What are HR Metrics & Knowing How to Use them
HR’s challenge is to provide business leaders with actionable information that helps them make decisions about investments, marketing strategies and new products. It is how organizations measure the value of the time and money spent on HR activities in their organization.
But HR metrics can help you know strengths and weaknesses within a company and allow you to understand which areas you need to focus on improving. HR metrics are invaluable for assessing your business and devising strategies.
The most helpful HR metrics and what they can tell you about your company.
Cost Per Hire – One of the most commonly used HR metrics, this can tell you just how much it really costs your company when you hire a new employee. It is the cost associated with a new hire. It is not only important to know how much it cost in hiring, but it is also important to see if the money spent is used to hire right people. Several factors become part of cost-per-hire metrics, such as the time recruiters and employers spend sourcing and interviewing candidates. This step can be as detailed as time expended researching job posting venues, locating venues that attract a diverse group of qualified applicants and the actual task of posting job postings. Other factors included in cost-per-hire metrics include staff time for interviewing candidates, the cost of pre-employment assessments, processing new employee packets and the cost of providing new-hire orientation, such as trainers’ staff time and the cost of materials, lunches and uniforms.
Revenue Per Employee – These HR metrics help you find just how much each one of your employees is actually earning for your company.
Absence Rate – One of the simplest HR metrics, this one gives you a look at just how many days your employees are missing and could indicate employee satisfaction rates.
Benefit Cost – These HR metrics will give you an overview of just what your benefits package costs you per employee.
Satisfaction – One of the more difficult to gauge HR metrics that tells you how satisfied your employees are. Satisfaction is more abstract, and surveys are the only real way to gather the needed info for these HR metrics.
Turnover – These HR metrics are straightforward and give you a look at how many employees leave your company in a given year.
Tenure – Conversely, these HR metrics help show the average amount of time that your employees have been with the company.
Turnover Costs – These HR metrics can surprise many employers and help show you just how much it costs you when you lose an employee based on separation costs, vacancy costs, new hiring costs, and new training costs.
Time to Fill – These HR metrics help highlight the efficiency of your HR department and measure the time it takes them to fill a vacant position in your company.
HR expense factor- It is the ratio between total company expense and HR expense. It shows if the expenses on HR practices are too much in terms of the whole company expense.
ROI for Training: It is the total financial gain an organization have from a particular training. It shows the effectiveness of the training program and how much it can benefit to the company after the training.
Developing company’s core competency- It helps to demonstrate the connection between HR practices and its effects on organization’s abilities to gain and sustain their competitive advantages. This approach often treats employees as their human capital instead of the expense.
Revenue factor: It indicates the effectiveness of company operation with the use of the employees as their human capital.
Human Capital- There is a tool for HR to measure the human capital and it is called Key Performance Indicators (KPIs). It helps measure human capital outcomes, such as talent management, employee engagement and high performance, illustrates the firm's business, financial and strategic goals, and promotes partnership with senior management for organizational success. Recently HRs integrated the traditional metrics to KPI which aligned with the corporate objectives also. The best KPIs should be able to reflect the human capital performance, such as financial outcomes, performance drivers. The best way to design a good KPI is to discuss things with the company business managers who knows the jobs the best in their own departments.
HR Metrics and Data- Management makes decisions based on facts, not feelings or opinions. Many of the important decisions made affects the business and the bottom line; therefore, in order to convince business leaders that organizations are benefiting from their people or on the contrary, losing money and wasting resources, HR will need to provide data. This data can be found in HR Metrics as an evidence. The key to finding the right metrics for your organization needs is to identify the overall business needs as organizations may differ in terms of the metrics they use. Metrics used by the organization need to show data on how human capital strategy is effective and that organizations are acquiring, developing and deploying the proper talent. Organizations that have trouble deciding what metrics to use for their organizations can always enlist the help of a specialist or consultant to do a company-wide assessment on their organization.
Employee Engagement- As subjective as employee engagement may be, there is a way to calculate the presence of employee engagement. Employee engagement refers to the level of enthusiasm employees have about their jobs and the pride they have in the job tasks they perform. Self-reporting is the only way to produce metrics in this area; however, asking employee survey questions that elicit information can then be converted to metrics that tell employers if their employees are fully engaged. The most effective way to measure employee engagement is through asking identical sets of questions throughout the year. Questions such as “on a scale of 1 to 5, how do you rank your enthusiasm about your job” and “would you describe your commitment level as very high, average, or low” asked twice annually measure the percentage of employee responses and any shifts concerning employee engagement.
Workforce Productivity- Production-oriented work environments benefit from HR metrics that measure whether the company can meet business demands. Metrics are based on scenarios related to the number of employees, their positions and the amount of work they produce. Workforce metrics are also valuable in predicting production capabilities as well as forecasting workforce needs when turnover and attrition occur. Forecasting turnover and attrition may be largely based on historical reference, such as previous years’ figures that indicate how many employees resign voluntarily and how many employees resign of their own volition. Analyzing metrics pertaining to attrition – losing workers to retirement or resignation without plans to replace them – contributes significantly to measuring what the workforce is capable of producing. In this instance, HR metrics are useful in developing a staffing strategy in the case of reduced employee counts and steady or increasing productivity demands.
Below are some suggestions for organizations interested in tracking talent through metrics should consider the following:
• Percentage of performance goals met or exceeded, showing if the organization is meeting the performance goal aligned with its mission
• Percentage of employees' rate at the top performance appraisal level who are paid above average salary
• Percentage of top performing employees who resign for compensation related reasons
• Percentage of employees in performance enhancement programs that show improvement within a year.