Introduction
Human resources (HR) metrics help businesses better understand their workforce and the impact of their HR activities. Leveraged wisely, HR metrics empower organisations to improve employee motivation and performance, along with helping to reduce risks and costs.
This article explores what HR metrics are and why they’re important. It outlines the most fundamental metrics every business should be tracking.
What are HR metrics?
HR metrics are measurements that assess the impact of HR strategies and plans. These strategies encompass everything from hiring and induction to training retention.
HR metrics are imports for the following reasons:
- Enhance the efficiency of the HR function, including the effectiveness of engagement, wellbeing, and performance programs
- Provide detailed analyses to upper management to drive decision-making, growth planning, and organisational strategy
- Boost resource and budget allocation for workforce planning, scheduling, recruitment, and remuneration
- Minimise costs associated with risks such as high turnover and employee performance
- Better manage compliance risks like payroll classification, overtime, and minimum wage
21 essential HR metrics and their advantages
These are the key HR metrics and the benefits they could provide:
- Absenteeism - Tracking individual and collective absenteeism provides insights into employee behaviour, engagement, and job satisfaction. It can inform improvements in management approaches and help minimise turnover. In addition, absenteeism rates by department or manager can help identify problems within specific functions or with managerial styles.
- Early turnover - Early turnover tells you the percentage of your new hires leaving within their first year in the role. High early turnover could mean your recruitment and induction processes can be improved.
- Turnover rate - This metric shows you the percentage of employees leaving your company in a given period. With a high turnover rate, you may need to address hiring and recruitment processes, work culture, management approaches, employee satisfaction, and other factors.
- Employee performance - These metrics help you monitor employee performance over time, using tools like manager appraisals, self-assessments, and peer reviews.
- Average performance rating - Average performance ratings yield insights into how individuals or teams are performing. You can use it to identify training opportunities and whether performance is improving or declining over time.
- Billable hours per employee - Calculating billable hours is essential for service firms like accountancy, finance, and law practices. It reveals how much revenue each employee generates relative to their remuneration.
- Engagement - Surveys and other types of feedback help HR determine the level of engagement in a business. The more engaged your workforce, the more productive and satisfied they tend to be and the higher retention will likely be.
- Vacation days used - Working out vacation-days percentage can show you whether your employees are maintaining a good work-life balance.
- Overtime percentage - This metric can help determine whether your business is understaffed and whether your work-hour scheduling is appropriate.
- HR costs per employee - This figure can indicate how cost-effective your HR department is.
- Cost per employee recruited - Cost per recruit is the cost of recruiting and HR staffing divided by the number of new hires. This metric shows how much it costs you to make a recruit and how efficient your hiring process is.
- Diversity and inclusion - Your diversity rate (total number of employees divided by the number of employees from a diverse background multiplied by 100), along with surveys, can reveal how inclusive and diverse your workplace is. In particular, diversity in the executive suite is correlated with business performance.
- 9-box grid - The 9-box grid gives useful insights into the performance and potential of individual staff. You can work out whether someone is an underperformer, a highly valued specialist, an up-and-coming potential, or a top talent.
- Retention rate - Your overall employee retention rate shows the percentage of employees staying with your company in a given timeframe, excluding new hires. Retention is important for reducing turnover risks, retaining valuable skills and knowledge, and enhancing business performance.
- Hiring time - Your hiring time reveals the amount of time between a recruit submitting their application and accepting their job offer. An effective recruitment process will likely not be drawn out and be a better experience for candidates.
- Time to productivity - How long are new hires taking to achieve acceptable productivity levels? The shorter this period, the more effective your recruitment and onboarding processes are likely to be.
- Time since last promotion - How long has it been since an employee had their last promotion? This metric can help you work out why valued employees are leaving and what to do to improve retention.
- Training expenses per employee - Your average training costs per employee enables the HR function to calculate how much you need to invest in training and development.
- Training effectiveness index - How effective are your training initiatives? Training effectiveness can be challenging to track but one approach is setting training goals and assessing whether employees have met them. Another is to measure baseline productivity after training.
- Workers’ compensation - Tracking the number of workers’ compensation claims in a given period helps you better review workplace health and safety and decide how to improve your working environment for employees.
- Employee satisfaction - Happy employees are more committed, engaged, and productive. Monitoring this metric can help identify sources of stress, conflict, or dissatisfaction.
Conclusion
These 21 metrics are some of the most fundamental for organisations, allowing you to transform your HR department into a truly strategic function. Tech tools allow organisations to capture more data than ever before, but it’s selectivity that leads to effective leveraging of data for informed decision-making.
Choosing the right HR metrics to capture is the starting point. Deciding the best way to translate these into actionable insights for your specific business requirements is crucial for success. The right HR metrics can enhance everything from your recruitment processes and retention to training and development programs and strategic planning.
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