Human Resource, as a department in any organization, is as integral and crucial as any other department. Attracting, hiring, managing and developing the workforce in the right way in a firm can reap big rewards and contribute immensely to business success. When the internal customers, in this case, the employees, are well taken care of, treated with dignity and given clear SMART goals, they are bound to perform better.
To enable the company to better manage its employees, the use of data analytics techniques to get insights on metrics that relate to staff in the organization is imperative. Quantifying data, using key formulas can shed more light on various dilemmas e.g.: Is it more economical to hire from outside or promote internally? Is the current HR Workforce short-staffed and if so, is it the only reason why the department is not performing as per the required standards or there are other inherent factors contributing to a decline in performance? From this point, the company can be better placed to come up with the appropriate remedies as opposed to starting from a blank page which most often than not leads to wrong interventions.
Here are 7 HR Metrics that can be useful to an organization and specifically to the HR Department:
a) Metrics that relate to Recruitment and Retention of Employees
Early Turnover
This is one of the most important metrics to evaluate the hiring success of a company. It measures the percentage of recruits who leave the organization within their first year of employment with a company.
It is calculated as follows:
Early turnover Rate (ETR) = Number of hires who have left the organization during their first year with the company for a certain duration/period / Number of new hires during that duration/period X 100
Early turnover is expensive for an organization. The cost of replacing an employee, especially in the senior roles, can cost as much as 1.5X to 2X the employee’s annual salary. Companies should therefore strive to retain their employees as much as possible and keep this metric as low as possible.
Time since last promotion
This metric is useful in explaining why a company’s high potential employees leave the organization. It is most ideal for any firm to nurture their talent by stretching and developing them to take on more responsibilities in the future. When high potential employees feel like they are not given these chances to grow in the organization, they often start looking elsewhere for opportunities that go in line with their current ambitions.
This metric is calculated by measuring the average time in months since the last internal promotion. The lower this number, the better for the organization.
Quality of Hire
This metric gives insight into the value an employee brings to the organization. It considers various factors namely: Job performance, an employee’s contribution to achieving team/organizational goals and how well the employees fit in the company’s culture.
Time to Hire
It gives insight into the recruiting efficiency (the speed at which the HR Department hires a candidate, from assessment to job offer acceptance) and candidate experience.
It measures the number of days between a candidate applying for a job and them accepting the job offer.
It is calculated as follows:
Time to Hire = (1st candidate time to hire (in days) + 2nd candidate time to hire … + nth candidate time to hire) / Total number of jobs.
The less this number, the more efficient for the organization. It also paints a great picture of the organization and how effective its recruitment processes and policies are both laid out and applied.
b) HR Metrics that relate to Revenue
Revenue per employee
This metric is often used as an indicator of the quality of the workforce. It is mostly calculated on an annual basis.
It measures the amount of revenue generated by each employee of the organization. The higher this figure, the better it is for the organization. However, it is important to note that a very high figure may be indicative that the workforce is short-staffed. If one or few of the employees exit the company, the incumbent staff would have a lot on their plate to increase this metric. Therefore, employers should always be on the lookout to ensure that they have the right number of employees to drive up sales.
It is measured as follows:
Revenue per employee = Total Annual Revenue/ Average Number of Employees (Beginning +Ending / 2)
HR to Employee Ratio
In a typical organization, the ratio of all employees in the HR Department to the total number of employees in the company should be around 2% or 1:50. This means that every employee in the HR Department serves 50 employees.
This ratio can vary depending on these four factors:
- The industry the company is operating in.
- The specific responsibilities tasked to the HR Department
- The level of automation of HR Processes in the organization
- The complexity of HR needs in the company.
c) Soft HR Metric
Employee Satisfaction
It measures how satisfied employees are with the working environment, corporate culture and their current job roles.
This metric is often measured through surveys and questionnaires as it is not easily quantifiable. Employees are normally asked questions relating to:
- The job and the workplace in general
- Work-life balance
- Management effectiveness
- Job security
In conclusion, as depicted in the different metrics above, the use of data analytics to come up with insights and solutions is part and parcel of enhancing a data-driven HR Department. The data used to compute these metrics also needs to be as accurate as possible as having inaccurate data would beat the purpose of analyzing the data.
Mark Ngumo
HR Professional - ElevateHR Community