HR metrics help organisations measure performance data and make sense of it. In turn, this informs talent management decisions. Through the right metrics, HR managers and leaders can learn how to better support employees and strengthen results.
“Metrics are measures of the effectiveness, value and/or costs of a particular program or process,” explains the Society for Human Resource Management (SHRM). “Examples of HR metrics include cost-per-hire, turnover rates/costs, training and human capital return on investment (ROI), labour/productivity rates and costs, benefits costs per employee, etc.”
To observe trends, HR should measure the same metrics over time. But which HR metrics offer the most value, and how can you measure them? We’ll dive into these topics in just a moment. But first, let’s take a broad look at what makes metrics so crucial.
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The Importance of HR Metrics
HR metrics help HR understand not just what is happening, but why it’s happening—and how to change it when needed. HR can act as a business partner to executive leadership with the help of these metrics. Solid HR metrics allow HR directors to aid in organisational planning.
Let’s explore how metrics benefit multiple dimensions of HR.
HR Metrics and Recruitment
Metrics can help determine where you need more talent. They can reveal gaps in your collective skill set in relation to business strategy.
HR Metrics and Engagement
Metrics can help assess employee engagement and satisfaction as well. You’ll learn how motivated and enthusiastic employees feel in their daily work.
HR Metrics and Benefits
HR metrics can also help predict benefits usage and future needs. You can assess whether current benefits are delivering the necessary value.
HR Metrics and Training
Metrics can help identify which training programs are working best, gauging their return on investment (ROI). You’ll also see whether employees are taking advantage of the support provided.
In all of these areas, HR metrics help make the business case for HR decisions. In other words, they help leaders decide where to allocate resources in order to drive business results.
The 26 Best HR Metrics
Let’s examine some specific HR metrics to consider tracking, grouped under several HR functions. You don’t have to focus on all of them right away. Instead, choose a sampling that represents different aspects of talent management.
Recruitment and Retention
- Cost per hire. This illustrates how much a company spent to hire an employee, on average. To find it, divide total recruitment costs by number of hires within a specific period.
- New hire turnover rate. This is the percentage of employees who leave within the first 90 days.
- Time to hire. This is the average amount of time between a candidate’s first interaction with the company during the recruitment process and acceptance of an offer.
- Time to productivity. This measures the time it takes for an employee to master their role and attain full productivity.
- Tenure rate. How long do employees stay, on average? What percentage stay for two years or longer? To find your tenure rate, add up the total months each employee has worked. Then divide it by the total number of employees.
- Rate of high-potential turnover. As Deloitte says, this metric assesses how many high-value employees depart the organisation.
- Quality of hire. This more complex metric measures productivity, fit for role, and ability to work on a team. In essence, it assesses the average value a new hire adds. To calculate it, choose several indicators of success that matter most for that role. Indeed presents this sample equation for quality of hire:
(Productivity + Client feedback + Training time + Engagement) / Total number of indicators = Quality of hire
A ranking from 1 to 100 would be generated for each of these indicators before making this calculation. For example, a client feedback score could be derived from client surveys. (A 90% satisfaction rate would equal a score of 90.) You can then calculate quality of hire as shown above. For example:
85 + 90 + 75 + 90 / 4 = 85
So, the quality of hire score for this example would be 85. To get the average quality of hire among a group of new hires, simply add up their scores and then divide the result by the number of hires.
Engagement and Productivity
- Absenteeism. This is the average rate of unplanned absence. To calculate it, divide the total number of absences in a period from the number of working days. Then multiply that number by 100. Importantly, don’t include planned and approved absences like vacation days.
- Employee productivity. Essentially, productivity is output divided by hours worked. How you measure output will vary by role. For instance, with a sales professional, you could calculate output as the number of sales. Performance management software can help assess productivity based on job responsibilities.
- Benefits participation rate. This marker can show the participation rate for each type of benefit. Then, you’ll know which ones employees value the most so you can allocate funds accordingly. You can also examine the average healthcare cost per employee. Over time, you can see if programs like wellness initiatives lower this cost.
- Net promoter score. This is a measure of employee satisfaction. You can calculate it on a scale of 1 to 10 via an anonymous survey. This pulse survey should include just one or two questions, asking how likely they are to urge friends to apply for a job at your company. An employee who scores at 9 or 10 would be a net promoter. Meanwhile, scores of 7 or 8 would indicate neutrality and scores of 6 or below would show disengagement.
- Goal achievement. Through this metric, you can assess the percentage of goals achieved within a set time frame.
- Employee innovation index. This metric helps gauge employees’ ability to solve problems and exercise creativity. Companies can measure it in different ways, such as patents filed or ROI from projects inspired by employee ideas.
- Overtime percentage. This shows what percentage of an employee’s working hours are overtime hours. Higher levels of overtime can decrease productivity while increasing costs. To calculate it, divide overtime hours by regular hours and multiply the result by 100.
Diversity, Equity, and Inclusion (DEI)
- Organisational diversity. This shows overall diversity among all employees. You can consider different types of diversity, such as race, ethnicity, age, and gender. Simply divide the number of employees of a specific demographic by the total number of employees.
- Diversity in leadership. This metric measures diversity in management and leadership positions. You can evaluate whether it matches organisational diversity and the diversity of your geographic area. This will help illustrate whether equity is increasing.
- Diversity in the leadership pipeline. Do your talent cultivation practices align with the level of diversity you want to see in your leadership?
- Pay equity. This metric highlights any disparities between people of different genders, ethnicities, or other demographics.
- Inclusivity. In addition to more tangible markers of DEI, you can gauge employee sentiments. Conduct a survey that asks questions about how inclusive the organisation is. You can evaluate results for specific demographics to find out if anyone feels left out. The Gartner Inclusion Index uses seven questions to assess inclusivity, for instance.
- Time to promotion. This calculates the average time between promotions, which influences employee satisfaction. You can also compare time to promotion for particular demographics.
Training and Advancement
- Cost of training per employee. Divide the total costs of training programs by the number of employees. You can also calculate this number for each team.
- Revenue per employee. This calculation looks at how much each employee earns for the company, on average. The costs of inputs (training, salary, benefits) must be subtracted from gross revenue to calculate this number.
- Training return on investment. This shows the ROI from training initiatives. You can calculate it by dividing the value of benefits by the cost of training. This gives you the dollar value of benefits returned for each dollar invested in training. (Assigning an exact dollar value to benefits can prove tricky. However, you could estimate the value of project outcomes or increased productivity that stemmed from the training.)
- Percentage of succession plan promotions. This metric reveals the ratio of promotions that arise from this plan.
- Ratio of HR managers to employees. This will help you assess whether employees have enough support—and whether HR is working efficiently.
- Use of potential. By using a 9-box grid, you can compare performance to potential. Calculate how many employees fall into each square of the grid.
Importantly, assess whether different factors balance out. If productivity is high, make sure satisfaction matches it—and if not, make some changes.
With metrics like these, you can also create a succinct HR scorecard. Use it to evaluate the success of your HR department, showing the percentage of HR KPIs achieved. This scorecard provides a snapshot of how well you’re reaching your objectives.
Companies That Use HR Metrics
Most successful companies use analytics derived from solid metrics. For example, Juniper Networks (which develops networking and cybersecurity technology) uses data to assess where departing employees go. From this information, they consider how to offer current employees more exciting career paths to boost retention.
For more than a decade, Google has used people analytics to pinpoint factors that make managers and teams more effective. For example, they assess managers’ success by looking at a combination of three things:
- Performance ratings
- Productivity measures
- Employee feedback
They then assess how managers’ leadership approach affects employee engagement and performance.
Renewable energy company Convergent rigourously assesses inclusivity markers, says HBR. Not coincidentally, it ranks among Inc. Magazine’s best workplaces of 2023.
And metrics aren’t just for the office—UPS uses them to increase drivers’ efficiency and safety. Data on how many U-turns they’re making reflects these aspects of performance, for instance. “Enhanced performance means the company can pay its drivers some of the highest wages in the industry, which no doubt helps support employee buy-in for data-driven performance,” writes Forbes.
FAQs About HR Metrics
Curious about implementing HR metrics at your company? Here are some questions we commonly see on this subject.
How many HR metrics should you use?
Don’t overwhelm your HR staff by trying to calculate every possible metric right away. Instead, choose 5–10 metrics that feel most relevant to you. Focus on low-hanging fruit and build up to more complex ones, advises Deloitte.
Which HR metrics are most critical?
SHRM suggests tracking at least the following five metrics:
- Employee turnover
- Time to hire
- Benefits participation rate
- Employee diversity
- Employee satisfaction
This will give you a solid foundation to build from. As you grow proficient in using these metrics, you can add others to your HR playbook.
Are there any drawbacks to HR metrics?
HR metrics themselves have no real drawbacks—only huge benefits. But if used improperly, they can negatively affect performance management. If managers focus on less relevant metrics or calculate them improperly, that could undermine their efforts.
How to Use HR Metrics
Let’s dive into how to leverage HR metrics. This is where you put your data to work.
Assess Your Strategy
Review your business strategy and talent management strategy, as SHRM advises. How does HR aim to help the business meet its goals? What talent management choices have you made recently? Consider your HR department’s OKRs (objectives and key results). This will illustrate which metrics are most relevant.
Select Software That Offers Analytics
Choose software that provides an HR metrics dashboard. This places key metrics at your fingertips, giving you up-to-the-moment updates. Look for software that will produce detailed reports as well. Quality software uses HR metrics formulas that make calculations for you. Working behind the scenes, it provides up-to-the-moment insights into every aspect of talent management.
Establish a Baseline
For each metric you’re tracking, record the baseline condition. In other words, note the current numbers prior to making any changes.
For each metric, also set benchmark goals. Establish SMART goals for the month, quarter, and year. How to set them? Ask yourself what success will look like in each dimension. Then, consider how much progress is ambitious yet feasible within this timeframe.
Generate Reports Regularly
Create a reporting schedule, letting the executive team know when you’ll be sharing this data. Produce reports at regular intervals, delivering them to key stakeholders. Good analytics tools will show changes between months, weeks, or years.
Drill down into the “why” behind the “what” as you examine your data. You may need to ask “why” multiple times before arriving at your answer, as SHRM says. For instance:
- “Why does this manager do better with certain employees than others? Is it related to employee motivation or personality differences?”
- “Why are just 25% of leadership hires made internally?”
- “Why doesn’t our leadership body reflect our employee base, demographically speaking?”
Keep an open mind about what variables may affect results, and be curious.
Use HR Metrics to Enjoy Ongoing Business Success
As you employ the right HR metrics, you’ll gain invaluable data on topics like retention, recruitment, and performance. Using these insights, you can strengthen each of these areas. Continue tracking these metrics over the long run to see how your HR practices affect each of these areas.
Want to experience how software can deliver the metrics you need? Demo our product!