Metrics are invaluable to the HR function, from employer turnover rates to calculate the cost/benefit analysis of an employee training program. However, it is crucial to know how to use those data points. As Alexis Fink of Intel says, “Most people use data the way drunks use the lamppost: for support rather than for illumination. Fink explains HR metrics as operational measures, addressing how efficient, impactful, and successful the HR practices of an organization are. On the other hand, Talent analytics focuses on decision points, guiding investment decisions” that impact the workforce and related matters.”
Organizations use human resources (HR) metrics to measure how their
HR investment and related costs contribute to overall business performance. Moreover, top management and HR professionals agree that measuring these metrics is transforming from a business advantage to a must-have for any HR team that seeks to build up a solid, data-driven business strategy for their company.
What Are HR Metrics?
Human Resource (HR) metrics are essential data that help enterprises track and measure the utilization of their human resources. These HR metrics help organizations provide deep insights to develop optimal people strategy by measuring what HR policies are working well, what needs improvement, and what trends to expect in the future.
Understanding the HR metrics and reporting these according to your executive team’s needs and then meeting those needs helps organizations become more strategic. HR metrics play a very critical role in an organization’s success as it helps them make informed, strategic choices for the future.
Recruiting metrics to refer to measurements that are used to track hiring success and optimize the process of hiring candidates for an organization by providing a complete picture of hiring activity, such as -All open and occupied positions, several candidates for each job position, average time and cost involved to hire for each position and more. An analysis of recruitment data may indicate improper hiring practices or problems with training and staff onboarding. Additionally, these recruitment metrics create benchmarks, develop accountability, prompt improvement efforts, and highlight areas of recruiting that are working well. Moreover, job candidate demographics are among the most important recruiting metrics for hiring decision-makers to diversify candidate pools and increase inclusion across all talent streams.
The total number of employees within a specific department or an organization is being tracked. The headcount metric provides clarity on Employee count and turnover by location, department, or function. It will also indicate the Retention rates across job level or title.
Time to Hire
An average number of days between when a company posts a job and when a candidate accepts the offer. This metric is beneficial for business planning. It offers a realistic view for the HR manager to evaluate the total time it will take to attract a replacement for a departing candidate.
The acceptance rate refers to the percentage of candidates who accepted your offer.
Cost per hire
It is the average cost involved in hiring a new employee for an organization. Companies use this metric to arrive at recruitment budgets and adhere to them. To draw a reasonable inference of the cost per Hire, HRs also need to look at complementary data such as time to fill and mandatory industry benchmarks of cost per Hire. It has to be noted that the cost of hire optimization should not affect the quality of resources being hired.
Time to Productivity
It refers to the time between the first day of hiring a candidate and the point where the employee starts to contribute to the organization entirely. Generally, this metric is influenced by the effectiveness of the onboarding program, the experience of the candidate, and job support—all three of these need to work together to optimize the time to productivity.
The characteristics of the workforce such as age, gender, education level, and length of service.
It refers to the number of employees who leave their company within the first year of employment. Employees who leave the company in their first year of work fail to become fully productive and usually cost a lot of money. First-year attrition can be classified as managed and unmanaged attrition. Managed attrition implies that the contract is terminated by the employer and is often an indicator of the bad first-year performance of an employee or a bad fit with the team. Unmanaged attrition means that recruits leave on their own accord and are most likely because of an unmatched job description and the actual job.
Engagement & Retention
Employee retention is a set of organizational strategies to optimize your workplace to ensure employees are satisfied, qualified, and prepared enough to excel in their current jobs rather than leave for another position. Engagement refers to a degree to which an employee is committed to giving their best effort at work, and it is often hard to achieve. Employee retention should be an essential priority for any organization because replacing employees is an expensive, disruptive, and time-consuming proposition.
This metric indicates the number of employees who are happy with their jobs and would suggest your company as an excellent place to work.
This metric is calculated by subtracting the number of employees who have departed in a given period from the total number of employees then dividing that by the total number of employees. The two most common approaches to measuring workforce satisfaction are conducting employee surveys and collecting feedback, which indicates how likely your employees are to recommend your company to others.
Total Turnover Rate
It refers to the percentage of employees who leave your organization during a given period. Some of the top reasons for a high turnover rate are hiring the wrong people, poor employee onboarding, on-competitive compensation, or a lack of career path.
Voluntary Turnover Rate
The turnover rate includes only those employees who leave your organization willingly.
Talent Turnover Rate
It refers to the turnover of an organization’s high-performing and high-potential employees.
It refers to the number of employees who remain in your organization over a given period. It is opposite to turnover rate.
Retention Rate per Manager
This metric computes retention rates broken down by individual teams and managers. Low retention rates amongst some managers could be a warning sign that these leaders struggle to build strong relationships with their employees.
It refers to the average number of days employees are absent in a given period, also called absenteeism. Absenteeism is the HR term for “not coming to work when you’re not sick or on holiday.” Growing absence rates could indicate a worsening work climate, increased stress in the workplace, to name a few. Moreover, Unannounced absenteeism can lead to several issues, most importantly disrupting the flow of work. Hence this metric can identify and address the four core reasons for a high absence rate- compensation, communication, benefits, engagement.
It refers to the number of overtime hours worked by employees in a given period. The measurement of overtime metric is vital because there are times when the employees’ inefficient usage may lead to overtime, and time management techniques can quickly solve this. Another reason for a higher overtime percentage may be the existence of too much work for too few employees. This may indicate a requirement for hiring more full-time employees so that there is no burden on the existing staff and work quality improves.
Employee Value & Performance
A scaling business should be able to answer these three questions at a moment’s notice.
1. How much does it cost to find, train and keep an employee in our business?
2. How much do employees contribute to our top line?
3. How long do employees stay in our company?
Employee Performance HR metrics provide the answers. These are values that track an employee’s contribution and performance for an organization. These metrics play a part in the entire employee journey. During the recruitment phase, recruits can learn that performance is not simply managed but supported to ensure all team members succeed. At the onboarding phases, the hiring manager should discuss performance expectations, how to set goals, and how the manager will support team members. During their tenure, all employees must be given the space for continuous improvement by using performance metrics as the measurement tool to discover areas of opportunity.
Revenue per Employee
It refers to total revenue divided by the total number of employees. This is a productivity metric and tells you how each additional Hire or existing employee adds to your top line/profits.
You can keep track of your employee performance through self-assessments, peer reviews, manager assessments, or a combination of all three.
Eventually, you can set clear and measurable performance metrics that you want your employees should work to achieve, and by hitting them, each employee contributes to the overall health of the business with the help of goal-based strategies. Ensure that the individual employee goals are specific, measurable, and action-oriented. Additionally, department Managers should use these metrics during regular one-on-one sessions with each team member to discuss progress and various obstacles that hamper the achievement of these goals.
The quality of an employee’s work is vitally important to achieving his/her goal. Poor quality can translate into poor employee retention rates and, ultimately, inferior products. Ensure your quality metrics align with the type of work an employee does; for example, in a setting where productivity matters, quality can be assessed using a percentage of product defects or errors produced. Secondly, For sales reps, a quality metric can involve the number of sales calls resulting in a sale.
Training & Development
We all know the importance of a robust training and development program for your employees. Establishing a few HR metrics for your training program will ensure you’re creating an effective program and not wasting funds.
Training metrics refer to the data points used to quantify and validate the effectiveness of a training program. These training measurements serve as benchmarks and can evaluate your employee performance based on information and skills they have learned throughout the training and their ability to apply it practically in their jobs.
Effective training metrics benefits your organization in the following ways:
- It can help you quickly determine employee and business performance.
- It can help you identify where employees struggle and incorporate changes into the training design process.
- It can help you drive increased revenue as employee behavior improves.
Training Expenses per Employee:
It refers to the average training cost per employee in a given period.
It is the ROI of training. Any increase in training ROI will prove that the employee training has been successful. However, a decrease would mean that you need to improve your training plan.
Training Completion Rate
It refers to the total number of employees who completed their training in a given period. These metrics are critical in measuring training effectiveness. Whether it’s measured by modules, by lessons, or by programs, you should measure how many employees start and successfully finish the training assigned to them.
Time to Completion
It refers to the average time it takes for an employee to complete a given training program. You can quickly determine your employee progress. If they make slow progress, perhaps the employees lack the motivation to study. You may need to figure out why employees are not interested in learning through a survey. Is the training module or course too complicated, too easy, or too time-consuming? Are your employees struggling with a specific activity, or maybe they need more support, or the activity is too complicated?
There are several ways to measure training effectiveness, including running tests or assessments to generate a pass/fail rate. The various assessment and eLearning simulations can help you offer timely feedback that allows employees to determine how well (or not so well) they’re doing.
How to Use HR Metrics
For making HR metrics a real impact on your organization, it’s crucial to keep these few things in mind :
First, the HR metrics must be used to make informed decision-making supported by facts rather than hunches. In other words, HR metrics are not just plain intelligence gathering; on the contrary, they must be used to resolve an underlying issue or create a business strategy.
Secondly, HR metrics should be relevant to a specific team. HR has to be able to build a business case to show how its dollars impact ROI. It is recommended to use the right audience for every HR metric. For example, HR metrics, such as new-hire turnover or time-to-hire, are helpful for your recruiting team. However, they might not be relevant to your senior managers. For example, by calculating the exit rate in sales, look into what might be driving sales representatives to leave the organization. You might find that certain managerial types have been discouraging employees. Delving further, then HR can match staff to different managers and reduce turnover rate.“
Thirdly, HR metrics alone offer limited value.HR data should be analyzed and connected to solve a business problem.
Fourthly HR metrics must be closely interlinked to your organization’s goals and targets. There is no universal magic benchmark figure for your turnover rate or what your training per employee should cost. So, every company should have a goal for each HR metric related to your organization’s overall success.
Lastly, don’t compromise on data quality. The intelligence you glean from an HR metric will be good, only as the data included in your metric. Hence the underlying data must satisfy Levenson’s CARE criteria:
Consistent– the data underlying the metric must be measured over some time.
Accurate– information must be precise with few errors.
Reliable– your metrics must be a reliable proxy of what you are trying to assess.
Efficient– the cost of collecting the data should be minimal.
Monitoring your HR team performance and crucial employee-related metrics is essential to your business success. With these metrics, you can provide your organization with vital and often unseen data it needs in finding out whether or not the organization is spending its resources efficiently and effectively.
High-quality training programs are crucial for staying ahead in today’s competitive market. With HR metrics and learning analytics, you can easily track your performance metrics to ensure your training program is effective and successful. Each of the HR metrics will provide your HR manager with valuable insights that will help them optimize the training content to achieve the training goals and drive training ROI.
KloudLearn LMS helps you achieve your organization’s learning goals and drive training ROI. The built-in capabilities of KloudLearn LMS enable HR managers and L&D professionals to transform their raw LMS data into valuable insights for building effective business strategies. Contact Us to know more about KloudLearn.