How does your organization measure the effectiveness of your human resource (HR) efforts? What key HR metrics demonstrate your success or lack thereof? After all, HR arguably holds one of the most critical roles in your company, managing your most valued business asset – your people. Successful HR leads to talent attraction, retention, employee development, compliance, and other important business success factors.
There are a host of metrics you can measure. Which key metrics will let you know you’re on the road to success in HR? The ones most important may depend on your current organizational goals, but we list the top 10 must-have HR metrics.
Key HR Metric #1: Time to hire/fill
How long does it take your organization to hire a new employee, from when they apply until they accept the position? Calculate this key HR metric by counting the calendar days from application submission to position acceptance. Likewise, you may measure the time to fill a role, including the entire recruitment process from job creation or opening until a candidate begins.
Knowing your time to hire and time to fill rates help assess the efficiency of your recruiting process. According to a recent LinkedIn study, the average time to hire is 36 days. If your organization takes significantly longer, it’s time to assess your recruitment process. What is slowing you down? How can you simplify? Between advertising and lost production or employee morale, time is money for unfilled positions.
Key HR Metric #2: Cost per hire
Cost per hire measures the amount it costs you to gain an employee. Calculate this HR metric by dividing total recruitment costs (internal and external) by the number of new hires recruited within a given period.
Internal recruitment costs include your hiring team’s salaries, money spent on training your recruiters, and employee referral bonuses. At the same time, external costs include job board listings, advertising, recruiting software, and background check service costs.
Obtaining cost per hire data demonstrates how much you spend recruiting talent. This metric has more value when combined with revenue and employee productivity data, as it allows you to assess the benefits of your hiring process against costs. Also, it will come in handy when evaluating the cost of turnover for your organization.
Key HR Metric #3: Employee turnover rate
Your employee turnover rate is the percentage of employees who have left your company within a specific timeframe. You calculate this HR metric by dividing the number of departures by the total number of employees at the start of the time period. You then multiply the result by 100 to get a percentage.
Turnover happens, but you want to aim for as low a rate as possible. Retaining employees is vital to business success. You avoid the cost of hiring, maintain institutional knowledge, and optimize your training and development investments. Ten percent is considered a healthy turnover rate, but average rates vary from industry to industry. Check out this article to see your industry’s average turnover rate.
It’s crucial to keep a pulse on your turnover rates. When they get high, use exit and stay interviews or engagement surveys to identify areas of improvement for keeping those star employees!
Key HR Metric #4: Employee growth rate
This metric measures the increase or decrease in those employed with your company during a specific timeframe. To calculate the employee growth rate, subtract the headcount at the start of the period from the headcount at the end. Divide the result by the headcount at the start and multiply it by 100 to reach a percentage.
You can also calculate employee growth rates for different departments or for successive periods to uncover trends in the rate of change over time. Identifying and understanding patterns in growth rates can help determine company needs and aid in future employment planning.
Key HR Metric #5: Salary averages
This key metric measures the average wage earned by employees within specific groups. You can apply this metric to any category, including position, department, and demographic groups. To calculate the salary average, you add all the salaries earned by the employees within the group and divide the total by the number of employees in that group.
Tracking salary averages helps compare employees who hold a particular position within your company with those who perform the same role at competing organizations. This metric can also play a role in identifying pay gaps when it’s applied to employees of different ages, gender, and race. One example is the gender pay gap.
Key HR Metric #6: Gender pay gap
The gender pay gap is the difference in average salary between women and men in the same position with similar responsibilities and experience. The first step is to calculate the average salary of your female employees and your male employees in the same positions separately.
You then calculate the gender pay gap by subtracting the average women’s salary from the average men’s salary, divide the result by the average men’s salary, and multiply by 100 to get the percentage difference in pay.
Doing this math will allow you to identify and eliminate pay inequities between men and women doing similar work at your company. Closing the gender pay gap is crucial for creating fairness and equity to attract the best talent, regardless of gender. It would also be very beneficial to look at differences in pay among different racial groups to address any disparities between them as well.
Key HR Metric #7: Quality of hire
Quality of hire tracks the value a new employee brings to your company. Unlike other metrics, the quality of hire figure uses a broad range of metrics or indicators. The indicators you choose will depend on your business objectives. But, they often include performance appraisal scores, turnover and retention metrics, 360-degree feedback scores, and profit contribution.
So, to calculate the quality of hire, you add the values of your chosen indicators (generally expressed as a percentage) together and divide the sum by the number of indicators you have used.
The quality of hire metric is often seen as the “holy grail” as it attempts to measure the return on investment that the recruitment process brings to your organization. It also measures new hires’ contribution to your organization’s long-term success.
Key HR Metric #8: Employee net promoter score (eNPS)
Employee net promoter score (eNPS) measures how likely your employees are to recommend your organization as a place of work. This metric is an indicator of employee satisfaction. As part of a survey, values for eNPS are obtained by asking employees to indicate on a scale of 1 to 10 how likely they are to recommend your company to a friend or family member.
Employees who score 9 and 10 are classed as promoters, while those who score 7 or 8 are passives. Detractors are those who give a score of 6 or below.
Once you gather the survey data, calculate eNPS by subtracting the number of detractors from the number of promoters. The result is then divided by the number of employees surveyed and multiplied by 100 to reach a percentage.
A score between 40 and 50 is considered outstanding and indicates that employees are very satisfied with the company. An eNPS between 20 and 40 is still great, and anything between 10 and 20 is fair. Scores below ten can indicate widespread dissatisfaction among employees.
You need more than eNPS to help you understand the reasons behind the satisfaction or dissatisfaction. So, give space for employees to say why they assign a particular score. Additionally, to get a much clearer picture of overall workforce satisfaction and happiness, gather information from regular employee check-ins, employee engagement surveys, and feedback forms.
Also, you increase the value of this metric by classifying results by an employee’s age, gender, and race. For example, you may find that persons of color consistently give lower eNPS scores than white employees, which can serve as a trigger to investigate issues with race-based discrimination.
Key HR Metric #9: Diversity, Equity & Inclusion (DEI)
Candidates are looking for companies with a firm DEI policy. So, your company must have effective DEI initiatives to ensure that you have a diverse workforce in terms of age, gender, race, disability, sexual orientation, and cultural background.
You can use several metrics to track the effectiveness of your DEI policies. For example, diversity ratios show the demographic makeup of your workforce. You can also determine ratios for other factors such as age and gender.
You can also measure DEI in other ways, such as pay and recruitment. For example, you can measure the diversity of your candidate pool by dividing the number of diverse applicants by the total number of candidates.
In such a competitive labor market, finding the right talent has become more challenging than ever. That’s why the use of HR analytics is now a must. Metrics such as turnover rate, cost per hire, quality of hire, and eNPS allow you to keep improving your HR practices. By doing so, you’ll be able to recruit and retain the best talent and build a diverse, engaged, and happy workforce.