Human Resource Metrics: What to measure and how to measure it.

Have you ever wondered why people in HR do what they do and more importantly how they know if they have achieved it?

Human Resource (HR) Metrics are measurements used to determine the usefulness and productivity of human resource activities and processes.These basically serve to show the organization and its various stakeholders value for money and time spent on actives such as recruitment and selection, disciplinary processes, training and human capital development,  and performance and talent management.

The value of measuring and reporting the efficacy of HR processes in various areas aims to improve the organizations functions and actually demonstrates the value of HR interventions to the organization. If properly applied HR metrics quantify the cost and the impact of employee programs and help measure the success (or failure) of HR initiatives thus ensuring continuous improvement.

Below is a table indicating numerous HR Metrics that might serve as useful to a range of professionals and organisations.

Metric Formula Who will this benefit When should it be conducted
Absence rate This is calculated as indicated below; (Total # of days’ worked by the total number of employees absent in a month) ÷ (Total number of workdays in that month multiplied by number of employees) 

If you want it as a percentage multiply your answer by 100.

Decision makers, as they will be able to holistically see how often their employees are absent and how this then affects productivity. This can also be done by department to see which departments are most afflicted by absenteeism. It can also be done for sick leave, compassionate leave and permission. This should be calculated on a monthly basis, and comparisons made on a month by month basis. 

 

  

Staff Expense This shows if the expenses on staff are too high (this varies from industry to industry but it should range from (15-30%). It is calculated by taking comprehensive staff expenses as a percentage of total company turnover. Management and HR staff as this will track the staff costs in the organisations compared to industry norms. This should be conducted every quarter and aid in making the necessary corrective actions.
Benefit or program costs per employee Total cost of employee benefit/program ÷ total # of employees Helps assess which programs should be undertaken. This should be utilized on a case by case, whilst of taking into consideration qualitative benefits.
Cost per hire Average recruitment costs + Average compensation and benefits cost  ‘Cost per hire’ metric shows how much it costs the company to hire new employees. This also serves as an indicator of the efficiency of the recruitment process. Once a year.
Time to Hire Average time taken to hire an employee after a need has been recognized. This shows the efficiency of the recruitment process and provides insight into the difficulty of filling a certain job position, this is important for management and HR staff as it influences decision-making. This should be done twice a year across different employee levels.
Engagement or satisfaction rating Percent of employees engaged or satisfied overall or with a given aspect of the workplace Employment engagement and satisfaction tend influence aspects such as employee productivity, thus it imperative knowledge for management to have. Employee surveys (formal or informal) are the best way to calculate this. Twice a year 
Percent of performance goals met or exceeded

 

# of performance goals met or exceeded ÷ total # of performance goals.

(Multiply by 100 to get percentage)

Highlights productivity in the organisation. Variable
Performance rating # of employees rated under a given score or rating on their performance evaluation ÷ total # of employees (to get it as a percentage multiply this figure by a 100) This alerts management of the various levels of employee performance. It can be utilized for decision making e.g promotions or demotions. Every time performance appraisals are conducted
Return on investment (ROI) (total benefit – total costs) x 100; This can also be done qualitatively depending on what is being investigated. Indicates to numerous stakeholders what the ROI is on an activity. This can be done on various HR activities, Training programs are ideal for this metric.
Training/ development hours sum of total actual training hours ÷ total # of expected training hours Training aids continuous improvement in an employee’s productivity. This metric helps to determine to what extent training/development targets are being met.  Once a month, depending on the organisations training program.
Tenure Average # of years of service at the organization across all employees This will help establish the life span of employees, and assist in decision-making such as how to improve retention. Once a year
Employee turnover (annual) / Early Turnover # of employees exiting the job during a 12 month period ÷ average actual # of employees during the same period. This is arguably the most important metric to determine hiring success in a company.
The early leaver metric (employees who have left an organization in less than one year) indicates whether there is a mismatch between the person and the company or between the person and his/her position, It also helps determine the usefulness of induction programs. Early turnover is also very expensive. It usually takes 6 to 12 months before employees have fully learned the ropes and reach their ‘Optimum Productivity Level.’
Once a year
Employee turnover costs Total costs of separation + vacancy + replacement + training Establishes the efficiency and effectiveness of recruitment, selection and retention programs, as well as aids in decision making, for example would it be cheaper to utilize a recruitment agency for certain positions. It should be noted that a certain level of turnover is a healthy for an organisation. Once a year. This should be done across 3 levels, Senior Management, Middle Management and Shop floor.
Performance and potential (the 9-box grid) The 9-box grid appears when measuring and mapping both an individual’s performance and potential in three levels. This model shows which employees are under-performers, valued specialists, emerging potentials or top talents. This metrics is ideal for differentiating between wanted and unwanted turnover. Anyone who is interested in Talent and Performance Management. It is easier if it is done departmentally. Twice a year or every after appraisals.

Needless to say, these can be modified and applied to an organisations individual needs.