HR analytics measure specific human resource (HR) metrics used to improve overall business strategy. Human resource departments have tracked some of these data in the past, but the significance of HR metrics has evolved human resources into a leading analytics force in organizations.
Understanding what HR metrics are, why they matter, and how to track them can be leveraged to improve the business strategy.
What Are HR metrics?
Human resource metrics are critical measurements used to track the relationship between human capital costs and their contribution to overall business success. HR metrics are key indicators of organizational performance, HR operations, and process optimization and delivery.
Why HR Metrics Matter
In a survey by Gartner, 800 HR leaders identified five top priorities:
- Building critical skills and competencies (68%)
- Organizational design and change management (46%)
- Developing current and future leadership (44%)
- Preparing for the future of work (32%)
- Employee experience (28%)
HR metrics are key indicators that are measured, analyzed, and used to develop actionable plans which support and improve decision-making.
Most Important HR Metrics and How to Track Them
HR metrics are grouped by the HR function they optimize. These functions include:
- Engagement and retention
- Time tracking
- Employee value and performance
- Training and development
- HR Service and Software
All HR metrics provide the basis for analysis, but some are more important than others.
The seven most important HR metrics include;
1. Time to Hire
Time to hire measures the time elapsed between when a candidate applies for the position to when a candidate accepts the offer.
Time to hire gives critical insight into the recruitment process as it assesses the efficiency and speed of recruiting and the experience of candidates. An extensive period reflects an ineffective assessment and interview process that may discourage candidates.
2. Cost per Hire
Cost per hire (CPH) tracks the average cost incurred when hiring a new employee.
The standard formula for CPH according to the Society of Human Resource Management (SHRM) and the American National Standards Institute is the sum of external recruiting costs and internal recruiting costs divided by the total number of hours in a specified period.
CPH = (∑ (external costs)+∑ (internal costs))/(Total number of hires in a time period)
3. Employee Turnover Rate
Turnover is the rate at which employees are leaving the organization in a given period. Employee turnover determines employee retention and satisfaction and reflects the quality of management and work culture in an organization.
A high turnover rate is costly as expenses will be targeted towards recruiting and training new hires. Targeted turnover rates (across demographics, positions, and periods) determine where and when an organization is at risk of losing talent and can help determine how to mitigate that risk.
The formula to calculate employee turnover rate is the number of employees that left the company within a given period divided by the average number of employees. Multiplying the answer by 100 gives the percentage of turnover.
Percentage of turnover rate = (number of separations during a time period)/(average number of employees during a time period) × 100
4. Engagement Level
Tracking engagement helps organizations know the extent to which employees are committed to their goals and strategy. It measures how employees demonstrate dedication to success through the contribution of their skills and performance.
Employees who feel engaged are more enthused about work, therefore, more productive. Engagement surveys can measure job satisfaction, approval of leadership style, and overall happiness.
Absenteeism refers to the average number of days employees are absent in a given period (excluding approved paid time off) due to sickness or other causes. Recurrent absenteeism in employees can indicate dissatisfaction and predict turnover.
The Bureau of Labor Statistics (BLS) reports that 2.8% of all full-time wage and salary workers are absent on regular workdays.
Calculate the absenteeism rate by dividing the number of absent days by the total number of available workdays in a given period.
Absenteeism rate = (number of absent days)/(total number of available workdays in a given period of time)
6. Average Performance Rate
Performance is measured by conducting appraisals and performance reviews. The average performance rate tracks the mean performance rating across a specific group of employees receiving performance assessments.
Average performance rate = (Total of all employee performance ratings)/(Number of employees who received a performance rating ) × 100
7. Revenue per employee
Revenue per employee is a metric that measures the efficiency and productivity of the whole organization. It assesses the quality of time and effort inputted by human capital against the revenue output. An increase in the ratio indicates increased productivity of employees.
Revenue per employee = Revenue/(Total number of employees)
Other HR metrics and How to Track Them
HR Metrics in Recruitment
1. Offer acceptance Rate
The acceptance rate measures the total number of candidates who received and accepted offers. The acceptance rate is a metric that gives insights into how organizations are faring against their competition.
A low acceptance rate can indicate that candidates are dissatisfied with the recruitment process, salary, and benefits compared to industry standards.
Acceptance rate = (number of offers accepted)/(total number of offers extended)
2. Time to Productivity
The period it takes for new hires to adapt to their roles and work at maximum productivity. Setting a baseline for productivity helps to track this metric. Measuring time to productivity shows the effectiveness of the hiring and onboarding processes.
Time to productivity = Length of time from date of hire to date employee achieves satisfactory productivity.
3. New Hire Turnover
New hire turnover measures the number of new employees who leave an organization within a fixed period. This early turnover could be within six months or a year of their employment and indicates a disconnect between new employees and their role or the organization as a whole.
Recurrent recruiting is costly, so tracking this metric helps determine why new hires are leaving and ways to make them stay.
Percentage of new hire turnover = (New hires who leave (within a short fixed period))/( Total number of new hires ) × 100
HR Metrics in Engagement
4. Retention Rate
Retention rate tracks the extent to which an organization is retaining key members. It can point out ways to improve benefits and compensation, training and development, and overall leadership. Retention rate per manager is another important metric.
Retention rate = (number of employees in a specific group at a given period)/(number of employees originally in that group)
5. Employee Net Promoter Score (eNPS)
Net Promoter Score (NPS) is a poll used to measure a customer’s interest in a product. Employee net promoter score is a subset that measures the affinity of employees to the organization’s brand. It assesses the willingness of employees to promote the company or brand.
Measure eNPS by conducting a poll for employees to pick a number (usually between 1 and 10) that represents the willingness of an employee to recommend the organization to potential candidates.
Based on their responses, the scoring model categorizes employees into these three groups:
- Promoters (9-10)
- Neutrals (7-8)
- Detractors (0-6)
Employee Net Promoter Score = (% of promoters - % of detractors) x 100.
The score is recorded as a whole number to show how much more promoters than detractors exist in a company.
HR Metrics in Time Tracking
6. Overtime Hours
Overtime refers to the hours an employee works beyond the 40-hour week. Tracking overtime hours shows the efficiency of job planning and scheduling as high overtime hours can lead to stress and fatigue in employees.
Calculate overtime hours by dividing the total hours of overtime by employees in a given period by the number of employees.
Overtime hours = (Total number of overtime hours in a given period)/(number of employees with overtime hours)
HR Metrics in Employee Value and Performance
7. Performance and Potential
Categorize employees according to their past performance and future potential using the 9-box matrix. The framework showcases underperformers, high achievers, and emerging potentials.
HR Metrics in Training and Development
8. Training Expenses per Employee
Tracks the total cost accrued by an organization to train employees. The expenses should include all monetary investment towards the courses and programs: e.g., materials, trainer, travel, logistics, etc.
Training Expenses per employee = (Total cost of training )/(number of workers participating in training)
9. Training Completion Rate
Offering training can be counterproductive if employees don’t participate. Measuring the completion rate can assess how much employees appreciate these training and development opportunities, which can aid planning and budgeting.
% of training completion = (Total number of workers who have completed a specific required training )/( total number of workers who are required to take that training ) x 100
10. Time to Completion
The length of time it takes for an employee to complete the requirements for a given course or program.
HR Metrics in HR Services and Software.
11. HR to Employee Ratio
It represents the number of employees per HR professional on the HR team. This ratio tracks HR staffing levels within the organization.
HR-employee ratio = (HR professionals)/(total number of employees in the organization) x 100
12. Cost of HR per Employee
The total expense of HR functions and services spent on an employee in an organization.
Cost of HR per employee = (HR expenses)/(total number of workers)
13. Diversity and Inclusion Metrics
A study by Boston Consulting Group (BCG) in 2017 identified diversity as a driver of innovation, with diverse teams producing 19% more revenue. Hiring professionals from different demographics such as gender, skill set, and industry background creates a melting pot of ideas and an inclusive environment.
Measuring an organization’s diversity and inclusion metrics can identify underrepresented groups, encourage organizations to bridge these gaps, and influence candidates to apply.
Calculate the diversity metric by dividing total hires within a set period by a specific demographic.
Group diversity rate = (total hires within a period)/(specific group hires)
HR metrics provide data for analysis. According to the society of human resource management,
“Applying basic statistical techniques, doing dimensional segmentation, and trending one metric to another, or a target or benchmark is sufficient to turn metrics into analytics and information into insight. It is the insight that produces value, not the metric itself. Reporting is insufficient so analysis is critical.”
Investing in the right software can help you know the right metrics to track, the appropriate audience for each metric, and crucial questions your organization needs to answer.