Top 5 HR Metrics and Why They’re Important

HR needs data insights now more than ever. HR metrics are important data points that measure the effectiveness of a company's HR initiatives. As an HR manager at a small to medium-sized employer, you can compare these metrics to those of other SMBs in your industry. Additionally, you should strive to improve these metrics within your company every year.

Why are HR metrics important?

Without HR metrics, data about the workplace remains hidden and incomprehensible. Small business HR managers often have a wealth of human resources data that could help their company. Focusing on key metrics helps your company achieve its business goals, predict the company's future, and improve employee retention and satisfaction. When you make decisions about your company's workforce initiatives based on key metrics, you leverage easily accessible data and set the stage for your company's success.

The 5 most important HR metrics

1.Time to Hire: Time to Hire determines the efficiency of your hiring efforts by measuring how long it takes you to hire a candidate for an open position. The time period begins when an applicant applies for a position and ends when they accept an offer. This metric indicates how quickly you found your best candidate and moved them through the hiring process.

You can measure time to hire using an average value per person, 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 critical because if your company is frequently losing strong candidates, it might be time to look for problems in the hiring process. Hiring managers who take longer to hire risk losing talented candidates and angering management who need to fill the positions as quickly as possible.

We recommend considering questions such as:

Are we attracting suitable candidates?
Are applicants invited to an interview in a timely manner?
What period of time is considered appropriate for hiring an applicant?
Are hiring managers prepared to assess candidates?
Additionally, with the help of an online applicant tracking feature, you can track candidates from the moment they submit an application through their onboarding process at your company. This allows HR and hiring managers to see exactly how long each candidate goes through the hiring process. This can help reduce time to hire. Making timely changes to your hiring schedule and process based on the answers to these questions will help your company actively seek out new talent and quickly add them to the team.

2. Employee Turnover Rate (ETR): The turnover rate is important because it often indicates whether or not a company offers a positive employee experience. According to SHRM, the average cost per hire for companies is between $4,000 and $5,000. Hiring employees is expensive, and if an employee leaves the company loses a significant amount of money. An analysis of past turnover can also be helpful when determining the annual budget for hiring and training.

The turnover rate is crucial because it also impacts the team. When an employee leaves your company, others on the team must pick up the work that the employee no longer does. A sudden increase in workload and responsibilities can weaken employee morale and overall productivity. In addition, the manager now has to spend a lot of time interviewing new applicants. Turnover ultimately leads to more turnover as burned-out employees may consider leaving your company.

The 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.

3. Employee satisfaction: As the main people responsible for human resources management in their companies, HR managers should evaluate the satisfaction of the employees they work with several times a year. As a rule, there is a direct connection between the satisfaction of a company's employees and productivity in the workplace. When employees are happy, they are more engaged and motivated to achieve higher levels of performance. On the other hand, dissatisfied employees tend to do the bare minimum and eventually quit, leading to a high turnover rate. Employees generally associate satisfaction with the feeling of being respected, recognized for their achievements and receiving compensation commensurate with their performance.

One way to quantitatively measure employee satisfaction is to use the Employee Net Promoter Score. eNPS is a metric that can be used to measure employee loyalty to your company. The key question to ask your employees is: "On a scale of 0 to 10, how likely are you to recommend your employer as a good place to work to friends and family?"

Those who give a 9 or 10 are called promoters, those who give a 0-6 are called detractors. Total eNPS is calculated by subtracting the percentage of detractors from the percentage of supporters. A value between 30 and 50 is considered good. The higher your eNPS, the happier your employees are. In our HR glossary on employee satisfaction you will learn how you can use surveys as another tool for measuring employee satisfaction.

4. Cost per Hire (CPH): Cost per Hire (CPH) determines the average dollar amount you invest in finding and hiring new employees. This means the dollar amount begins when recruiting begins. It's important to note that this metric also takes into account spending for what SHRM calls "lost candidates," i.e. H. Candidates who ultimately don’t get hired.

Calculate your company's CPH using the following equation:

This equation would likely be done annually, but if a company is experiencing significant growth, a quarterly calculation may be appropriate. The total cost of hiring includes both internal and external recruiting costs.

The external costs include, among others: the costs of engaging recruitment agencies, marketing costs, postings on job boards, job fair expenses and costs of evaluating applicants.

The majority of internal recruiting costs are the salary costs for your hiring team. But other internal expenses such as training, development and compliance costs can also increase your CPH. When you factor salaries into the equation, you should calculate costs in terms of cost per hour per person.

If e.g. For example, if each of your five hiring managers earns $35 per hour and each of them spends 20 hours per month on recruiting, you would increase your total recruiting costs by $3,500. If you measure your annual CPH, you would add $42,000 to your total hiring costs.

Cost per hire is most useful when compared to your company's allocated recruiting budget. CPH is a metric that can be easily overlooked, but being mindful of your hiring budget can save your company thousands of dollars.

5. Benefits Participation Rate: Tracking the benefits regularly used and not used by employees can help ensure employees' needs are met and resources are used wisely. Regular analysis of benefits participation data can help your company tailor the benefits package to employee needs and give you the opportunity to expand the benefits offering. To find the 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 from IceHrm.