Why your HR initiatives need performance metrics

HR metrics are sometimes overlooked by small organizations that assume they are too complicated or time-consuming to deal with. The hassle is assumed to be larger than it really is, while the benefits of having this data are undervalued. Don’t make this mistake at your organization.

Choosing a few key HR metrics to track will help you uncover strengths and weaknesses within your organization and give you the tools you need to understand which areas need improvement.

HR metrics help you:

    • Tap into the quality and stability of your workforce
    • Understand if HR initiatives are working
    • Make informed decisions to recruit and retain the best staff
    • Spend HR budget wisely
    • Set a foundation for long-term organizational success

HR metrics to track

Now that you know you need to be gathering and tracking HR data and why it’s important, the next step is figuring out what to track. Different data provides different insights. It helps to identify your goals so you know what data to gather and track so you can measure performance against those goals.

Here are 10 HR data points any business can track that will give strategic insights to HR trends, costs, efficiencies, productivity, and success.

  1. Employee retention rate

    Track your employee retention rate to understand how your employee retention strategies are working and gauge company morale. Pair this metric with the cost of employee turnover to get a sense for the amount of money your organization is spending on replacing employees who leave.

    How to track your HR data

    Tracking HR data helps any organization make data-driven decisions about recruiting, hiring, onboarding, retention, and HR policy. This section covers how to calculate specific return on investment (ROI) measurements, and tips for how to track HR data.

    Calculating employee retention rate

    Employee retention rate is a helpful statistic for an employer to calculate – both as a benchmark and periodically (ex: quarterly or bi-annually). The formula is simple. Divide the number of employees who left during a period by the total number of employees at the end of a period to get the percentage.

    Sample Inputs Sample Calculation
    Period of Time: Fourth Quarter
    Total Employees at Beginning of Q4:24
    Total Employees Terminated in Q4: 4
    24 – 4 = 20
    20 / 24 = .83
    .83 x 100 = 83%

    Standard employee retention rates are anywhere from 70% - 85% but vary greatly by industry and calculation method. For example, you may choose to measure only voluntary turnover or all terminated employees.

  2. Cost of employee turnover

    Knowing and tracking the cost of losing an employee will help you make more strategic decisions about benefits and retention activities.

    How to Calculate the cost of employee turnover

    The cost of losing an employee varies by industry and role at the company. 

    Here are estimates based on a Center for American Progress (CAP) study you can use to estimate your costs:

      • Less than $30,000/year: 16% of annual salary
      • $30,000 - $75,000/year: 20% of annual salary
      • $75,000+/year: Up to 213% of annual salary (highest for hard-to-replace, high earning CEOs)

    Now, calculate costs of employee turnover for a period. In the example below, the company has 24 employees (EEs) and had four employees leave during Q4.

    Of course, each company is unique. With the right data, you can calculate your specific cost of employee turnover by taking into account the following factors:

      • Lost Productivity
      • Lost Engagement
      • Hiring and Recruiting Costs
      • Orientation and Training Costs
      • Cultural Impact
  3. Current and historical compensation data

    Track compensation data to ensure you are meeting the minimum wage requirements in your area in addition to overtime pay compliance; and to understand employee growth within the company. In addition, it is helpful to know what other organizations pay for comparable positions so you stay competitive.

    How to calculate compensation data

    To track historical and current compensation data, collect and analyze the following information:

          • Employee name
          • Employee Class
          • Position
          • Start date
          • Starting salary
          • Current salary
          • Other wage information helpful to your workforce
  4. Training and onboarding expenses

    Calculating your new employee training and onboarding expenses is one piece of understanding your cost to hire, and is important for budgeting. Successful onboarding will reduce your hiring costs and ongoing employee training will help reduce turnover.

    How to calculate training and onboarding expenses

    To calculate training and onboarding expenses, include the following:

    • Personnel Time (time spent to train, prepare, etc.)
    • Training Materials/Supplies
    • Meeting Space
    • Social Activities

    This data can be collected in a budgeting spreadsheet, or flagged in accounting software for easy tracking and analysis.

  5. Recruiting expenses

    Your recruiting expense is the other piece of your cost to hire. You can also track which platforms your eventual hires find you on to see which ones produce quality candidates and which ones don’t.

    How to calculate recruiting expenses

    To calculate training and onboarding expenses, include the following:

    • Advertising
    • Recruiting Software
    • Networking
    • Personnel Time (time spent screening, interviewing, etc.)

    This data can be collected in a budgeting spreadsheet, or flagged in accounting software for easy tracking and analysis.

  6. Employee satisfaction

    Employee satisfaction data, typically collected through employee surveys, are an important indicator of morale and company culture. Satisfied employees stay longer, are more productive, and do better work.

    How to calculate employee satisfaction

    An easy way to measure employee satisfaction is with a simple employee survey. Free survey tools are available online, or you can use a printed survey or more sophisticated survey software.

    When creating a survey, keep it simple. Include a few targeted questions about satisfaction, culture, growth, pay, advancement, etc. Use a number scale so results are quantifiable, and only ask about metrics that matter to your business. Survey employees monthly to calculate satisfaction over time.

  7. Absence rate

    Employee absence rate is a simple measurement that helps you understand how many days employees are missing (no call, no show), and can be an indicator of employee dissatisfaction.

    How to calculate absence rate

    Absenteeism is defined as employees missing work due to personal illness, personal time off, or other reasons (usually excluding paid vacation). These absences may be avoidable or unavoidable. Employee absence rate is a simple measurement that helps you understand how many days employees are missing.

    Absence Rate = Workdays Lost Due to Absence ÷ ( Average Employee Population x Number of Work Days Available per Employee )

  8. Revenue per employee

    Revenue per employee shows you how much revenue each employee generates for your organization. A higher number means that your employees are more productive and your organization is more efficient. This metric mostly applies to for-profit organizations, though not always.

    How to calculate benefit & perks expenses

    Each company has a unique package of benefits and perks.

    To calculate benefit and perks expenses, include the following, as applicable:

    • Benefits (ex: company contributions to health insurance, retirement, or life insurance)
    • Administrative costs
    • Supplies (ex: meals provided, party supplies, etc.)
    • Cell phones
    • Tuition reimbursement

    This data can be collected in a budgeting spreadsheet, or flagged in accounting software for easy tracking and analysis.

    Tip: Many of these benefit expenses can be offered as a tax-free fringe benefit.

  9. Benefit & perks expenses

    Calculating your benefits and perks expenses helps you budget, and helps you understand how much your benefits package costs you per employee.

  10. Time to fill

    Similar to recruiting and hiring expenses, knowing your time to fill a position will help you understand the true cost of employee turnover. Keep in mind that this is heavily affected by current economic conditions and the public perception of your organization. The longer it takes to recruit for a position, the more it costs to fill a position.

    How to calculate time to fill

    Time to fill a position (or time to hire) can be measured with a simple calculation:

    Time to Fill = Average days a job is open before it is filled

    For this calculation, track the following inputs:

    • Position and department
    • Date job is open/posted
    • Date offer is accepted and/or date candidate starts

    This calculation can be tracked using spreadsheets, or using recruiting software that tracks applications and hiring.

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Tips for tracking HR data

HR metrics should be simple, clear, and connected to your company’s goals and priorities. Here are six tips for tracking HR data as you consider which data points matter to your business.

1. Know why each HR metric matters

As you collect and track HR data, keep in mind why you’re collecting the data and why it’s important to your organization. If the data is not connected to an organizational priority, don’t spend the time tracking or analyzing it. Knowing your return on investment (ROI) is key to making strategic decisions for your organization.

How do I calculate return on investment (ROI)?

ROI is a performance measure used to evaluate the efficiency of an investment. 

To calculate ROI, the payback (return) of an investment is divided by the cost of the investment, and multiplied by 100 to get a percentage.

ROI = [(Payback - Investment)/Investment)]*100

2. Keep it simple

HR metrics should not be complicated. If the metric is not simple, clear, and easily gathered and calculated, it likely will not be used. Track and collect simple, straightforward information that will provide useful insights to your HR and organizational objectives.

3. Identify how you will track data

From spreadsheets to comprehensive Human Resource Management Systems, there are a variety of tools available to track HR data. An important step is to identify which data you will collect and how.

4. Know your audience

As you collect HR data, some information will be more insightful to HR and some information will be more insightful to other stakeholders like the owner or CFO. As you present information, keep in mind the metrics that matter most to your audience.

5. Connect HR metrics to organizational objectives

The most powerful and useful HR data connects HR metrics to business objectives.

6. Don’t just file data away - share it

You’ve collected a lot of great HR data. Don’t just file it away. Analyze it, learn from it, and share it with your leadership team. Then create a plan with actionable next steps that will get you to your goals.

How to use your results

When it comes to HR ROI calculations, the goal is to use the information to make smarter HR decisions, spend company money more wisely, and create a high-performing and productive workplace.

HR data that leads to action

Data without analysis and action is just numbers on a screen. Use your HR data to understand trends, issues, and opportunities. Then, take action to make changes based on your learnings.

To make the most of your HR ROI calculations:

  • Connect the HR data to business objectives and goals.
  • Use the data to drive organizational improvements. Learn about what is working and not working, then make changes based on what you learn.
  • Schedule regular times to review the data and put it into action. Strong habits produce strong results.
  • Communicate learnings and recommendations to key decision makers.

Data management options when calculating HR ROI

An important step in tracking HR data is developing a system to track and record information. How you track and analyze the data will depend on what you are tracking. Don’t worry, the data management system you choose doesn’t need to be overly complex. But it does need to be consistent, time-efficient, and scalable.

Spreadsheets

Use Excel, Google Sheets, or another spreadsheet program to track your HR data points.

  • Pros - Easy and inexpensive to set up.
  • Cons - Manual entry and maintenance required, time consuming to maintain accurately.

HR software

There are numerous HR software solutions on the market to help with employee management, hiring, personnel, benefits, and compliance administration.

  • Pros - A variety of options and features available. Cloud-based options available which are easy to set up and use. Makes data collection and reporting more automated.
  • Cons - Administrative fees required, but vary by type of software and vendor. Some businesses find limitations with customizing HR software.

Comprehensive human resource management system (HRMS)

A human resource management system (HRMS), also known as human resource information system (HRIS), is a comprehensive system to store and analyze HR data, as well as track job applicants, performance management, attendance, compensation and benefits management, workforce analysis, and scheduling.

  • Pros - Minimizes errors since there is less manual data entry and allows for employee self-service.
  • Cons - Has the most expensive administration costs of these options and may not deliver a high enough return for small- and medium-sized organizations.

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