Different HR activities need to be measured by different metrics. Plain and simple. Use this list to identify the HR metrics that matter the most to your organization.
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The value that human resource departments have on companies continues to increase year after year. HR departments are able to influence almost every part of the company, which means they play a great role in its direction and success.
While it’s hard to simplify the work that HR does, in the end, it all boils down to metrics.
Finding the HR metrics that matter is the key to having a positive influence on the way a company runs. With that being said, let’s explore 20 HR metrics that matter and the impact each of them can have on your organization.
Why HR Metrics Matter
Today, HR professionals rely on employee data to identify problems so that they can make the best strategic decisions for their company’s growth and success. HR metrics paint a clearer picture of the effectiveness your current processes.
While HR metrics can be vast in what they are used for, they can generally be grouped into 3 key categories:
- Retention: To help keep your best employees around
- Recruitment: To hire the most relevant talent efficiently
- Diversity, Equity and Inclusion: Building a culture of fairness
Key HR Metrics: Retention
Employee turnover is one of the biggest ways that companies waste money.
When you spend money to recruit and onboard new employees, you typically want them to stay for the long haul so you can get the most bang for your buck.
Retaining your employees builds trust and loyality, while also saving recruiting and training costs. There are many important HR metrics attributed to retention.
Employee turnover within one year of being hired is a more advanced HR metric that should be examined closely.
Ordinary turnover can tip the scales on the budget, but first-year turnover is detrimental to your return on investment.
At the end of the day, recruiting and onboarding are investments. If that investment is leaving within one year, it could signal that there is a flaw in the hiring process that needs to be fixed.
It could also point to an issue with the onboarding process and make new employees feel comfortable while they are transitioning to a new job. Be sure to reference your employee handbook for ways to improve the onboarding process.
Voluntary Turnover Rate
While turnover rate is unmistakably one of the most important HR metrics, it’s crucial not to overlook the voluntary turnover rate. For example, if an employee turns out to be a bad fit and the company decides to terminate employment, it may not necessarily be a bad thing.
Take the time to differentiate between employees who leave voluntarily due to company flaws and those who leave because they weren’t a good fit for the company. This can help give you a more accurate impression of whether or not your turnover rate is acceptable.
Employee Absence Rate
Few things can kill productivity as quickly as high absenteeism. HR departments will have records of how many sick days employees are taking. But this is a metric that should be tracked closely and monitored for a sudden spike.
If the absentee rate is higher than normal or higher than expected, it can point to fundamental problems within the company. This can include employees getting sick at work, employees who are stressed out or working too hard, or simply poor morale among the staff.It’s also important for HR managers to differentiate between scheduled and unscheduled absences. This helps to get an accurate measurement of the company’s employee absence rate.
Turnover and Absences Per Manager/Department
Among the more specific HR metrics that matter are the rates of turnover or absenteeism within a certain department or a particular manager or supervisor.
A spike in turnover or absenteeism may not necessarily be a company-wide problem. Certain teams or departments might have higher rates because there is a problem with leadership or employee engagement.
The more specific HR teams can get with issues like turnover, the easier it’ll be to spot potential problems that can be corrected.
Employee satisfaction is linked to other HR metrics like absenteeism and turnover. Yet it’s a key indicator that can help you make informed decisions to impact your employees’ experiences.
A useful practice to measure this metric is to conduct surveys that focus on employee engagement and satisfaction. Through this tool, you get a clearer idea of how employees feel about the organization. They can also share thoughts on their coworkers, managers, and the work they are currently doing.
It’s also worth conducting periodic surveys to measure how employees feel about changes going on in the company. These changes can affect culture, operations, and the employee experience in general.
eNPS (Employee Net Promoter Score)
Speaking of employee satisfaction, a proven metric to measure this area of business is through an employee net promoter score. Otherwise known as eNPS, this metric measures how keen your employees are to recommend the company.
It might be the easiest metric on this list to measure, as it follows a specific formula. Take the following steps:
- Send employees a survey, asking them how likely they are to recommend the company as a place to work, on a scale of 0 to 10. Employees whose grade is from 0 to 6 are “detractors,” 7 to 8 are “passives,” and 9 to 10 are “promoters.” The latter label is what you’re looking for.
- Subtract the number of detractors from the number of promoters.
- Divide this figure by the number of responders.
- Multiplied by 100. A score of 40-50 is outstanding, 20-30 is good, and 10-20 is reasonable. Anything below is a cause for concern.
Everything boils down to how productive employees are. With more employees working remotely, only coming into the office part-time, or following the traditional 9-to-5 format, there needs to be new human resource metrics for measuring employee productivity, other than profit or revenue per employee. (In fact, you may offer a flexible schedule or even a 4/10 system.)
You can’t just look at who shows up on time and who’s staying late – not that this was an effective metric in the first place.
HR managers need to look for new ways to track what employees are accomplishing. It’s become important to set up a productivity index that can measure what employees are successfully completing.
Internal Promotion Rate
Companies can save a considerable amount of time and money on recruitment and onboarding if they’re able to promote people from within. This also helps with retention and company morale.
By tracking the number of jobs filled by internal promotion, you can also get a sense of how effective your company is in hiring the right people in the first place.
Ideally, you want to be hiring people who have the skills and ambition to climb up the ladder and take more responsibilities within the company. In the long run, internal promotions will save a lot of money and increase the continuity within the company.Don’t forget to send an internal promotion announcement.
Naturally, employees want their salary to reflect whatever stage of their career they are at. If you’re not gradually increasing annual salaries for employees, they will more likely choose to look elsewhere.
Through salary change metrics, you can see how your company’s base salary changes. This helps you make informed salary projections.
To calculate salary changes, you need to:
- Work out the difference between current base salaries and base salaries in the previous interval.
- Divide this by the sum of base salaries in the previous time interval.
- Multiply this by 100, which will show you the salary change as a percentage.
If the percentage is low, then this means there was a small number of salary increases. You can measure this by team, department, or even for the entire company.
Key HR Metrics: Recruitment
Time to Fill Empty Positions
Among the HR metrics related to employee turnover and onboarding, this is perhaps one of the most overlooked.
The average time to fill a position is 36 days.
Naturally, the sooner a job is filled, the less money you’ll spend on searching for an employee and the more time you’ll save where other employees can focus on their jobs and focus less on picking up the slack.
After all, HR managers spend a lot of time looking at resumes, while other managers might take time from their busy schedules to conduct interviews. Productivity decreases the more time it takes to fill the vacancy.
On the other hand, if you rush the process, there’s a good chance you’ll end up with the wrong candidate and have to start the process all over again. If your HR department can fill positions with the right candidates in just under 36 days, you can consider yourself slightly above average in this metric. Look for key qualities in each candidate and ask behavioral questions during the interview to better gauge the candidate.
Cost to Fill Vacancy
Of course, out of all of the various HR metrics related to turnover and hiring the most important one is the cost of filling a vacancy. This calculates the fees spent on job postings and recruitment, among other costs associated with the interview process.
The biggest reason to track this as a human resource metric is so you can set a budget for future job openings and estimate the cost of filling available positions.
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Quality of Hire
Every employee you recruit should bring value to your company. That’s where “quality of hire” comes into play. The type of employees you’re recruiting and how new hires are easing into their new roles are typical ways to measure this.
Whatever factors you take into consideration, you need to assign a score of 1-5 to it. Add up the scores of all the metrics you are measuring, and then divide the sum total by the number of metrics.
You can measure the quality of hire throughout their time at the organization. With that said, the first 90 days of their employment are an ideal time to carry out this assessment. This way, you can see how they’re fitting in and how quickly they’re growing into their role.
Employee Growth Rate
If your company is growing and consistently recruiting new employees, then you must be doing something right. Employee growth rate tells HR how much their organization has grown over a period of time. This metric provides insights and patterns on how the company’s headcount is changing. It also informs HR on how to optimize employee growth in the future.
To measure this metric, you need to:
- Subtract the number of employees in a previous period from your current number of employees
- Divide this number by the average number of employees, combined with the total number of days
- Multiply this figure by 100 to get the growth rate percentage.
Other related metrics include:
- The number of new recruits during a specific period
- Your employee headcount
- The number of terminated employees.
Training Cost and Effectiveness
Along with cost per hire and onboarding, training can be costly. This metric also relates to employee performance and productivity. If employees are being trained to do certain things but are still struggling to accomplish them, the training system might be flawed.
It’s not always a matter of spending more money on training; sometimes, you have to find ways to be more effective with your training methods.
Employee happiness is extremely important as well.
Happy employees will be more productive, have lower rates of absenteeism, and be less likely to leave the company, creating a lower turnover rate. Be sure to focus on your employee retention strategies here.
Something as simple as encouraging employee feedback or employee satisfaction surveys can tell you a lot about how happy your employees are and give you a good indication of how the company can make improvements.
It’s a given that healthcare costs will increase year after year. However, human resources metrics should measure whether the company is getting the most out of the money being spent on healthcare.
- Are the benefits offered being used by employees?
- Is your current insurance carrier offering a plan that works for your employees?
Check in with your employees because a better plan or a different set of benefits might be more advantageous.
Key HR Metrics: Diversity, Equity, and Inclusion
Staff Diversity and Inclusion
In most industries, it’s helpful to have a diverse workforce that’s made up of people from different backgrounds who can bring multiple perspectives to the table. Company leaders are beginning to understand that workplace culture is a critical part of success.
This directly relates to a workplace embracing diversity and inclusion. Without diversity, company culture can suffer, which can impede success. This is why staff diversity is becoming one of the newer HR metrics that matter.
If your company isn’t already tracking pay gaps based on gender and race, or if you’re now required by law, it’s time to start. Even if the law doesn’t require it, paying employees the same wage for doing the same job is the right thing to do, which is why it’s important to monitor HR metrics that create transparency on this issue.
Most companies stick with fixed salary ranges for new recruits. Of course, exceptions can be made for exceptional candidates. At any rate, HR can work out how far an employee goes into their salary range.
To do this, you have to:
- Subtract the range minimum from the salary
- Subtract the range minimum from the range maximum
- Divide the former by the latter
- Multiply the figure by 100.
This formula helps to identify pay gaps when it’s time to hire.
Salary averages can also be calculated to pinpoint pay gaps. It’s a key HR metric when understanding diversity and equity in your business.
To do this, you need to add up all of salaries in your select group and divide by the total number of employees.
HR can measure salary averages by teams, departments, or the entire company.
Since non-exempt employees make 1.5 times their normal wage when working overtime, the cost of paying employees overtime is a HR metric that should be monitored closely.
Paying for too much overtime can quickly put a strain on the company’s budget.
It’s important to make sure that the work being performed by employees working overtime is worth the extra money. You can then determine whether or not it’s more cost-efficient to hire more employees rather than paying current employees overtime.
The Bottom Line On HR Metrics That Matter
Technology is a great way to consolidate information so that you can boost retention rates, while avoiding high turnover rates, termination, and low engagement rates.
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