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Top 5 HR Metrics and Why They’re Important

Top 5 HR Metrics and Why They’re Important

What Is an HR Metric? 

HR needs data insights now more than ever. HR Metrics are essential sets of data points that measure the effectiveness of an organization’s HR initiatives. As the HR function at a small to midsize employer, you can compare those metrics to other SMBs in your industry. Additionally, you should aim to improve those metrics within your organization each year. 

 

Why Are HR Metrics Important? 

Without HR metrics, workplace data hides in plain sight and is rendered unintelligible. HR parties of one in small companies frequently have a plethora of people data that could help their organizations. Focusing on key metrics will help your organization achieve its business goals, predict the future of the organization, and improve employee retention and satisfaction. When you make decisions about your company’s HR initiatives based on key metrics, you make good use of easily obtainable data and set your organization up for success.

 

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Top 5 HR Metrics

1. Time-to-Hire: Time-to-hire determines the efficiency of your recruitment efforts by measuring how long it takes you to to hire a candidate for an open position. The timeline starts when a candidate applies for a job and ends when they accept an offer. This metric indicates how fast you spotted your best candidate and moved them across the hiring process. 

You can measure time-to-hire using a per-person average, as shown in the following equation: 

 

 

For example, if you are hiring for 7 new positions and 3 of those positions took 34 days to hire while the other 4 took 40 days, you would find your organization’s average time-to-hire by using the following calculation: 

 

 

 

 

 

Analyzing time-to-hire is crucial because if your organization is frequently losing strong candidates, it could be time to look for issues in the recruiting and hiring process. HR parties of one with a longer time-to-hire risk losing talented candidates and upsetting management who need positions filled ASAP.

We recommend considering questions like:  

  • Are we attracting suitable candidates? 
  • Are candidates being interviewed in a timely manner?
  • What is considered to be a timely manner in which to hire a candidate?
  • Are hiring managers prepared to evaluate candidates? 

Additionally, using an online applicant tracking feature can help you track candidates from the moment they submit an application through their onboarding process to your company. From there, HR and hiring managers are able to see exactly how long each candidate is lasting during the hiring process. This can help streamline the time-to-hire metric. Making timely changes to your hiring timeline and process based on answers to these questions will help your organization actively seek and quickly bring new talent onto the team. 

 

2. Employee Turnover Rate (ETR): Turnover rates are important because they often reveal whether or not a company delivers a positive employee experience. According to SHRM, the average cost-per-hire for companies is somewhere between $4,000 and $5,000. Hiring is expensive, so when an employee heads for the door, the company loses a significant sum of money. Analyzing the historical pattern of employee turnover can also be helpful when considering your annual hiring and training budget. 

Turnover rate is critical because it also affects the team. When an employee leaves your organization, others on the team will need to make up for the work that employee is no longer completing. Sudden increases in workload and responsibility can weaken overall employee morale and productivity. Additionally, the manager now needs to spend significant time interviewing new candidates. Turnover ultimately leads to more turnover as employees who become burnt out may consider leaving your organization.   

Employee turnover rate is calculated using the following equation: 

 

 

A high rate can signal issues like poor candidate selection, low pay, or lack of opportunity. If your organization falls into this boat, try to identify underlying issues by collecting employee feedback regularly, which can be done through annual surveys. 

It’s important to keep in mind that turnover rate can be calculated in two different ways: voluntary and involuntary. To get more specific and helpful metrics, calculate voluntary and involuntary turnover rates separately.

Voluntary turnover occurs when an employee leaves a job, whether because they got a new job elsewhere or retired. 

Involuntary turnover includes layoffs or reductions in force, and terminating poorly performing employees. A high involuntary turnover rate is considered especially undesirable because it can reflect a company’s management and recruitment efforts. Check out our HR Party of One episode on voluntary and involuntary turnovers for more information.

 

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3. Employee Satisfaction: As the primary wearer of the people management hat at their organizations, HR should assess the happiness of the employees they work with multiple times a year. There is typically a direct correlation between a company’s employee satisfaction and workplace productivity. When employees are content, they are more engaged and motivated to achieve a higher level of output. On the other hand, employees who are not happy tend to do the minimum and eventually quit their jobs, leading to a high turnover rate. Employees typically relate satisfaction with the feeling of respect, being recognized for their achievements, and compensation matching their performance. 

One way to quantitatively measure employee satisfaction is by using the Employee Net Promoter Score. The eNPS is a metric used to measure employee loyalty to your organization. The key question to ask your employees is ‘On a scale of 0 to 10, how likely are you to recommend your employer to friends and family as a good place to work?’ If employees are satisfied, they are far more likely to steer others toward a career at your company. 

Those who give a 9 or 10 are called Promoters and those who give a 0-6 are called detractors. The overall eNPS is calculated by subtracting the percentage of detractors from the percentage of promoters. A score between 30 and 50 is considered good. The higher your eNPS, the more satisfied your employees are. Check out our HR glossary on employee satisfaction to learn about how you can use surveys as another tool to measure employee satisfaction. 

 

4. Cost-Per-Hire (CPH): Cost-per-hire or CPH determines the average dollar amount you invest into finding and hiring new employees. This means that the dollar count begins at the start of recruiting. It’s important to note that this metric also takes into account any expenses spent on those who SHRM calls “lost candidates,” or candidates not ultimately hired. 

Calculate your organization’s CPH using the following equation: 

 

 

This equation would probably occur annually, but if a company is going through significant growth, quarterly may be appropriate. The total hiring dollars includes both the internal and external recruiting costs. 

External costs can include hiring recruitment agencies, marketing costs, job board postings, job fair expenses, candidate assessment costs, and more. 

Most of the internal cost of recruiting will come from the salary expenses of your hiring team. However, other internal expenses like training, development, and compliance costs can increase your CPH. When factoring salaries into the equation, be sure to calculate the expense in cost per hour per person. 

For example, if each of your 5 hiring managers make $35 an hour and they each spend 20 hours a month on recruitment efforts, you would add $3,500 to your total recruitment costs. If you are measuring your annual CPH, you would add $42,000 to your total hiring dollars. 

Cost-per-hire is most useful when compared to your organization’s allocated recruiting budget. CPH is a metric that can be easily overlooked, but being intentional about your recruitment budget can save your organization thousands of dollars.

 

5. Benefits Participation Rate: Tracking the benefits that employees regularly use and don’t use can help ensure that employees’ needs are being met and money is being spent wisely. Regularly analyzing the data on benefits participation can help your company tweak its benefits package to meet its employees’ needs and gives you the potential to expand benefits offerings. To determine the benefits participation rate, use the following equation: 


 

For example, if you are evaluating the need for pet insurance at your organization and 6 out of 80 total employees are enrolled in pet insurance, divide 6 by 80, and then multiply by 100 to get a benefits participation rate of 7.5%. A lower rate, like this one, will indicate that there is not a great need for the benefit and money could be better spent elsewhere. 

Regularly auditing benefits participation rate and offering better, more suitable benefits for your employees will likely improve your organization’s retention rate. 

 

How to Improve HR Metrics at Your Organization

It can do more harm than good to ask for employee feedback and not act on it. These HR metrics are only useful if used to improve your organization and work environment. A good place to start would be by setting SMART HR goals based on the metrics for your organization. Concerned about how to choose which HR Metrics would be the most useful to your organization? Ask other HR Parties of One in our community

 

Additional Resources

You can stay informed, educated, and up to date with important HR topics using BerniePortal’s comprehensive resources:

  • BernieU—free online HR courses, approved for SHRM and HRCI recertification credit
  • BerniePortal Blog—a one-stop shop for HR industry news
  • HR Glossary—featuring the most common HR terms, acronyms, and compliance
  • Resource Library—essential guides covering a comprehensive list of HR topics
  • HR Party of Oneour popular YouTube series and podcast, covering emerging HR trends and enduring HR topics 


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