Using HR Data to assess business success

There are lots of different pieces of HR data that can be used to measure success:

• Wages.
• Recruitment costs.
• Promotion.
• Labour turnover.
• Employee engagement.
• Absenteeism.
• Morale.
• Labour productivity.
• Management (styles).
• Working environment.
• Health and safety.

High labour turnover is bad, although you don't know why they left - it includes retirees.

Assessing Success using Environment Data

The UK government recommends that businesses report on environmental performance in four key areas:

• Emissions to air (e.g. Greenhouse gases, particles, dust).
• Emissions to land (fertiliser, pesticides, waste).
• Emissions to water (metals and organic pollutants).
• Use of scarce and non-renewable resources.

Environmental data is becoming more important:

• The media look at it.
• It can affect the business' reputation.
• Climate change.
• Non renewable materials.
• More stakeholders are now interested.
• Poor planning may impact on the future.

Assessing a business' sucess via its marketing

The following marketing related items can be used to assess a business' success.

• Return on advertising.
• Customer loyalty and retention.
• Brand awareness.
• Where and how they're marketing.
• Analysis of social media.
• Analytics of video and images.
• Web traffic.
• How much is spent on marketing.

It is important to note that marketing data may be misleading  It must be placed in the context of wider business activities and compared to previous years.

Core Competencies

Businesses have things that they are really good at. They are the business' core competencies.
It is something unique that a business can do well, strategically.
Core competencies are based on three different things, and if they can answer the following questions, they are a core competency:

• How do they provide access to a wide range of markets?
• How does it provide consumer benefits?
• Is it difficult to imitate?

Criticisms of Core Competencies 

• Businesses may outsource too many things, resulting in a loss of knowledge and skill.
• Businesses have to trust the outsourcers to produce high-quality products.
• Businesses lose some control over the business.
• Forces the business to avoid taking major risks.
• Outsourcing allows poor working practices.

Triple Bottom Line

The triple bottom line is a way of assessing business performance based on three important areas:

• Finance (Profit)
• People
• Planet

Profit

• Familiar to managers.
• Identified from the income statement.
• Audited, so the information and figures are reliable.

Planet

• How the business activities impact the environment.
• More tangible - such as emissions.

People

• Assesses how the business is socially responsible.
• Hard to calculate and report.

Benefits of the Triple Bottom Line

• It encourages businesses to think beyond narrow measures (like profit).
• Encourages CSR reporting.
• Supports measurement of environmental impact.

Drawbacks and Criticisms

• Not very useful as an overall measure of business performance.
• Difficult to reliably and consistently measure.
• No legal requirement, meaning that take-up is poor.

Kaplan and Norton's Balanced Scorecard

The balanced scorecard provides a relevant range of financial and non-financial information that supports effective business management.

There are four sections/perspectives.

• Financial Performance
• Customers
• Internal Business Processes
• Learning & Growth

Perspective	What?	How?
Financial Performance	Looking at the overall financial performance of a business, such as it’s profit, the income statement and balance sheet.	Comparing the financial data with previous financial data.
Customers	How the customers see the business.	Look at customer satisfaction, reviews, surveys, customer loyalty.
Internal Business Processes	Do we provide what our stakeholders want – customers & employees. What do we do well?	Labour Productivity, Capacity Utilisation, Employee Retention and Quality.
Learning & Growth	How can we improve and learn?	Targets, leadership, kaizen, and R&D.

Positive

The balanced scorecard includes more information than the triple bottom line, such as how the customers see the business and the business’ internal business processes. It also includes information on learning and growth. As a result, the balanced scorecard provides the business with a wide amount of information to be judged on.

Negative

Whilst he balanced scorecard shows a wide range of information, it doesn’t paint the whole picture of the business. Not all financial figures are included, and some parts may be inaccurate as they may be hard to measure or find data for. As a result, for the scorecard to be successful, it should be used as part of the whole business strategy.

Liquidity Ratios - Current Ratio and Acid Test Ratio

The ability of the business to play the amounts that it owes when it's due.
Most of the required information used for these is from the balance sheet.

It requires the current assets and the current liabilities to be considered.

Current Assets - Cash, Stock/Inventories, Amounts that are owed (trade debtors)
These need to be enough to pay for the liabilities.
Current Liabilities - Amounts owed to suppliers, Overdraft.

Add the current assets and current liabilities

Current Ratio
Current assets/current liabilities

Evaluation the current ratio 
1.5-2.5 suggests the business in a decent position.
A current ratio of below 1 is bad and may suggest the business is struggling.

Firms have different requirements.
It should be compared to competitors.
The trend is more important.

Acid Test Ratio
The same with inventories/stock removed.

Evaluating the acid test ratio
Better indicator for business that hold high stocks.
If it's significantly below 1, it's bad news.
Less relevant to supermarkets due to high stock turnover.
Trend - deterioration in the ratio can suggest a problem.