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The Most Important HR Metrics

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Organizations face a radically shifting perspective regarding the workforce, the workplace, and the world of work in general. As the pace of change is only accelerating, having in place key metrics allows companies to adapt faster and reach their business performance potential.   

Technology-driven insights are a crucial part of the overall business strategy for high-performing companies, so tracking HR metrics unlocks the ability to make data-driven improvements to every phase of the HR pipeline.   

HR metrics and people analytics are among the most powerful levers for business impact and may help companies address pressing issues like labor shortages or reskilling the workforce.

What Are HR Metrics?

Advances in statistical methods and artificial intelligence (AI) have widespread applications in the business world, yet the adoption of human capital analytics is lagging behind. Today more than ever, companies need to focus on career strategies, developing soft skills, talent mobility, and overall employee experience in new and exciting ways.   

So, what are HR metrics, and how can they transform the workplace?   

Companies use human resource (HR) metrics to gauge and track their HR initiatives’ effectiveness. By measuring how their human-capital-related costs contribute to their business performance, they can get a deeper understanding of any issues, improve their efficiency through actionable insights and ultimately predict the future.  

As much as 71% of companies now say they consider people analytics to be a high priority.   

Examples of such data include cost-per-hire, turnover rate, benefits participation rate, and others. Measuring this kind of data – what brings value, what needs improvement, and what to expect for the future – helps organizations tailor their people strategy.  

These metrics also demonstrate the value HR departments bring to an organization’s upper management.  

Key HR Metrics

While there are many things HR can measure, businesses need to focus on the insights they need to grow and succeed.  

It is essential to communicate with the executive leadership to understand which specific metrics are important now and in the future.   

Below are some key HR metrics and formulas to monitor in a company.  

The HR Metrics Dashboard

Analytics is no longer about finding fascinating information about your organization. Today, data is used to understand every part of the business process and operation, and analytical tools are embedded in daily decision-making. 

As a result, dozens of metrics, KPIs, and reports can give insight into the performance of HR-related activities. However, structuring this data and turning it into a piece of meaningful information is best done with data dashboard software. This software helps visualize any metrics and KPIs and provides high-level information that can be broken down further for insights.  

Leading HR teams, department leaders, and executives are implementing a set of people analytics dashboards to inform and support any decisions based on the metrics tracked.  

HR metrics dashboards may highlight metrics like: 

  • Recruiting costs 
  • Employee absentee rate
  • Total active employees 
  • Employees count by department 
  • Employees count by salary range 
  • Number of terminations per month 
  • Overall labor effectiveness 
  • Gender diversity ratio 

1) Time to Hire

The average time to hire is a crucial recruitment metric that indicates the hiring process’s efficiency. A long time to recruit can result in lost qualified talent that ends up being recruited by competitors.   

The time to hire is the length it takes to recruit a new employee, from when the job is posted to their first day of work. You can find the average length of your organization’s time to hire by adding up each individual’s hire time and dividing it by the number of new employees you have hired.  

According to the SHRM, the average time to fill a position is 36 days 

Where does your organization fall on this HR metric 

 

Time to hire =

The number of days elapsed from the job posting to the employee’s first day on the job.

2) Cost per Hire

Similar to time to hire, the cost-per-hire metric includes all the expenses that occurred while searching for a new employee. Included is everything from the recruiter’s time, the time spent interviewing, or any potential cost of listing a job on third-party sites and paid advertisements.   

Cost per hire =

All internal and external costs

Total number of hires in a time period.

3) Revenue per Employee (RPE)

Revenue per employee is the amount of profit from operations generated over a particular period – usually a year- per permanent employee. It is calculated as: 

Some other versions of this KPI include net-income-per-employee and sales-per-employee. Revenue per employee is one of the most popular HR metrics. 

Revenue per employee =

Total Revenue

Number of permanent employees.

4) Offer Acceptance Rate (OAR)

A poor acceptance rate of employment offers is often a sign of problems in the hiring processes, the salary and benefits package offered, and the image or reputation of the company. Another version of this rate is how often candidates accept the first offer without negotiating for a better salary or other benefits.    

Offer acceptance rate =

Number of employees who left

Total number of offers extended during the same period

x 100

5) Employee Turnover

The employee turnover metric is arguably the most crucial benchmark to determine if the recruitment process is efficient.  

If your organization frequently loses new employees and needs to hire new ones, there might be a problem with the hiring or staffing process.  

Turnover rate =

Number of accepted offers

Total number of employees

x 100

While not all turnover is bad, if you are losing your key talent, it becomes a problem. Calculating voluntary, involuntary, top-talent, and first-year employee turnover rates is an excellent way to distinguish between them. 

6) Absenteeism

Like turnover, absenteeism is a strong indicator of discontent and a predictor of turnover. Absenteeism is the number of times employees are absent from work without a good reason.   

As long-term absences and unplanned absences can be very costly, absenteeism rates provide information to prevent this kind of leave. HR managers can quickly spot potential problems and resolve them by calculating absenteeism rates for employees working under different managers or in various departments.   

Absenteeism rate =

Total number of unplanned absences

Total work days scheduled

x 100

7) Employee Engagement

Employee engagement is one of the most critical HR outcomes to measure, and yet it is the most challenging metric to obtain. People who like their job and are proud of their work are generally more engaged and productive. To measure engagement, human resource software can be used to issue company-wide surveys and ask the employees to rate their experiences. 

8) Training Expenses per Employee

One standard metric is the training cost per employee, which tracks development expenses and helps HR make prudent investments in developing personnel. Included are the time spent training new employees, the equipment and materials needed, travel, course fees, paying the people who do the training, or investing in the learning management system (LMS).   

You can calculate this metric by determining the cost of the company’s overall employee training and dividing this number against the number of employees.

Training expenses per employee =

Total training costs

Number of employees

9) Healthcare Costs per Employee

The healthcare costs metric helps you understand how much your budget is spent on employee health insurance. To calculate your healthcare costs per employee, sum up what you contribute to your employees’ healthcare premiums over a benefits period (i.e., one month) and divide it by the number of insured employees. 

Healthcare costs per employee =

Total healthcare costs

Number of insured employees

10) Cost of HR per Employee

HR cost per employee is the total expenditure of the human resources department by the number of employees working in a company. This metric can help understand the costs needed to train, hire, manage, and develop your workforce.  

Cost of HR per employee =

Total HR salary and benefits

Number of employees

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HR Metrics Examples

When used correctly, HR metrics can play a vital role in an organization’s success. Metrics are gathered data points and sets, and analyzing them without context may be misleading.  

For example, consider the time to hire in a company.  

Without historical data or comparing the time against similar companies, you might not know what an appropriate amount is. Analyzing HR metrics examples by considering historical data, how it’s related to other processes and information, and benchmarking against similar organizations lets you reevaluate and improve HR processes. 

For instance, when measuring training efficiency, HR needs to collect the related metrics – like attendees’ reactions, learning, behaviors, and results. This data can come from surveys, test scores, observations, and other metrics related to the process. Analyzing this data from all aspects can reveal whether the training is adequate or necessary.  

Today’s metrics do not just measure quantitative data but also qualitative or, often called “soft” HR metrics. Soft metrics can be discovered by gathering employee feedback and analyzing relevant metrics such as conflicts at the workplace or performance management 

The “soft HR metrics” category includes job satisfaction, employee happiness, innovation, and morale.   

Digital HR tools enable a near-real-time overview of the workplace. Companies can now monitor engagement, turnover, training expenses, and other measurements to help business leaders make better-informed and data-driven decisions.   

On a Final Note 

Digital HR is spearheading a sweeping transformation of organizations worldwide, and there’s a good reason for it. Through HR metrics, leaders can get valuable insights, deliver solutions, and continuously innovate – forever changing how business strategies are developed.  

Written by Shortlister Editorial Team
Written by Shortlister Editorial Team

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