HR Metrics: Everything You Need to Know
HR metrics are performance indicators that enable the human resource department to measure and track employee performance based on many different variables. 8 min read
What Are HR Metrics?
To put it simply, HR metrics are performance indicators that enable the human resource department to measure and track employee performance based on many different variables. HR metrics and measurements can be powerful in displaying areas where we could improve and better meet the needs of the employees of an organization and the organization as a whole. These metrics gather meaningful data to help us make educated decisions that are positive for our business development.
Many HR metrics can be used to uncover all aspects involving your company, along with some great HR systems that are useful for tracking various HR metrics whenever needed. However, not all HR metrics are the same and are sometimes overlooked by businesses who assume they're too complicated to use.
Examples of HR Metrics
There are an endless array of HR metrics you can use from payroll to employee retention, benefits and compensation, training, and more – all of which can provide incredible insight into how your HR function is performing. By combining efficient planning, detailed analysis of the HR metrics in question, and effective strategy, you can use the findings to benefit and move your company into the future.
Performance and Recruitment
One of the HR metrics is "time to fill," which highlights the efficiency of how long it takes the HR department to fill an open position in the company. When trying to save budget and time, an efficient recruitment process ought to take around four to six weeks to fill a position.
Some of the metrics to measure this HR detail are:
- Hiring cost - or the cost associated when you hire a new member of the staff
- Time until promotion - a measurement of how long it takes for an employee to be promoted (and explains why any high-potential employees leave)
- Ratio of offer acceptance - calculates how many people offered a job accept versus how many decline the position
- Performance management yield ratio that's above average - how many people perform at a higher level based on the system for performance reviews
- Percentage of performance goals met or exceeded
- Percentage of receiving performance rating - which tells the number employees rated under a given score or rating system based on their performance evaluation (this number is then divided by the number of employees to give the percentage)
- Success of employee referral program
- Early turnover - or an employee leaving within one year
Early turnover is an important and expensive metric to determine hiring success in a company, as it indicates any irregularities or "mismatching" between the employee and the company or between the employee and his/her position.
Revenue per employee shows the efficiency of the organization as a whole and gives insight as to how much each employee earns for the company. Although return on investment (ROI) is an obvious metric to use, this HR detail can be determined based on a number of other measurable factors:
- Individual employee engagement
The most important "soft" HR outcome as an engaged workforce is a productive workforce. People who like their job and who are proud of their company are generally more engaged, even if the work environment is stressful and pressure is high. Engaged employees also perform better and are more likely to perceive stress as an exciting challenge, not as a burden.
Team engagement is also key to look into. Most companies can tell when employees are engaged, versus when they are not, but you can't really put a number here.
- Billable hours per employee
Something especially relevant in professional service firms, benchmarking the billable hours per employee between other departments or partners provides valuable data for future hiring processes.
- Performance and potential
A mapping technique that looks into individual performance as well as potential based on three distinct levels:
3.Emerging potentials (top talents)
The performance and potential of the nine-box grid shows which employees are performing optimally for the company.
- Overtime cost
A measurement of how much you spend in overtime wages per year. Does this increase? This metric determines if you are under- or overstaffed, and may also suggest using a type of software for employee scheduling or tracking time/attendance.
Bottom Line-Focused Metrics
Excessive overtime, especially for longer periods of time, can significantly increase the turnover or absence rate of your employees. To resolve consistently high levels of overtime, simply hire additional employees.
- A timesheet or scheduling match, which can help determine the number of hours needed to be in alignment with the number of hours worked
- Health care costs per employee, wherein you look to spend an amount that you are mindful of
The timesheet metric is best for restaurants, retail, and other shift-based sales businesses. Measuring health care costs, however, needs to be aligned with the company's overall budget for health care.
Employee Training Metrics
Training helps people to become better at their jobs and is used to reward and connect people with their organization. Training spent per employee is used as an efficiency metric as well as to reveal uneven training spending. Measuring any training or development hours gives the sum of total training hours, which is divided by the total number of employees.
It's key to keep a training effectiveness index that measures what employees have learned. When testing for effectiveness, it is better to set training goals and check whether employees have reached those goals when the training has come to an end. Companies can also track baseline productivity and look into the impact of training over a longer period of time.
Effective training is put in place to help the employee become better in his/her job and in doing so, raises an employee's level of performance. The more effective the training, the more the Employee Productivity Index will increase. Another metric is to look at training efficiency, which can be measured by dividing the training expenses per employee by training effectiveness.
Workers' Compensation Metric
Workers' compensation, the number of incidents within a set time period, and/or the exact costs of workers' comp per employee, are important to know for both the company and employees. Measuring the cost per employee shows the figure of the total number of workers' compensation cost for the year divided by the average number of employees. The workers' compensation incident rate is another formula to consider:
1.The number of injuries and/or illnesses per 100 full-time employees
2.Divided this number by the total hours worked by all employees during the calendar year
3.Multiply this by 200,000
Soft Skills-Centered HR Metrics
These HR metrics are harder to gauge with numbers, but you can tell their existence based on the bottom line, a general feeling, or employee morale. Employee wellness should also be considered and may or may not be influenced by some of the other metrics.
One of the soft skills-centered HR metrics is communication. Communication should be consistent, as well as respectful and strong across all channels (electronic, written, and verbal) of the company culture you are trying to create. High levels of communication are a good thing! The fewer number of miscommunication incidents reported, the better.
The environment also influences the communication metric. Some companies like quiet office spaces, while others need loud, open office spaces. There is no preference or better choice; it simply depends on the team that works there. It can give or take away from collaboration and teamwork, another metric. A classic goal for improvement is for companies use teamwork more wisely and be more collaborative.
Other Basic HR metrics
HR metrics also include the effectiveness of HR software, which is a more complex metric. This enables the HR team to better determine what works for the employees and what does not. However, there are many metrics to implement for HR purposes. Below is a list of some of the most popular measurements companies use for successful HR efforts:
- Cost per HR employee, the cost efficiency of HR expressed in dollars
- Ratio of HR business partners per employee, a set of highly developed analytical capabilities that enable HR to see the impact of its policies
- Tenure, to show the average amount of time an employee has been with the company
- Benefits as a percent of salary (annual benefits cost is being divided by annual salary)
- One of the HR metrics is compensation as a percent of total compensation
- Benefit cost, an overview of how much your benefits package costs you per employee
- Yield ratio, the percentage of applicants from a recruitment source that make it to the next stage of the selection process
- Utilization rate, which is the total number of employees using a program/service/benefit (this figure is then divided by the total number of employees eligible to use a program/service/benefit)
- Turnover, a look at how many employees leave your company in a given year
Turnover also shows how much it costs you when you lose an employee based on separation costs, new hiring, vacancy costs, and new training costs. It's primarily used to look into the difference between high and low performers.
The turnover metric also provides HR business partners with a great amount of information about the departments and functions in which employees feel at home, and where or what aspects of the organization that do not work for them. For example, retention rate per manager or division is a metric that helps you identify ineffective managers, which in turn can facilitate a new hire and training process.
Absence rate also is just as highly regarded and just as costly to manage. This number gives a look at how many days your workers are missing and could indicate employee satisfaction rates. Absence rate is a strong indicator of an employee's dissatisfaction, which can somewhat affect turnover rate and any details to prevent this kind of leave.
Absence rate per manager is also a figure given to measure the number of absence days in an entire team or department by the total full-time equivalent required of this team or department. Using absence rate per manager, HR can easily identify problem areas within the company.
When certain divisions or managers structurally struggle with high absence levels, they may be doing something wrong, and their performance is likely to suffer.
Happiness Is Essential, but Is It an HR Metric?
Employee satisfaction along with available development opportunities is imperative. Any EEOC metrics that deal with diversity will help track how many employees self-identify with any protected classes across an employee base, such as gender or race.
Retention rates will differ between people with different jobs. Low employee happiness in certain parts of the organization can be an indicator of conflict or work stress. This could lead to high turnover rates of talent, so it's important to track the turnover of both your high potentials and your low potentials. The overall goal is to have a low turnover of your high potentials, as a high turnover means a lack of career opportunity within the company.
Happiness goes in direct correlation with the productivity index. An HR metric measuring employee happiness is more often recognized as a valuable HR metric. Happy employees are productive employees; they are committed to the organization and don't mind working overtime when necessary. Employee happiness is related to commitment to the organization, and commitment to the job.
However, satisfaction is difficult to gauge as it's more abstract. Surveys are the only real way to gather the needed information.
Common Ways to Track and Implement HR Metrics
Metrics are mainly used to track past performance and are later used in accordance with analytics, which take this past data to generate predictions or insights. Think about the metrics that relate most to topics where you can track performance and how it best aligns with company goals. Later, use the data to set objectives and put your company on the path to success.
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