HR metrics quantify the cost and the impact of employee programs and HR processes and measure the success (or failure) of HR initiatives. They enable a company to track year-to year-trends and changes in these critical variables.
Human capital is important to organization because they are the people who are actually working for the organization. They build the company’s core competencies and competitive advantages to the organization. With effective management of the human capital, a company can achieve the maximum outputs from its own human capital and be superior to other competitors.
Some organizations are unaware even of how many people they have in their organization. The problem with HR is that they have been held unaccountable in the initiatives and programs they promote across the organization. Typically, nobody in the organization, let alone top business leaders of the organization are aware of the impact of these programs whether, positive or negative. This is because HR leaders have not been delivering metrics that show the value of their programs or investments. HR metrics is important because it allows organizations to make the connection between the value of what HR is doing and the outcomes of the business. If HR professionals don’t measure their function’s effectiveness and providing decision-making leaders the data they need, HR will continue to be undermined and eventually sidelined when it comes to having a seat at the table. Therefore, many experts urge HR professionals to use the data they have in front of them and understanding how metrics and analysis could give HR an advantage as an overall better strategic partner. This will allow them to help business leaders solve the people problems that matter to the organization.
Before HR metrics, many of the HR activities and processes were difficult to quantify, making it hard to fully understand the real employee costs associated with each HR functions. For example, “a decade ago, if someone looked for turnover rate by performance category, it could be a two-week project.” With HR metrics, more specifically Retention metrics, HR leaders are able to quantify variables such as turnover rate, average tenure, the rate of veteran worker, or the financial impact of employee turnover. These results can indicate how much separating employees is costing the company and help the company to create proactive plans to prevent future loss of top talent.
More importantly, metrics enable leaders and decision makers in organizations towards more efficient and better delivery of HR services
General HR Metrics
Revenue per Employee
Determines value of employees to company.
Revenue per employee = Total revenue ÷ Total number of employees
Cost per Hire
It measures what you’re paying to recruit and onboard each new employee.
Cost per hire = All recruiting and HR staffing costs ÷ Number of new hires
Employee Turnover
Determines whether employees are happy or not. A 20% turnover rate is the norm and 10% or less, is a good goal. Turnover time frame can be month, quarter, or year.
Turnover rate = Number of employee terminations ÷ Average number of employees
Overtime Percentage
It tells how efficient employee scheduling is.
Overtime percentage = Overtime pay amount ÷ Total payroll
Absenteeism
Tells about employee health and wellness
Absenteeism = Workdays missed ÷ Total workdays scheduled
Length of Service
Tells employee job satisfaction and workforce happiness.
Length of service = (Today’s date – Employee’s hire date) ÷ 365
Job Satisfaction Rate
It is measured on a survey like customer satisfaction survey.
Job satisfaction rate = Number of people who report being satisfied ÷ Total number of employees
Employee Productivity and Performance Metrics
Profit per Employee
Profit per employee = Business profit ÷ Number of employees
Health Care Costs per Employee
Health care costs per employee = Total health care costs ÷ Number of employees signed up for health care
Average Time Until Promotion or Pay Increase
Average time until promotion = Date of pay increase or promotion – hire date
Cost of HR per Employee
Cost of HR per employee = Total HR salary and benefits ÷ Number of employees
Training and Development Metrics
Training Spend per Employee
Training spend per employee = Total training costs divided by ÷ Number of employees
Training Return on Investment
Training return on investment (ROI) = Cost of employee training ÷ Value of increased performance
Innovation
Innovation = Number (or value) of successful product or process ideas ÷ Total number of suggestions
Talent Acquisition Metrics
A short summary of each Talent Acquisition sub-category, including examples, follows.
- Requisitions: measures that assess the volume of requisitions and hires from a recruiter perspective.
- Efficiency examples: Requisition Rate, Total Requisitions per Recruiter, Average Filled Requisitions per Recruiter, Job-Posting Factor
- Applicants & Interviews: measures that quantify the sourcing and interviewing of candidates.
- Efficiency examples: Average Interviews per Hire, Interview Rate, Referral Rate, Hire Rate, Percentage of No-Shows
- Hiring activity: measures that assess the volume, types, and sources of hires made.
- Efficiency examples: Recruitment Rate, Percent of Hires Referred, Rehires Percent of Total Hires, Net Hire Ratio, Recruiting Source Distribution
- Hiring cost: measures that calculate or compare the cost of hiring
- Efficiency examples: Cost-per-Hire, Recruiting Cost Ratio, Sign-on Bonus Factor, Source Cost per Hire
- Hiring process: measures that assess the efficiency or effectiveness of the hiring process itself
- Efficiency examples: Recruiter Response Time, Time-to-Fill, Time to Start, 90-Day Separation Rate
- Quality of hire: measures that assess the quality of hires made.
- Effectiveness examples: Hire Index, New Hire High-Performer Rate, First Year Separation Rate, Hiring Manager Quality of Hire Satisfaction
Recruiting Metrics
Recruiting metrics include efficiency, number of hires achieved per recruiter, and the average cost per hire. In an organization some positions have greater impact as compared to other positions. The key positions are given a priority and weight age in the overall assessment of how well the individual recruiters have performed in managing the talent. Recruiting is measured strategically using the following metrics.
- On the job performance for the new hire for the initial 6-12 months.
- The percentage of new hires in key jobs who were asked to leave, or the failure rate of new hire.
- The percentage of employees who quit voluntarily within the first year of their joining the turnover rate of new hires.
- The line managers’ satisfaction on the hiring process and the performance of new hires.
- The new hires’ time to productivity or the time taken by a new hire to fulfill minimum job requirements and output.
- The new hires training success during the initial training and induction.
By tracking the above outcomes recruiters can be identified for the areas that require improvements. The best recruiters are identified on what makes them successful and they can be used the train other recruiters.
The recruiters’ goals have to be consistent with the staffing strategy and the company’s objectives. The recruiters are also given feed back to overcome their short coming in performance. Monitoring a recruiters’ behavior is a difficult task, more so when the recruiter is located offsite. Hence, it is important to ensure the recruiting goals are aligned with the goals of the organizations.
