Key HR Metrics You Need to Track: Part One
In the age of remote work, the Great Resignation, and the subsequent Great Reshuffle, it’s no surprise that HR’s priorities have changed tremendously. As the workforce continues to be flipped on its head, monitoring employee performance and measuring productivity to ensure that employees reach their potential while maximizing the cost benefits to the company continues to be of utmost importance to HR. That’s why it is critical that HR has a strategic plan in place to define objectives and goals, measure growth, performance, outcomes, and potential risks – including anything that could potentially impact the company’s bottom line. This is why HR metrics are so important-having controls in place to help you measure, identify, and address areas that need improvement can help you keep your finger on the pulse of your organization and ensure business goals are being met.
HR metrics are a key benchmarking tool used by organizations to measure the effectiveness of its human resources, with the aim of fostering growth, building a positive, diverse and inclusive workplace culture, in a work environment that is productive, and maintaining profitable business operations. Elements of a solid benchmarking overview include the following data: employee turnover, cost of benefits per employee, cost per hire, revenue per employee, employee productivity, workforce diversity, voluntary employee turnover, pay equity, rate of employee absences, overtime percentage, healthcare cost per employee, training expenses vs. effectiveness and efficiency per employee.
In this blog, we’re focusing on the top five HR metrics commonly used to maximize employee efficiency and engagement, as well as the health of a company’s overall strategic plan.
1. Cost per hire
The hiring process costs money, and the last thing an employer wants is to make a bad hiring decision. Cost per hire is the average expense incurred in the talent recruitment and acquisition process. Employers ask themselves, “is the value to the organization worth the cost of hiring and onboarding this potential new employee?” The associated costs include internal talent acquisition and training, external agency fees, job postings, etc. The object here is to help HR develop and support recruitment budgets and stick to them, with the goal being to optimize cost per hire without negatively affecting the quality of the resources being hired. Calculating the cost per hire is an important metric that helps drive this. 2. Employee revenue
Revenue data that shows how much each employee generates, as well as equal distribution of work, is key to making business decisions with the goal of optimizing productivity. If your revenue increases over time, it’s a good indication that the company is operating efficiently. Conversely, if your employee revenue is lower than competing organizations, your productivity levels need some attention. 3. Employee productivity As more employees have begun remote work, the importance of employee productivity has taken center stage. While many employers have long regarded working from home as a detriment to employee productivity due to the risk of too many distractions, the opposite is true. Many employees are successfully working from home, increasing their productivity, and spending more time on the job as they don’t have to worry about getting ready for work every day, commuting, and less time meeting with colleagues and more time on Zooms and email. Employee productivity helps employers gauge which employees are performing well and allows you to zero in on problem areas that might be negatively affecting productivity. Once you’ve identified employees who are struggling, you can then work to implement effective training and development programs to help with their performance issues. This is mutually beneficial to both the company and the employee and can help with employee retention rates. 4. Workforce diversity With diversity, equity, and inclusion (DE&I) in the workplace at the forefront of many discussions between business leaders and their HR departments, organizations have incorporated DE&I initiatives into their strategic plans and emphasized the importance of hiring employees from a variety of backgrounds and experience. Lack of diversity in the workforce leads to negative impacts on sales, recruitment, and overall company health. HR metrics to track this can be done in many ways, from gender, ethnicity, age, to years of service within your organization. Placing value on diversity in the workforce can increase employee well-being, workplace culture, performance and productivity, and employee retention, while reducing turnover. 5. Voluntary employee turnover Another key metric HR departments should be tracking is employee turnover rates. This can help you have a better understanding of what motivates quality employees to leave, and what you can do to keep them. The lower the turnover rate is, the better it is for your organization overall. Higher turnover rates equal higher costs per employee because the cost of retaining employees is always less than the cost of hiring and training new ones. If you’re faced with employees who are underperforming or are not a good fit for the organization, it’s always a good idea to have a handle on this early on in their employment. Tracking specific rates of employee turnover at increments of three months, six months, and a year can help you focus on the reasons behind why they left and what other underlying problems exist at your organization that could be related. Generally, the turnover rate should be no higher than 10-15%. If it is, you’ll want to take a closer look at what might be causing it. HR metrics are an undeniably important part of the overall operations at any organization. Companies use this data to help them understand what they can do to improve and make strategic business decisions regarding people, processes, and productivity. An HRIS can help you compile this data for you, so you can identify areas of strength and weak areas that need more attention. Having this information at your fingertips will also help you keep in check all the fundamental components that affect your business operations from the top down. The Benetech HRIS automates and streamlines your HR processes, so you have time to focus on more important things. In the next blog, we’ll focus on five more key HR metrics and why they are important for all organizations to track.
