection is done by a group of people so the human intervention too poses a challenge in terms of identifying deviations and problems with the data.

The way forward

An integrated solution for manpower planning, workforce activity tracking (productivity and utilization tracker), attendance and absence management seems to be a feasible option for organizations. The greatest benefits of having an integrated solution are the reduced errors & malpractices and a greater degree of transparency, primarily because of minimized human intervention.

KEY LEARNING FROM WORKFORCE PRODUCTIVITY SURVEY
James Thomas, Country Manager – India Operations, Kronos Inc

With the Indian economy increasingly going global, workforce costs going up rapidly across industries and hiring skilled manpower becoming increasingly difficult, it is critical for organizations to enhance workforce productivity to remain competitive. The Workforce Productivity report comes at the right time that aims to understand the factors hindering workforce productivity in Indian organizations across verticals. In fact, measuring and managing workforce productivity has turned out to be one of the top HR challenges in India. By better understanding the factors that impede workforce productivity and managing them, organizations can transform their workforce to become a strategic differentiator. While organizations do have processes in place to measure productivity, most of them, it turns out, are not able to measure it effectively as they lack the necessary tools to track efficiency and productivity. The survey also seeks to help organizations find out the gaps in their automation processes. Along with it, the survey also aims to understand where organizations are on the people engagement maturity curve.

Organizations clearly need to automate their employee productivity measuring processes to be competitive. The survey results point to the lack of automation across industries be it manufacturing/ITeS/hospitality/healthcare. They need to focus on three key issues viz. are they planning manpower well, how do they plan to execute the plans and how do they innovate so that their people are more transformational. It is not only imperative to have visibility on these three issues, but it also has to be in real-time for managers to make proactive business decisions. This is where cookie cutter approaches used by organizations are most unlikely to work. It is here that organizations also need to look at both the supply and demand side of challenges facing them.

Given the rapidly changing business dynamics, organizations will have to be quick in defining processes and adopting tools to manage those processes in real-time. It is critical to understand that defining processes and deploying tools need to go in tandem. Organizations need tools to drive excellence, and they need to inculcate the sense of urgency to be tool driven. They need to put in place the right building blocks and tools, which are scalable and flexible. In the context of developing economies like India, the supply side challenges with respect to talent (workforce) is a given, and hence, the need to sincerely focus on employee engagement. If employees are engaged, organizations will automatically see a decline in replacement costs. The survey results highlight the costs associated with planned and unplanned absenteeism, which in some cases runs to as high as 25 percent. It is important for organizations to seriously address the issue of employee engagement and productivity, which will eventually help in the long term profitability of the organization.
 

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