HR Metrics
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The following HR Metrics will help you:
• Evaluate and measure HR’s performance
• Identify key issues and opportunities that will help the organization improve
• Develop organizational goals and objectives in support of the business strategic plan
• Communicate performance and results
• Supply the data to support a business case
Getting Started
• Decide what should be measured (reference your business and HR strategy and goals – and don’t forget pain points)
• Determine a baseline (either from industry standards or from your current data)
• Consider who will be receiving the data and how (is this for operations or a scorecard?)
• Gather and evaluate the data
• Identify possible contributors
• Develop solutions and set a target goal
• Implement your solution
• Remeasure and reassess
Determine a frequency and method for evaluating this data. Typically, these are measured monthly at a minimum with a quarterly review to compare against the strategic plan along with an annual review to determine overall performance.
And please note, depending upon the industry, it may require the metric(s) to be adapted and customized to better represent business conditions and meet company needs. Many software systems (HRIS, timekeeping, applicant tracking) will also have their own built in, static formulas for calculating.
| Top Metrics (Fundamentals) | ||
| Recruitment & Onboarding | ||
| Time to Fill This one also contributes to lost productivity time and ultimately revenue. |
Total # of Days Job is Available and Unfilled | You can determine the exact timeframe you want to track. For example, the day following the incumbent’s last day of work or the day a job is approved to be filled/refilled. You may also want to distinguish between jobs filled with internal vs external candidates. |
| Average Time to Fill | Total # of Days of Open Jobs / Total # of Jobs Open | Time to: · advertise an open position in all channels · identify an acceptable candidate · complete all interviews · complete background checks (if needed) · create and extend an offer · allow for candidate to accept offer |
| Time to Hire | Day candidate accepted the offer – Day the candidate entered your recruiting pipeline | This metric can be used to measure how long it takes from the day you identified a qualified candidate to the day you get an accepted offer. This can measure how quickly you can get your best candidate through your get-to-know-you and evaluation periods. |
| Average Time to Hire | Total of Time to Hire Days for Candidates Hired / Total # of Candidates Hired
|
Simply an average of all Time to Hire stats during a determined period. |
| CostPerHire | Total Cost of Hiring / Total # of New Hires Can be for a: · Determined Period of Time (i.e. month) · Specific Position(s) · State or Region |
Costs can include: · Advertising (internal and external costs) · Employee referral rewards · Recruiters (internal and external) · Recruitment technology · Travel · Background checks · Relocation |
| Early Turnover Rate – Turnover During Onboarding | Newly hired employees who leave before the end of their onboarding period / Total number of newly hired employees Recommend distinguishing between voluntary and involuntary separations. |
How long is your onboarding period? Many companies have a 90-day onboarding timeline. |
| Early Turnover Rate – Turnover During 1st Year | Newly hired employees who leave before the end of 1 year of service / Total number of newly hired employees Recommend distinguishing between voluntary and involuntary separations. |
This metric can be looked at in a rolling 12-month period to determine how it is trending. |
| HR/Organizational Performance | ||
| Vacancy Rate | # of open positions in the organization / total # of positions (multiply by 100 for the %) |
Find out how long a position has been vacant. This is lost productivity time and ultimately revenue. |
| Retention Rate | # of Employees Who Stay / Total # of Employees | |
| For Example – Monthly: # of EEs who remained employed in the month (for the entire month) / Total # of Employees that month (including those who left during the month) (multiply by 100 gives the %) |
I.e. There were 70 EEs who did not term in the month of April. There were also 75 employees who were active during that month (including the 5 who terminated). The rate is 93.33% retention. This is typically the offsetting percentage of the turnover rate. | |
| Turnover Rate | Turnover Rate = Number of Employees Who Leave / Total Number of Employees | This can be broken down by Department, Manager, Position, etc. to help you dial in on potential contributing factors. |
| For Example – Monthly: # of EEs who separated in that month (those with a term date in the month) / # of EEs who were active at some point during that month (multiply by 100 for the %) |
I.e. There were 5 EEs who terminated in April. There were also 75 employees who were active during that month (including the 5 who terminated). The rate is 6.67% turnover. | |
| Turnover – Voluntary | Total # of Leavers / Total # of those Employed (multiply by 100 for the %) |
Evaluate the reasons employees are separating from your organization. You may only want to track those who left because they were dissatisfied with the organization. You may want to exclude those where circumstances were out of their control (i.e. needing to move closer to an aging parent, spouse/partner relocated) |
| Turnover – Involuntary | Total # of Discharged / Total # of those Employed (multiply by 100 for the %) |
You may decide to exclude any layoffs or position eliminations and focus on performance issues, policy violations, and the like. |
| Turnover Rate by Department/Manager/Position | This metric can be used to evaluate different units/leaders and hone in on trends or problem areas. It can also be used as a performance measure for managers. | HR Library Video: Minimizing the Cost of Employee Turnover |
| Turnover Rate – High Potentials | # of Employees categorized as High Potentials who left / Total # of High Potentials | This is a crucial metric to monitor especially if your business is dependent upon these individuals or you have an active succession/leadership readiness plan underway. |
| High Potentials Rate | # of Employees categorized as High Potentials / Total # Employees (headcount) | This is a good development and recruiting indicator. Is talent developing as needed and is the business picking up the critical talent at the pace it needs? |
| Average Length of Service – Current Employees | Average # of years of service of all employees currently employed | |
| Average Length of Service –Separated Employees | Average # of years of service of all employees who have left | |
| Absence Rate (Unscheduled) | # unscheduled days/hours absent in month ÷ (average # of employees during a month x # of workdays/hours) By Individual: # unscheduled days/hours EE was absent in month ÷ # of scheduled workdays/hours) |
You can further break down this metric by department, manager, region, etc. |
| Financial Performance | ||
| Revenue per Employee | Total Revenue / Average # of Employees (Average # of EEs can be calculated by taking the # of EEs active at the beginning of a period and the end of a period and then dividing by # of periods. E.g. # of EEs at beginning of the year + # of EEs at the end of the year and then dividing by 2). |
This can be done as Revenue as well as Gross/Net Profit depending upon how it will be used and analyzed. |
| Cost of HR Per Employee | Total HR Operating Costs / Total # of Employees (positions) | Note: This is not just a “cost” indicator. There is another side to this story. For example, if investing more or allocating more resources, was there a positive output to this? If a company invested more in training resources or more aggressive recruiting efforts, did it improve productivity, employee engagement/retention, overall staffing level? A cost/benefit analysis could prove valuable on this. And on the contrary, by keeping HR costs too low, is there a negative impact on some of those same factors previously noted? A company should finds it “right size” given the goals and objectives it expects to attain. |
| Ratio of HR Professionals to Employees | Total # of Employees / Total # of HR Professionals I.e. If there are 550 employees and 5 HR professionals, the ratio is 1 HR professional to 110 Employees. Also stated as 1:110. |
See comments noted above. |
| Total Labor Burden/Cost Per EE | 1. Calculate the EE’s annual pay: If hourly, multiply hourly rate times 2,080 hours the EE is available to work (40 hrs/wk x 52 weeks). You can also add in any projected overtime the EE is expected to work and any additional pay the EE is expected to receive. If salaried, use their annual salaried rate and any additional pay the EE is expected to receive. 2. Calculate payroll and benefits-related costs for the EE: payroll taxes (fed, state, local), employer paid employee benefits, retirement plan match, workers compensation costs, paid time off benefits (incl. holidays). 3. Determine if you want to also include operating costs such as the internal HR team costs, payroll and benefit vendor costs, training, supplies, office space cost allocation, etc. This is typically an average cost assigned to an EE. 4. Hourly Total Labor Burden:Add items 2 and 3 to the EE’s total annual pay in item 1 and divide by 2,080 available hours. You now have the total labor burden per hour for that EE. For example, if items 2 and 3 total $17,000 and the EE’s annual pay is $60,000, the combined total is $77,000. Dividing it by 2,080 hrs results in $37.02/hr. This is compared to the EE’s hourly rate of $28.85/hr using just annual pay calculations ($60,000 divided by 2,080 hrs). Total Labor Burden as a Percentage: A quick percentage calculation: $37.02/hr divided by $28.85/hr is a 28% labor burden. |
There are many ways that companies can decide on how they want to track and analyze this information. Some get granular while others choose to limit it to an estimated projection. It will depend upon what best fits your organization and how closely tied revenue and costs are to this metric. Hint: When this is calculated, it is relatively easy to convert this into a total compensation statement for your employees which can provide significant value and feedback. |
| Fully-Burdened Labor Cost by EE | 1. Calculate the total number of hours the EE actually works: For example, 2,080 avg annual hrs available to work – 80 hrs of PTO – 80 hrs holiday = 1,920 actual worked hrs. 2. Follow steps 1-4 as noted in the Total Labor Burden section above EXCEPT divide by 1,920 hrs in step 4. This gives you the fully-burdened labor cost since it is based on actual worked hours rather than available hours. For example, if items 2 and 3 total $17,000 and the EE’s annual pay is $60,000, the combined total is $77,000. Dividing it by 1,920 hrs results in $40.10/hr. Total Labor Burden as a Percentage: If compared to the EE’s hourly rate of $28.85/hr using just annual pay calculations ($60,000 divided by 2,080 hrs), $40.10/hr divided by $28.85/hr is a 39% labor burden. |
This calculation is important to companies who bill their employee hours or who track productive hours. |
| Overtime | Overtime is a metric that is closely monitored each week due to its potential high cost on a business and its indication of staffing levels and needs. A metric can be applied to your company depending upon how it is to be evaluated such as: · Percentage of overall pay or total compensation · Percentage of hours worked · Determining if additional positions should be added to keep staffing levels and costs in line |
Benefits of overtime: · Manage increased or peak workloads without adding staff (usually temporarily or sporadic) · Provide EEs with the opportunity for additional income · Access to trained EEs who can be available to work on short notice. Downside of overtime: · It can become expensive if additional staffing would have otherwise lowered the cost · Too much overtime for too long a period of time can be wearing on the workforce resulting in morale issues and lower productivity |