HR metrics form the cornerstone of successful organizations and people management.
Every good HR manager is aware of this.
The trouble, however, is aligning those human resources metrics with the strategic goals that a company’s executive committee establishes.
CEOs focus on generating revenue for a company.
For that reason, they struggle to understand the softer needs of compensation management.
Nick Holley highlighted this in his study ‘What CEOs want from HR‘.
He explained that the prime concern of CEOs is talent and finance as opposed to the nitty-gritty of human resources.
Therefore, HR managers need to go the extra mile to win their executive team over and implement programs.
Whether you’re a CEO or an HR manager, this blog post shines a light on more than 20 essential HR metrics.
We will examine what they are, why they are important, and how you can incorporate them into your business for better people management.
Let’s get right into it.
What Are HR Metrics?
HR metrics are measures that are used to gauge the success (or lack thereof) of a specific business operation.
These measures are quantifiable and allow companies to assess the people management programs they implement.
In Kevin D. Carlson and Michael J. Kavanagh’s book HR Metrics and Workforce Analytics, the author’s dated developments in HR metrics to as far back as World War II.
Since then, HR metrics saw continued growth through post-war industrial expansion in the 1970s and further development in the 80s and 90s.
The efforts of the forefathers of HR metrics have led to more organizations today incorporating them into their business practices.
HR Metrics vs Human Resources Metrics
It’s important to mention that HR metrics and human resources metrics are not synonyms.
This may sound strange as HR is an acronym for Human Resources. However, there is logic to it.
HR metrics encompass all the measures that affect people management. Human Resources metrics, on the other hand, focus on measures that align with interpersonal people skills.
These skills are referred to as soft skills in most organizations.
Quantifying these skills is difficult as it requires the evaluation of your staff’s sociability as they interact with one another.
They include skills such as adaptability, communication, time management, critical thinking, and conflict resolution, among others.
Therefore, human resources metrics are a subset of the broader term ‘HR metrics’.
HR Metrics – Why Businesses Need Them
HR metrics provide valuable input that executive management needs in order to make strategic decisions for the progress of a business.
- Understanding Work Culture – As mentioned, HR metrics are a way to determine whether the programs and policies a company implements for its staff are working. In doing so, they provide said company with a comprehensive overview of their work culture. This is important in developing a strategy for productivity. Understanding the company’s work culture enables management to make sounder decisions for the betterment of their staff.
- Relating Poor Human Management To Company Risks – This is for HR managers who have difficulty bringing across HR matters to the executive management team. By presenting metrics and showing the value they bring to an organization, it increases the chances of their implementation. This is because you will be able to show clear links between those initiatives and the strategies that will lead the business to realize their goals.
- Promoting Cohesion Between Stakeholders & Executive Management – In order for HR metrics to be implemented, the business’ stakeholders need to give their stamp of approval. Not only does this promote team building, but it also cements positive communication between the executive committee and stakeholders.
- Giving An Objective Statement On The Company – Human resources metrics examples are recommendations that are based on objective analysis and findings. Since they are unbiased, they let both executive management as well as stakeholders, investors, and the government understand where the business is. As a result, it puts all parties involved in a better position to pitch ideas that will allow the organization to accomplish its goals.
- Helping To Reduce Costs – These metrics allow companies to increase revenue by boosting productivity in the workplace while reducing costs.
HR Metrics Your Company Needs
Now, we will present a list of human resources metrics examples that are trending among leading companies.
We have grouped these human resources metrics into different categories in accordance with their role in business management.
We’ll start with the metrics used for recruitment.
Human Resources Metrics Examples in Recruitment
This refers to calculable measures during a period of sourcing and hiring within an organization.
Under this category, essential metrics include:
Time To Hire
This is a metric that calculates the number of days it takes for a candidate to accept a job from the initial moment of contact.
This metric is important as it tells an organization how efficient their recruitment process it.
What’s more, it also offers key information about how hard it is to source someone for that specific position.
If hiring someone for the job was difficult, it would signal that you should pay even more attention to your employee retention tactics. That way, you can lessen the chances of that staff member leaving the job.
This is the formula used to calculate this metric:
Time to hire = Day employee accepts the job – Day employee submitted the application
To explain how this calculation works in practice, let’s imagine the following situation:
Your hiring team advertises a job opening at your company. The day that opening is made public counts as Day 1.
Let’s say the successful candidate submits an application 10 days after your team posts the job. That would be day 11.
You hire that candidate 5 days after they handed in their application, meaning that on day 16, they were brought in.
Therefore, the time to hire would be 16 – 11 = 5 days.
Cost Per Hire
Unlike time per hire, the cost per hire metric tells a company the monetary value of each hiring process that a new staff member goes through.
In other words, it lets them know the average amount of money a business can spend when bringing on staff.
Knowing this information is crucial to setting up and tracking recruitment budgets.
The American National Standards Institute, in collaboration with the Society of Human Resource Management, produced a standard formula for cost per hire:
First, you come up with the costs and expenses that your organization will have to bear as a result of hiring someone. That includes a worker’s salary as well as any costs you may incur from a referral program.
Then, you need to identify all the expenses to be paid to outside companies. These may be agency fees, board fees, or even an expense for doing a background check on your employee.
These are called Internal and External Recruiting Costs respectively.
Once you have those two figures, you add them together:
Total Costs = Internal Costs + External Costs
Then, divide the sum by the company’s total number of hires:
Cost Per Hire = Total Costs ÷ Total Number of Hires
Each of the variables used in the calculations should be taken from the same time period.
In other words, if the amount factored in for Internal Recruiting Costs covers January to July 2019, all of the other variables must be taken from that time frame.
Otherwise, the figure generated will not be an accurate reflection of your cost per hire.
While most employers might disregard this, knowing the acceptance rate on job positions can go a long way.
Companies that have a low acceptance rate should evaluate the factors that caused the employee to turn down the job.
This may involve self-analysis of a company’s benefits package or work culture to identify areas that can be improved.
Early turnover is a must-have HR metric to gauge the hiring success of a company.
If an employer leaves their job earlier than the business had anticipated, it indicates either one of two things:
- There was a discrepancy between the hired employee and company
- There was a discrepancy between the hired employee and the assigned position
Irrespective of the reason for which the employee decided to leave, early turnover signals an impediment in a company’s growth.
For starters, it means that another person needs to be hired to recoup the position which that employee abandoned.
Also, it constitutes a cost to the company.
According to a study from the Center for American Progress, early turnover costs can range from as low as 20% to 213% of the employee’s yearly salary.
Calculating early turnover is straight-forward. You need two variables: (1) the number of hired staff and (2) the number of staff who left before the company had expected.
You find the difference between the two and calculate a percentage of it based on the total number of persons hired.
Human Resources Metrics Examples in Revenue & Employee Productivity
While all HR metrics impact a company’s earnings, here are a few which have a more direct impact on a company’s revenue:
Revenue Per Employee
Calculating revenue per employee is one way that a company measures the role and contribution of each member of staff.
With it, a company generates a numerical figure that estimates the amount of income a worker brings in.
To calculate revenue per employee, most companies divide their net revenue by the average number of employees.
Revenue Per Employee = Net Revenue ÷ Average Number of Employees
While the resulting figure places a general value on each employee, it does inform a company of how it manages its staff.
In theory, a company that records high revenue per employee maximizes the potential of its staff.
Performance & Potential
Measuring and predicting how an individual performs is key to performance management.
There are several benefits to managing your staff’s performance:
- Findings Inform A Company’s Strategy – Getting a sense of how your employees fare on the job enables you to better structure teams and distribute tasks. That way, you can justify changes in the work strategy knowing that they are based on solid analysis.
- Promotes Employee Rewarding – Being able to pinpoint high achievers in your organization makes it easier to reward them for their efforts. Showing employee appreciation is a determinant in increasing employee engagement. It’s also another way to motivate employees to give their all.
- Lays The Foundation For Feedback – Employee feedback is key to the growth and development of your staff. What’s more, HR experts point to sound feedback as being a determinant in employee engagement.
Calculating performance and potential is complex.
To simplify it, some HR managers use a 9 box grid which measures an employee’s performance as it relates to their potential.
This type of metric is an adaptation of a subjective appraisal that ranks employees based on their score in each category.
Absence Rate Per Manager
The absence of a staff member within an organization can hurt the department’s ability to function well.
Being able to identify these risks ahead of time, HR can intervene so that the problem doesn’t get worse.
In short, this HR metric serves to diagnose an organization’s absentee rate as across departments.
Calculating this involves identifying the number of days that employees were absent across a department.
Then, divide that number by the total Full-Time Equivalence (FTE) in the department.
Absence Rate Per Manager = Absent Days ÷ FTE
The resulting figure will allow you to measure how employee absenteeism affects the workflow in a department.
As a business leader, you should expect your staff to do overtime every now and again.
However, when overtime becomes not only excessive but also a regular occurrence, it becomes a cause for concern.
From as far back as 1990, experts have investigated the relationship between absenteeism and overtime.
Those findings still stand today.
If an employee always requests overtime, it suggests that they are being overworked.
In such cases, this is the warning sign that an employee may decide to leave their post and look for a less time-consuming job.
Since this metric is based on excessive overtime, you will need two variables:
- Total overtime costs
- Total revenue gained
Both variables need to reflect the same timeframe.
Once you have those two figures calculated, you need to determine whether the amount of revenue gained can justify the overtime logged.
Based on your findings, you will be able to make a decision moving forward.
That may even mean hiring another temporary employee to assist your staff and offset costs.
Profit Per Employee
Similar to overtime expense, knowing your profit per employee lets you get a sense of whether you’re over or understaffed.
To calculate this, you divide your profit by the total number of staff.
Profit per employee = Profit ÷ Total Staff
Based on the numbers calculated, you can develop strategies to make the most out of the profits the business receives.
Student Loan Costs per Employee
Your organization may be offering an employer paying student loans program.
Employers tend to provide this perk under flexible benefit plans to make contributions to their employees’ student loan payment.
Companies like FutureFuel.io facilitate employers’ contributions by keeping a digital record of the employee’s student loan account.
This record itemizes details relating to an employer’s contributions, including the date that they were made and the amount.
Therefore, HR does not need to worry about calculating those costs as FutureFuel.io’s platform automatically does it.
Billable Hours Per Employee
This HR metric is useful for companies that need to bill out to clients.
It determines the number of hours that a business expects its staff to bill during a set period.
One business in which this practice is common is in law firms.
To calculate it, you need to determine a timeframe: in other words, whether the amount will reflect either. monthly or an annual period.
Then, sum up the number of hours worked during that period and divide it by the total number of your staff.
Billable Hours Per Employee = Total Hours ÷ Total Number of Employers
Human Resources Metrics Examples in Employee Engagement
These HR metrics are those which cover soft skills like gauging employee morale and work culture:
Aligning Mission & Vision With Staff
For staff to feel engaged with their respective jobs, they need to understand the importance of their role as it relates to the development of the company.
In order to determine this, HR experts developed a phenomenon known as the ‘mission and vision alignment of work’.
With it, companies can measure how connected employees feel to their job and the overarching goals of the company.
Here is the formula that HR managers use to determine this metric:
Alignment = Number of goals ÷ Work activities and goals.
Collaboration & TeamWork
A common goal for companies is to promote unity among departments and employees.
Teamwork and camaraderie form the backbone of organizations. When everyone has a solid working relationship with each other, tasks get done quicker.
Measuring this human resources metric is not subjective as there is no known formula.
However, depending on the type of business you have, some resources may prove to be useful in measuring it.
For example, if employees usually communicate online, tools such as Slack and Trello do improve teamwork through fostering better communication.
You can also judge how well a team is working by the outcome of a project.
Employee wellness is another element that affects employee productivity.
There is no steadfast way to gauge an employee’s wellness.
Doing so involves careful evaluation of your work culture and work environment. Based on that, you should determine whether they allow employers to take care of their mental and physical health.
That includes the number of hours that an employee works in a day as well as the time allotted for intermittent breaks.
Look and see whether there is a direct correlation between the absenteeism rate and something about the work environment.
If there is, make amendments where needed.
Making an objective assessment of your company’s work environment lets you know whether you should make any modifications.
This works in tandem with understanding your staff.
For example, some employees prefer to work in quiet spaces whereas others need to listen to music.
Knowing the dynamics within your workplace will allow you to better capitalize on the type of working environment you provide to them.
Worker’s Compensation Claims
Sometimes, workers need to file for compensation.
These claims stem either from an injury, illness, or ailment that an employee got on the job.
HR managers should review these claims by paying particular attention to the amount solicited as well as the cause of injury.
If there is something at your organization that is causing your company to incur a loss, it is best to remedy it as soon as possible to avoid further damage.
Employee satisfaction is yet another Human Resources metric that cannot be measured with calculations.
It is, however, important to lowering your employee turnover.
HR managers employ a myriad of tools to get as complete a review from their employees as possible.
These include company surveys and one on one interviews to find out how employees feel about their job.
Other HR Metrics
Effective of Software
Evaluating the effectiveness of your company’s software tells you how your staff is interacting with the platform.
Sometimes. delays in a staff member’s ability to accomplish a task are as a direct result of poor user experience with the software.
Needless to say, this hurts an employer’s productivity and, by extension, the company’s.
HR managers can get feedback from surveys, reviews, and questionnaires to get a sense of how employees feel about their software.
Your workplace should always promote diversity and be welcoming of people irrespective of their difference.
No employee should ever feel uncomfortable at the workplace because of their race, religion, ethnicity, or sexual orientation.
From employee feedback, you should get a sense of whether they feel uncomfortable at work and identify the underlying cause of their discomfort.
In conjunction with inclusion, a diverse staff helps in promoting equality and tolerance.
Getting a sense of your staff’s gender demographics will help you in selecting team building activities that your staff will enjoy.
Moreover, it gives you a chance to double-check that there are no discrepancies in wages on the basis of gender.
Executive vs Employee Perceptions
This goes hand in glove with aligning the mission of a company with your staff.
At times, there may be a mismatch in what the executive team of a company views as important and that of the employees.
For this reason, period meetings need to be set up between the executive committee and your employees to ensure that everyone is on the same page.