Goal setting

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 is 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.

Following are some of the most important 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 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, it could be around $150,000. It is advisable to calculate the cost-per-hire at each level individually to get a proper estimation of how much would it cost to hire a recruit at that particular level.

Cost-per-hire = recruitment costs / total number of hires

Cost of Training 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

Your total cost of employees 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.

Revenue generated through every employee:

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 performance so that he can contribute more. This helps in performance appraisals as well.

Revenue per employee = revenue / total number of employees

This HR metric will give you an average figure 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 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 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 be either be discontinued or various measures can be taken to increase their profitability.

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 only does it create a negative image about the company, 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 HR self-service tickets can also show the areas that cause problems to employees.

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 has 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 hiring, recruiting new candidates costs as well as the cost of training them.

Turnover costs = separation cost + vacancy cost + replacement cost + cost of training.

Cost of benefits given to employees

There is fierce competition among companies to hire the most talented individuals. 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. If you see the benefits offered by the top companies are more than enough to keep their employees satisfied and are ensured of higher engagement as compared to others.

At the same time, you need to make sure that you are not exceeding yourself.

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

Consider these important metrics as well as a few others and carefully analyze them. What may seem like little expenses 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 metrics – both dependent and independent of HR software used – do you think are useful for the HR department? let us know in the comments.

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  1. Pingback: HR KPIs to Measure Employee Success – Sean Brady

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