With today’s technology, it is becoming increasingly important to measure and analyse the value of your employees. The right metrics for HR can help you assess the health of your company, your internal processes, and whether employees are maximizing their performance and productivity. Metrics for HR are an essential part of a company’s business strategy but companies don’t always understand them or appreciate their value.
In this post we will look at the benefits of using HR metrics, and why they are so important. Find out if you are getting the most out of your human resources metrics and what you can do to improve the performance and bottom line of your company.
HR metrics are key performance indicators (KPIs) that evaluate how efficient and effective a company’s practices are. Data can be used to quantify the cost and impact of each process within a company, and determine areas for improvement. This allows HR departments and executives to make adjustments where necessary in order to improve the company’s performance and profits. It can also provide valuable data so that managers can make strategic decisions based on hard data.
Common metrics for HR departments to measure the health of the company include performance, key metrics for recruitment, revenue and expenses. Key HR metrics can be used to monitor and track processes and compare them to established targets and objectives.
HR Metrics and Analytics
These HR metrics are used to analyse HR, talent, financial, and operational data in order to:
- Improve the performance of the company
- Generate more revenue
- Minimise expenses
- Mitigate risks
- Execute strategic plans for the benefit of the company.
When used in the right way, they can provide valuable insights and improve the way a company and its employees operate. Strategic key metrics for HR are also a useful HR reports tool for executives, VPs, and investors as they provide tangible data about the overall health and performance of the company. This is an especially important resource for mid-sized to large businesses.
Many companies also implement “soft metrics for HR” in their strategy. These KPIs measure social skills, integrity, and motivation, and look at the impact they can have on a company’s profits and revenue. Unlike hard metrics, which deal in objective, measurable data, soft metrics can be difficult to quantify. It is therefore important to understand what matters to your company and work out the best way to measure results.
There are many benefits to measuring your business processes and tracking metrics in HR. Firstly, it helps you evaluate the health of your company and see how well things are working. Secondly, you can use your findings to make necessary improvements to ensure continuous improvement at all levels of the company. Metrics for HR are an effective method for making sure your company is making the most of its resources and intangible assets: its people.
The right HR KPIs for human resources can help you identify problem areas in your company. And the more reliable and relevant data you have, the better armed you will be. By identifying these areas and evaluating the impact they are having on your business, you can implement proactive HR measures to improve the performance of your company.
Problem areas that KPIs – Key metrics for HR – can help you detect include:
- High levels of absenteeism for specific departments or employees
- Employees or departments requiring training or development
- High turnover rates and the reasons for staffing issues
- Low motivation and staff morale
- Under-performers and over-performers
- Attendance and timekeeping issues
- Costs incurred from unnecessary or inefficient processes
- Unaddressed training needs and associated costs
The best HR metrics help you make strategic decisions based on facts, not hunches. The most important thing to keep in mind when you are designing your HR metrics is what is important for your company. You need to understand what areas you want to measure and track, how you are going to quantify your results, and what objectives you will set. Make sure your KPIs are realistic and not vanity metrics – the aim is to identify where you need to improve, not look good by generating meaningless stats.
Strategic HR Metrics and Workforce Analytics
Before compiling your HR analytics metrics it is important to understand the difference between HR metrics and workforce analytics:
- Metrics in HR are informational. Focused on the past. Operational measures are used to track and measure past performance. They assess the efficiency and impact of HR processes and practices.
- HR analytics are strategic. Focused on the future. Involves analysing data to generate predictions and insights. These measures focus on strategy and decisions which impact the workforce.
In other words, metrics for HR are about measuring performance and how efficient a process is. It’s about using tangible data to gain past insight about the company. It’s about getting the right numbers. With analytics, you are more concerned with the reason behind the results and where you should go next. You want the answers behind the data. By understanding the reasons for your results, you can address any issues, make the right changes, and improve overall metrics.
Definition: Metrics in HR
Basically, metrics in HR tell you WHAT something is, and analytics tell you WHY. Take a look at the following examples to help highlight the difference:
- You use HR metrics to gather information data in your company. The metrics for HR confirm that performance levels are average in your sales department, and staff turnover is high. HR then analyses the metrics to work out why people aren’t performing or staying long at the company. They discover that your competitor offers more incentives and career development opportunities.
- Your company implements a metric to determine what the average salary is for your administrators. Results show it is within industry standards. However, your job satisfaction metric confirms that many of your administrators feel they are being underpaid and undervalued. With analytics, you discover that there is a large pay gap between admin assistants and admin managers which has affected the average.
Now that we have understood what workforce metrics for HR and analytics are, and why they are such a valuable asset, let’s take a look at some of the most important HR metrics that you should be measuring in your company.
Top 10 HR KPIs:
- Performance metrics can show you which employees are underperforming.
- Turnover metrics will determine what the staff turnover rate is and if you have any issues with retaining staff.
- Recruiting metrics in HR. These can help you detect any issues with the recruitment process that could be costing you time and money.
- Absenteeism. Is it having an impact on productivity?
- Cost per hire. How much does it cost the company to hire new employees? It can help detect cost-cutting areas.
- Revenue per hire. How much revenue does each employee bring to the company?
- Cost of training per employee. Are you spending too much or too little?
- Ratio of managers to employees. Are your teams too large? Do you need more managers?
- Job satisfaction. Can help you evaluate morale and motivation levels in different departments.
- Employee engagement. Are staff engaged with their work and productive?
Other useful KPIs for HR examples include:
- Employee Productivity Index
- HR productivity metrics
- Training Effectiveness Index
- Training Efficiency
- Employee Happiness
- Overtime Expense
- Diversity/EEOC numbers
- Billable hours per employee
- Overtime expenses per employee/department
- Time since last promotion
Of all the metrics you will want to monitor, employee absenteeism is one of the key metrics to keep on top of! In particular, there are three areas to consider:
- Employee Absence Rate – otherwise known as unscheduled absence rate. This metric tracks the percentage of employees who are absent over a particular period.
- Employee Productivity Index – With an increasing number of workers who work from home, or are required to travel for work, productivity is a key metric to track. If you want to find out more, we’ll touch on more below.
- Staff Overtime Expenses – employees who work overtime, tend to need more time off later on if they find themselves burnt out. If you notice your employee overtime higher than normal, watch out!
It is important to keep your finger on the pulse and track the happiness and wellbeing of your workforce. If an employee is satisfied with their job and future prospects at the company then they are more likely to be loyal, hardworking and productive. The following common HR metrics will help you understand how your employees are feeling.
Job Satisfaction Rate
You can measure employee engagement and job satisfaction with regular anonymous surveys. The feedback you receive will also help you assess how employee morale is evolving over time. Include scales from 1 – 10 for answers so that your KPI data includes both quantitative and qualitative information.
Employee Productivity Index
A productivity index can help you measure the performance of your employees. The basic productivity formula is: productivity = output divided by input. Calculate how productive your departments are and find out if there are any significant changes or areas for improvement.
Learning and Development
A lack of development opportunities is one of the most common reasons for leaving a company. Implementing a good training program and creating metrics in HR to monitor it is crucial. You can include training metrics for HR such as:
- Expenses per employee: helps track training costs
- Effectiveness index: do employees perform better after receiving training?
- Training cost per employee: how much are you spending?
- Return on investment: is your training investment paying off?
Recruitment is a vital department in any organization. Recruiters decide who works at a company and, in many ways, they help define the corporate culture. This is why it is important to create accurate recruiting metrics. You could also use an applicant tracking system to help you gather your data. It will provide you with valuable input about your budgets, processes, and workflows. This, in turn, will provide added value to the company.
Common recruiting metrics:
Vacancy rate: The percentage of open positions versus the total number of existing positions. Can help you identify trends in the job market and the growth of your company.
Fill rate: How many positions are filled compared to the total number of job openings can help you determine if the recruitment team is effectively filling roles.
Applicants per hire: The average number of applications considered for each new hire. Results can vary by position. Can help you work out how long certain jobs take to fill.
Time to hire: The average number of days it takes for a candidate to complete the recruitment process (from sending their application to accepting the job offer. Can help you spot any areas for improvement in your recruitment process.
Other HR metrics for recruitment could include:
- Conversion rate (percentage of candidates who move forward at each step of the hiring process)
- Reach for hire (total number of people you are able to reach when posting job openings)
- Yield ratio (percentage of candidates from a specific recruiting source that made it to the interview stage)
- Source quality (how many applications resulted in successful hires)
- Offer acceptance rate (how many candidates accepted the jobs they were offered)
- Success ratio (performance ratings during an employee’s first year on the job)
Performance KPIs are one of the most important metrics for HR analysis. They are usually used to measure retention, turnover, and absenteeism. Performance management software can also be a useful tool for keeping track of your metrics.
Divide the current number of employees by the number of employees at the start of your measurement period, then multiply the total by 100 to get your retention rate. Check it on a regular basis to help you detect any high turnover rates in specific departments.
Voluntary Turnover Rate & Talent Acquisition
This metric can be used to track your turnover rate by high and low potentials. This can help you identify any problem areas within the organization. If you are losing key talent on a regular basis it could signal that there is a lack of career opportunities within the company.
Retention Rate Per Manager
Dividing retention rates by department will help you spot any areas needing attention. In other words, could some of your managers do with support and training to help them retain more employees?
Track the percentage of employees who are absent during a given period. A useful KPI for measuring attendance is the Bradford Factor. The right KPI can help you reduce absenteeism, boost productivity, and lower associated costs.
The following tips and best practices will help you improve your analytics:
- Don’t just gather your data – study it and make improvements where necessary. Report then action!
- Don’t generate data for the sake of it. Make sure all your metrics are useful and only report on what you need.
- Identify the right audience for each HR metric. Some KPI results will be useful for your managers, others for HR only. Make sure the data you send people is relevant.
- Establish clear goals and targets. Your KPIs should be tailored to your company’s business needs.
- Make sure your HR staff understands the difference between metrics and analytics. Your HR professionals should also be clear about the role metrics play and why they are so important. Provide regular training and support.
- Learn to ask the right questions (hint: the right question is always “why?”)
- Share the business strategy with your team
- Work across the organizations and provide feedback to managers when relevant.
- The aim is to gather quality data. Avoid vanity metrics to make you look good. Lessons learned are far more valuable.
The most important advice is to make sure you pick the right metrics that help you evaluate and improve your business. They should be in line with your goals and business objectives and provide valuable feedback about how your company is evolving. Vanity metrics might be reassuring, but they don’t provide any real value. Detecting issues, learning from them, and improving your business is the real key to success.