Performance Reviews, Work Culture

7 must track performance metrics for your HR Team

By on September 23, 2016

Look around in the corporate world and you would observe that while almost all departments in a company are subject to quantitative performance measurement, there is one exception – the HR department. For a long time, Human resource management has been treated as a soft skill rather than a scientific discipline. With more & more HR Technology tools cropping up in the market, it is easier than ever to make your HR team objectively accountable towards their goals.

What are HR metrics?

HR metrics or Human Resource metrics are used to determine how valuable and effective HR initiatives have been. These metrics measure data points across different categories like turnover rates, training effectiveness, labour costs, expenses per employee and more.

Why are HR metrics important?

HR metrics are essential to quantify the cost of management programs and HR processes, while measuring their impact on the organization overall. HR Metrics provide information to the leaders so that they can make decisions that are beneficial to the organizations they work for. With proper metrics in place, leaders can always have an idea about the pulse of the organization – by taking a look at employee engagement rates, retention rates and performance reports.

Benefits of HR metrics

The HR department can keep the employees of the organization happy while ensuring the company is successful through HR metrics and analytics. The adoption of HR analytics to gather better HR metrics can be distilled into a five-phase process:

  • Justification of investments is necessary to convince stakeholders of the importance of the project. Also, it paves way for a thorough research that can deliver some gnarly insights about the organizational work culture.
  • Leadership accountability helps employees take changes seriously. When leaders of the organization stand behind performance metrics and the process of using them, employees take it seriously and try to find out more.
  • Deciding effectiveness of key performance indicators allows for a smoother sailing during regular work. If the key performance indicators are not reflecting the changes they should, there’s no harm in going back to the drawing board and redrafting the process again.
  • Value creation with genuine insights is the final phase of the HR metrics part, where the investment in analytics starts providing results. Based on the size of the organization and the speed at which insights are evaluated and executed, this can take anywhere between a few months to a couple of years.

Making the most of HR metrics with Upraise Employee Success

Using HR metrics to measure performance means nothing if steps aren’t taken to improve it. With a framework like Objectives and Key Results (OKRs), this can be achieved – and with Upraise for Employee Success, from the Jira interface.

Courtesy- Amoeboids Upraise App for Employee Success

The reports feature of the app allows managers to identify areas of improvement and provide coaching if necessary. It simplifies the process of identifying issues as the manager has a clear overview of every team member’s responsibilities.

Courtesy- Amoeboids Upraise App for Employee Success

HR metrics that can be tracked

Following are some of the most important human resources metrics (HR Metrics):

Cost of Hiring each employee:

Before a candidate is hired there is an elaborate process that is followed. You have to first identify the need for hiring, check the various sources from where you can recruit, shortlist several prospects, conduct interviews, eliminate all others and select the one that is most suitable for the job profile.

It should be noted that normally the cost-per-hire of every level of every department varies to some extent. At a junior level, the total cost of hiring can be around $10,000 but for the middle level of management or an experienced HR manager, it could be around $150,000. It is advisable to calculate the cost-per-hire HR metric at each level individually to get a proper estimation of how much it would cost to hire a recruit at that particular level.

Cost per hire = recruitment costs / total number of employees hired

Training Costs of each employee:

Irrespective of the level of talent of the new employees, you need to conduct training and development programs wherein they can learn to adjust to the new work culture and perform accordingly.

Training cost per employee = total costs of employee training / total number of employees

The total employee costs for the human resources department would include the fees of external trainers and experts, expenditure on facilities or location, and travel if it is not on-premises. It could even include reimbursements given for tuitions or seminars that employees attend to help them with their careers, to give a 360 degree view for the HR metrics. These programs can be given an audit and compared with recruitment metrics, to assess their training effectiveness.

Employee Revenue generated:

You want to know how much each employee is contributing to your revenue. This way you can get to see if he is being productive. If not what measures can be taken to increase organizational performance turnover percentages so that he can contribute more. Tracking HR metrics like these helps in employee performance appraisals as well. Focusing on this can also bring up the retention rate.

Revenue per employee = revenue / total number of employees

This bundle of key HR metrics will give you an average number which may seem insignificant on its own but if it can be compared to the billable hours from the previous year’s or quarter’s figures, it can be used to understand which performance was better. If it is higher, it’s better but if it’s lower, you need to find out the reasons for low employee productivity.

Return on investment

If you are not getting returns on your investment, then there’s something wrong with the way things work in your organization. With the ROI HR metrics, you can calculate exactly how much investment is worth, including the returns from human capital.

Return on investment (ROI) = (Net Profit / Total investments) x 100

Being in percentage, you can easily compare the ROI of multiple investments together. Investments with high positive ROI should be nurtured whereas those with negative ROI can either be discontinued or various measures can be taken to increase their profitability. Having a good ROI also has a positive impact on the net promoter score.

Employee Turnover

If the number of employees who leave the company is very high, it is high time you find out the reasons at the earliest. Not having a good retention rate creates a negative image about the company performance, but it will also deter new employees from joining you. Address the issues and your employee turnover is sure to decrease. You can seek feedback about compensation, benefits, work environment and understand where the company is lacking. Keeping an eye on strategic HR metrics items like HR self service tickets can also show the areas that cause problems to employees. Based on these insights, employee retention plans can be made.

Voluntary Turnover rate = (number of employees leaving the job in one year ÷ average actual number of employees during the same period) x 100

Cost of Employee Turnover

While the turnover should be ideally low, it is still necessary to calculate how much it cost you. You need to understand all the costs that you may incur once an employee leaves such as separation costs, vacancy costs, new hires, as well as the cost of training those new hires. The number increases if talent turnover rate increases, and is the opposite of retention rate.

Turnover costs = separation cost + vacancy cost + replacement cost + external hiring costs + cost of training programs.

Cost of benefits given to employees

There is fierce competition among companies to hire the most talented individuals while reducing their turnover rate. They know that huge salaries are no longer the only criterion for enticing them. They need to come up with innovative ideas and offer lucrative benefits and perks that are more desired. Overtime hours and pay are considered in this category too. If you see, the benefits offered by the top companies are measured by taking key HR metrics into account. They are more than enough to keep their employee satisfaction levels and are ensured of higher employee engagement, as compared to others.

At the same time, you need to make sure that you are not exceeding yourself – and HR metrics can provide a good way to assess the same.

Benefits cost-per-employee = total costs of employee benefits/number of employees.

Consider these most important HR metrics examples as well as a few others and carefully analyze them. What may seem like little expenses, like turnover rates, may eventually snowball into major costs. Know that the performance of the HR professionals can be made as objective as possible with the use of these and other relevant metrics.

What other HR metrics – both dependent and independent of HR software used – do you think are useful for the HR department or increase HR effectiveness? Let us know in the comments.

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