HR metrics are quantitative measures that can provide insights into the people, culture, and practices within an organization. Establishing, understanding, and tracking these data points plays a crucial role in an HR leader’s ability to provide strategic advisement to the business. In what has traditionally been considered a tactical function, HR metrics help quantify the impact of HR’s efforts, solidify their seat at the executive table, and build data-driven business cases for decision-making.
Understanding the Landscape of HR Metrics
HR metrics can help tell the story of overall business health and performance, highlighting areas of strength and opportunity. Turnover, when compared to industry benchmarks or between departments or functional areas within an organization, can indicate problems with leadership, working conditions, job responsibilities, or pay inequity. Employee Net Promoter (eNPS) scores can cast light on the overall employee experience and insights derived from the highest scoring departments or locations can be implemented company-wide to boost employee satisfaction and fulfillment. HR metrics are key to illuminating themes, but understanding the story the data is telling and using that to inform decision-making is where the real magic happens.
The Top 6 HR Metrics for People Leaders
1. Employee Turnover Rate
Employee Turnover Rate is a way to measure how frequently employees leave a company. The rate can be calculated by dividing the total number of employees who left within a given period by the average number of total employees for that period, and then multiplying by 100.
Organizations lose not only institutional knowledge when employees leave, but employees are also expensive to replace (see cost per hire below). Knowing your current turnover rate can help you establish a baseline and track change over time to identify concerns or wins quickly. If turnover spikes right after a change in leadership or drops shortly after the retirement plan match is increased, for example, you can identify correlations and take them into consideration when making business decisions.
2. Employee Engagement Score
An Employee Engagement Score measures exactly what it says –
the engagement of employees within the organization. There are a few different
ways to calculate employee engagement, and some may be more effective for your
industry or workforce demographics than others. One of the challenges with
Employee Engagement Scores is that they are often self-reported and require
surveying employees. There are other engagement metrics that can be tracked -
it is best practice to try and utilize at least one self-reported metric and one trackable metric.
Some examples of self-reported engagement include Employee Net Promoter Score (eNPS), Employee Satisfaction Ratings, or ratings on third-party sites like Glassdoor.com. Others
that can be tracked by the HR team and can be indicative of engagement are employee
performance, employee absenteeism, and voluntary turnover. Voluntary turnover is
similar to turnover, but it specifically separates the employees who leave by
choice vs. those that were separated as a result of a company decision due to performance
or some other factor.
3. Cost per Hire
Cost per Hire is a calculation used to determine how much money a company spends on average to acquire a new employee. It is calculated by adding together the total internal costs and total external costs of hiring and dividing these by the total # of hires over a given period.
Some examples of internal costs include things like the salaries of the recruiting team, the applicant tracking software, or employee referral incentives. Some examples of external costs include the cost of advertising the job posting, hosting recruitment events, or paying for candidate relocation or travel expenses. In 2021, American organizations spent nearly $4,700 per hire and over $28,000 per executive-level hire. It is important to understand how much each hire costs so you can adequately prepare when budgeting for the future. Suppose you know your organization is going through a high-growth period and will be increasing the sales department by 20%. In that case, it is important to be able to plan financially for hiring costs beyond just the salaries and total reward offerings of the new employees.
Source: Forbes.com
4. Diversity Ratios
Diversity ratios measure employees who identify as part of certain demographic groups against the total number of employees in the organization. These demographic factors can include gender identity, age, ethnicity, disability, or veteran status. Diversity ratios alone can tell us the makeup of our entire workforce but are even more powerful when used alongside other metrics. For example, is the demographic breakdown of our leadership team representative of our organization as a whole? Are members of certain demographic groups being promoted more frequently than others? If the answer is no, we may need to revisit our performance management process and ensure that members of all demographic groups have equitable access to opportunities within our organization and that our decision-making process for promotions has been tested for potential bias.
5. Internal Mobility Rate
Internal mobility rates show how often employees move within the organization. High internal mobility rates have been linked to increased retention, engagement, and reduced cost and time spent hiring. Data from LinkedIn indicates workers who have moved internally have a 64% chance of remaining with an organization after three years, while those who have not moved internally only have a 45% chance of remaining after three years. Notice this statistic did NOT say workers who have been promoted. Internal mobility does not always mean upward mobility. Employees appreciate organizations that offer them the flexibility and opportunity to move laterally and sometimes even backward. Perhaps they want to reduce their work responsibilities because of increased caregiver responsibilities or move from a manager in marketing to an individual contributor in graphic design because they discovered a passion for a new skill. Allowing employees to explore within an organization prevents the need for them to leave to fulfill their career and personal needs.
6. Training and Development ROI
Perhaps one of the more challenging HR metrics involves training and development ROI. This is because of the multitude of factors involved in calculating both the cost and the value of the training. The value will be completely different for each program depending on what that training was specifically intended to do. For example, a training offered to the sales team could be measured by an increase in sales following the training. However, employee retention may be a more applicable indicator of success for a manager training. When calculating ROI, you also have to consider the costs. These can include the cost of purchasing or developing the content, the compensation provided to employees for the time it took to complete the training, and the opportunity cost of work not being done during that time.
The key to measuring ROI is to identify metrics ahead of time that you hope to improve by implementing the training and then selecting or building a training program designed to add the highest possible value to ensure the time is used wisely.
Implementing HR Metrics in Your Organization
HR metrics may seem intimidating, but once you understand how to leverage them, they will make your life so much easier. You can use them to create business cases for changing policies, implementing new software platforms, restructuring departments, re-skilling employees, and so much more. When getting started with HR data, start simple. Begin measuring one or two things at a time, build your confidence, infuse it into your decision-making, and strengthen credibility with your stakeholders. Go for quality over quantity and be intentional about what metrics, if improved, would have the greatest impact on your organization, and use this as your North Star for all decisions for the next 90 days to build your foundation.
Try to align the metrics you choose with your organization’s strategy or goals wherever you can. If a goal is to grow the sales team by 20%, can you help reduce cost per hire? If a goal is to provide the best possible customer experience, can you leverage customer service training? If a goal is to increase productivity, can you identify areas for cross-training that could lead to talent mobility? If after asking yourself all these questions, you still aren’t sure where to start – ask the people. What would make them want to stay at your organization longer? What is in their way of being more productive? How can you help make their experience better?
The Importance of Tracking Metrics for People Leaders
HR data tracking allows organizations to make informed decisions, improve efficiency, enhance employee experiences, and drive overall success. Use the power of data to fortify the value of HR within the organization and celebrate success with tangible results. Our Chief People Officer thought paper tackles the top HR metrics to track and also includes useful formulas and helpful resources. Download your free copy below!
