How to measure HR Metrics

How to measure HR Metrics

In every industry, collecting metrics that indicate the return on investment for a particular business event, campaign or strategy is essential to the success of your operations, also in the human resources organizations. Hence in being a strategic business partner, HR experts have to certainly communicate the language of business. Inherent in this language is the lexicon of business measurements and metrics – including HR metrics.

What is HR Metrics?

HR Metrics is the data used to quantify, measure and track the performance of most companies’ largest and most valuable investment, their workforce, or human capital. Through a variety of measurements, HR professionals can analyze a company’s strengths and weaknesses in hiring, compensation, training, and employee retention. Metrics add value to organizations by providing the information required to make the best decisions about their talent.

The HR dashboard and HR report are an important part of managing Human Resources.HR dashboards are useful for analyze performance and identifying areas for improvement in an organization. They’re not only important to HR managers, but for C-level executives as well. Decision makers ensure that company strategy is aligned from executive, to managerial, to individual goals.

The different between HR Metrics and HR Analytics

First, you have to recognize the difference between metrics and analytics; recently it seems to be getting more common for people to be confused over what exactly HR Metrics and HR Analytics are! In essence, metrics describe concrete measures of past performance, while analytics uses data to gain insights or predict future patterns. Metrics typically describe basic information, like how many candidates applied, how many employees left the company and other descriptive measures, while analytics looks at answering questions such as what educational background best helps indicate future high performers or why top performers are leaving.
Understanding these combinations help managers make more informed and better organizational decisions.

The main benefits of using HR metrics and analytics data are better-informed decisions within the organisation and enabling HR to be more proactive, according to recent XpertHR research. Nearly all (97.1%) HR departments gather or hold HR metrics data.
However, a majority (95.5%) of HR professionals have experienced problems gathering and analysing HR metrics data. The most common are poorly integrated data systems, a lack of resources to gather data and uncertainty over what to measure.

Measures of HR Impact

Determining what metrics to measure and report will depend on an organization’s strategy and goals. For help in choosing what HR metrics to focus on, HR professionals may want to consider the following:

Metrics that measure the effectiveness of the human resources function: effectiveness refers to the outcomes produced by HR activities, such as learning from training. The goals for these metrics are usually set by company management. The human resources department then monitors these metrics to ensure that they are meeting or exceeding their goals. Some of the more common effectiveness metrics include:

  • Turnover rate, which measures how often employees leave the company and need to be replaced
  • Absentee rate, which measures how many unscheduled absences are taken by employees
  • Employee morale, which measures the level of satisfaction that employees have with their jobs and with the company

Metrics that measure the efficiency of the human resources department: efficiency refers to how well her human resources departments is using their resources. The metrics compare the value that the human resources function adds to the company with the cost that the function incurs. Some of the more common efficiency metrics include hiring costs, benefits costs and the time to hire.

Top 10 HR metrics and how they can be measured

  1. Cost per hire: Recruitment costs/Cost of compensation + Cost of benefits
  2. Yield ratio: Percentage of applicants that make it to the next stage of the application process.
  3. Benefit cost per employee: Total cost of employee benefits/Total number of employees
  4. Compensation cost per employee: Total cost of compensation for the year/Average number of employees
  5. Training hours: Total training hours/Total number of employees
  6. Revenue per employee: Revenue/Total number of employees
  7. Rate of performance goals met: Number of performance goals met/Total number of performance goals
  8. Tenure: Average number of years in service of all employees
  9. Absence rate: Number of days absent (month)/Average number of employees (month) x number of workdays
  10. Annual turnover: Number of employees leaving during a 12-month period/Average number of employees during the same period

Regularly benchmarking how the organisation is performing on a targeted set of essential HR metrics can provide an ideal starting point for HR professionals looking to launch data and analytics activities.

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