revenue growth in the district as a whole was 5 percent, revenue growth at this particular store would be 5.5 percent.
Process: Impact on Managers’ Behavior and on the Firm
With the data in place, Sears leaders then began to hold store managers account- able for the elements of the model. They were rated and tracked with regard to the employee-attitude measures, and the system tracked the relationship between those attitudes, customer behaviors, and store performance. As the system evolved, Sears created web portals that allowed store managers to highlight and click on particular connections in the employee-customer-profit model for further study. Eventually, Sears invited store managers and others to post their best prac- tices to the website, and these were also integrated with the logical model.
Thus, not only could Sears store managers now track the measures, they could undertake the analysis using the proven logic of the model to evaluate and predict their own store’s performance. Moreover, if they saw an area where improvement seemed to have potential to enhance store performance significantly, they could click and see the best practices of other stores that had enhanced those attitudes or behaviors. 11
A note of caution is in order, because in other types of organizations, the direction of causality may not be as clear as it is in retailing. In fact, it may well be the case that the financial performance of a firm predicts satisfaction with security and overall satisfaction, rather than vice versa. This is precisely what one study found in an analysis of employee attitudes and financial performance for 35 companies over 8 years. 12
this description. Building on this idea, we begin by presenting the logic of em- ployee absenteeism, that is, how absenteeism creates costs ( Figure 2–4 ).
In this figure, “pivotal” jobs refer to those where a change in the availability or quality of talent have the greatest impact on the success of an organization, such as mechanics at an airline, or new-product designers at a company that thrives on innovation. “Opportunity costs” refer to “opportunities foregone”
that might have been realized if the absent employees were at work. These might include increased productivity or sales, for example. Figure 2–4 may serve as a “mental map” for decision makers, to help them understand the logic of employee absenteeism.
Analytics and Measures for Employee Absenteeism
In the context of absenteeism, analytics refers to formulas (for instance, those for absence rate, total pay, supervisory time) and to comparisons to industry Figure 2–4
The logic of employee
absenteeism: How absenteeism creates costs.
(Source: Cascio, W. F.,
& Boudreau, J. W.
(2008). Investing in people: Financial impact of human resource initiatives.
Upper Saddle River, NJ: Pearson Education, p. 47.)
Does the job allow the employee to set the times he/she works?
Absenteeism Not Relevant
Is Job Pivotal in Importance?
(Do others have to cover? Must process be stopped? Delays in important activities?)
YES NO
Incur Actual and Opportunity Costs
Are Costs Acceptable?
Incur Costs That Are Not Significant
Costs of payments for non-work time of absentees
Costs of managing absenteeism problems Cost of time of replacement workers Cost of reduced work quantity or quality
What absence-reduction program will address the significant causes? What is its cost?
YES NO
YES NO
averages and adjustments for seasonality. Analytics also includes various meth- odologies, for example, surveys and interviews with employees and supervisors, used to identify the causes of absenteeism and to estimate variation in absen- teeism across different segments of employees. Measures, on the other hand, focus on specific numbers (for example, finding employee pay-and- benefit numbers, time sampling to determine the lost time associated with managing absenteeism problems). Figure 2–5 is a flowchart that shows how to estimate the total cost of employee absenteeism over any period. Free online software that performs all of the calculations necessary to estimate absenteeism costs is available at www.shrm.org/publications/books , under “I nvesting in People .”
Process: Interpreting the Costs of Absenteeism
Remember, the purpose of the process component of the LAMP model is to make the insights gained as a result of costing employee absenteeism actionable. The first step in doing that is to interpret absenteeism costs in a meaningful manner.
Indeed, one of the first questions management will ask upon seeing absenteeism- cost figures are, “What do they mean? Are we average, above average, below average?” Unfortunately, there are no industry-specific figures on the costs of employee absenteeism. Certainly, these costs will vary depending on the type of firm, the industry, and the level of employee that is absent (unskilled
Figure 2–5 Total estimated cost of employee absenteeism.
(Source: Cascio, W. F., and Boudreau, J. W.
(2008). Investing in People: Financial Impact of Human Resource Initiatives.
Upper Saddle River, NJ: Pearson Education, p. 49. Used with permission.)
4a. Yes No 4b.
1. Compute total employee hours lost to absenteeism for the period.
2. Compute weighted average wage or salary/hour/absent employee.
3. Compute cost of employee benefits/hour/employee.
5. Compute total compensation lost to absent employees (1 ⫻ 4a or 4b, as applicable).
6. Estimate total supervisory hours lost to employee absenteeism.
7. Compare average hourly supervisory salary ⫹ benefits.
8. Estimate total supervisory salaries lost to managing absenteeism problems (6 ⫻ 7).
9. Estimate all other costs incidental to absenteeism.
10. Estimate total costs of absenteeism (∑5, 8, 9).
11. Estimate total cost of absenteeism/employee (10 ⫼ total no. employees).
Compensation lost/hour/absent employee = wage/salary ⫹ benefits
Compensation lost/hour/absent employee
= benefits only Are
absent workers paid?
versus skilled or professional workers). As a benchmark, however, consider that the average employee in the United States misses 2.3 percent of scheduled work time, or an average of 5.5 unscheduled absences per year (slightly more than one workweek). 16 In comparison, the average European employee misses an average of 10 days per year, or two workweeks. 17 Expressed in different terms, on an average day about 25 percent of the Norwegian workforce is absent (roughly 3 months per year) compared with 4.2 weeks for Sweden, 1.8 weeks for Italy, and 1.5 weeks for Portugal. 18
It is also important to note that the dollar figure just determined (we will call it the “Time 1” figure) becomes meaningful as a baseline from which to measure the financial gains realized as a result of a strategy to reduce absenteeism.
At some later time (we will call this “Time 2”), the total cost of absenteeism should be measured again. The difference between the Time 2 figure and the Time 1 figure, minus the cost of implementing the strategy to reduce absenteeism, represents net gain.
Another question that often arises at this point is, “Are these dollars real?
Since supervisors are drawing their salaries anyway, what difference does it make if they have to manage absenteeism problems?” To be sure, many calcula- tions in HR measurement other than absenteeism involve an assessment of the value of employees’ time (for example, those involving exit interviews, atten- dance at training classes, or the time taken to screen job applications). One way to account for that time, in financial terms, is in terms of total pay to the employee. The idea is to use the value of what employees earn (salaries, benefits, and overhead costs) as a proxy for the value of their time.
Total pay, however, is generally not synonymous with the fixed costs, vari- able costs (e.g., those that vary with employee productivity, such as sales com- missions), or opportunity costs of employee time. It is a convenient proxy, but must be used with great caution. In most situations, the costs of employee time simply don’t change as a result of their allocation of time. They are paid no matter what they do, as long as it is a legitimate part of their jobs.
The more correct concept is the opportunity cost of the lost value that employees would have been creating if they had not been using their time to manage absen- teeism problems. That cost is obviously not necessarily equal to the cost of their wages, benefits, and overhead. That said, it is so difficult to estimate the opportu- nity cost of employees’ time that it is very common for accounting processes just to recommend multiplying the time by the value of total pay. The important thing to realize is the limits of such calculations, even if they provide a useful proxy. 19