As an HR professional, you are likely responsible for tracking a variety of metrics related to your department. But in that sea of metrics, what is most important? What should you be tracking on a regular basis to ensure your department is functioning effectively and efficiently, and which ones are simply nice to know?
What are HR metrics?
The first step in understanding which HR metrics you should be tracking is understanding what HR metrics are.
In short, HR metrics are the numerical values that help you track and measure progress against specific goals related to your human resources department. This could include anything from employee satisfaction levels to turnover rates.
Why should you track HR metrics in your HR department
#1 To make better strategic decisions
Do you need new hires? What are indirect costs? Are there any pay gaps? HR teams need to ask themselves a lot of strategic questions, and the answers to these questions can usually be found by analyzing HR metrics.
When you know which HR metrics to track, you can begin to answer these strategic questions and make more informed decisions about the future of your department. Data driven decisions make for more successful HR departments.
If you’re not tracking HR metrics, how can you tell if your department is performing well? Redefine your HR reports with these essential metrics.
#2 To find areas that need improvement
Your organizational strategy would benefit from better understanding of what needs to be improved. After all, if you don’t know what needs to be improved, how can you take steps to improve it?
HR metrics can help you identify problem areas in your department so that you can focus your attention (and resources) on improving those areas. When your company grows, many common metrics that once were valid, may no longer be accurate. Reviewing your common HR metrics on a regular basis can help you adapt to these changes and ensure that your department is always running smoothly.
#3 To strengthen recruitment efforts
With the right set of data, you can make your recruitment process blossom. For example, if you’re tracking the number of qualified applicants per job opening, you can adjust your recruitment strategy on the fly to target a higher volume of applications. The better your recruitment processes, the better quality candidates you’ll attract. And that’s just one of the benefits of tracking key metrics and HR data.
#4 To lower costs
Are training costs bringing the right ROI when it comes to employee productivity? Can the total cost of recruitment be lowered? Answer these questions via HR KPIs and look for ways to cut costs without sacrificing quality. When you track the right HR metrics, you can find methods to lower costs while still maintaining (or even increasing) employee productivity.
Key HR metrics for you to follow
#1 Employee satisfaction
No matter what number of employees you have, their satisfaction should always be one of your top priorities. A happy employee is a productive employee, after all. There are a number of ways to measure employee satisfaction, but some common methods include:
- surveys – with this method, you can ask employees directly about their satisfaction levels. This can be done via an anonymous survey that is distributed to all employees on a regular basis;
- exit interviews – when an employee leaves your company, they will likely have some feedback about their time there. Be sure to conduct exit interviews with departing employees to get their honest feedback about your company;
- engagement levels – another way to measure employee satisfaction is to track engagement levels. This can be done by tracking things like absence rates, turnover rates, and performance reviews. We’ll cover that in detail later on.
#2 Employee performance
Engaged workforce is what employers dream of, but tracking employee performance can be tricky. After all, how do you quantify something like “employee engagement?” Fortunately, there are a number of ways to measure employee performance, including:
- productivity – this can be done by tracking things like output per hour, quality of work, and number of errors;
- sales – this could include tracking the number of sales made, the value of each sale, and the conversion rate;
- customer satisfaction – this could include things like customer surveys, Net Promoter Score (NPS), and customer churn rate.
You can do it using a few methods. Check the performance of new employees a bit differently than what you’d do with a tenured worker. New hires usually go through a probationary period, so their performance should be monitored more carefully during this time. After the probationary period is up, you can then begin to measure their performance in the same way as your other employees.
You should also measure performance of part time workers and set up a benchmark per employee, so you can compare employees to one another. This will give you a lot of valuable insights of how each employee is performing, as well as where there need to be changes applied.
#3 Absence rate
Absenteeism rate can make or break a company. Not only does it impact productivity, but it can also have a negative effect on morale. There are a number of ways to measure absenteeism, but some common methods include:
- tracking the number of days or hours missed – this is the most straightforward way to track absenteeism. Simply keep track of the number of days each employee misses, and calculate the absenteeism rate from there;
- tracking the number of days or hours worked – another way to track absenteeism is to track the number of days each employee works. This can be done by tracking time sheets or using an attendance tracking system.
Billable hours, payroll taxes, and cost per hire won’t lie – they all will have impact on your business, so it’s important to take them into consideration when combining with the absenteeism rate.
#4 Gender pay gap
People analytics is a data-driven approach to managing people at work. It starts with understanding the workforce, and then making decisions based on data rather than intuition.
One of the most important things that data can do is help us understand and close the gender pay gap. The first step is to calculate the pay gap between men and women in your organization. This can be done by looking at the median salary for men and women, and then calculating the difference between them.
Once you’ve calculated the pay gap, it’s time to start closing it. There are a number of ways to do this, but some common methods include:
- increasing transparency around salaries;
- conducting regular pay audits;
- providing training on unconscious bias;
- increasing the number of women in leadership positions.
By introducing equal employee pay, you ensure that your organization is fair and equitable for all. Even a small positive change compared with the previous period of your HR reporting is better than no change!
#5 Employee turnover
Employee retention rates are one of key performance indicators for your HR staff. Believe us or not, but the cost of losing an employee can be up to 213% of their annual salary! So, it’s important to keep track of your employee turnover rate, and understand what factors are causing employees to leave.
There are a number of ways to calculate employee turnover, but some common methods include:
- tracking the number of resignations;
- tracking the number of employees who are let go;
- tracking the number of voluntary departures.
This should be complemented by other labor statistics, including surveys with new employees, interviews with long hired employees, and more. “Fixing the situation” won’t happen overnight, yet even for large businesses, a huge employee turnover can pose a huge problem.
Employees feel engaged when they have a sense of ownership over their work. When they feel like their work matters, and that they are valued members of the team, they are more likely to stick around.
There are a number of ways to increase employee engagement, but some common methods include:
- increasing transparency around decision-making;
- giving employees a voice in the decision-making process;
- providing opportunities for employees to learn and grow;
- recognizing and rewarding employees for their contributions.
When employees feel like they are a part of something larger than themselves, you’re on your way to grow a productive workforce, full of happy and satisfied employees.
#6 Time to fill
Look at your recruiting reports. How long does it take to fill an open position? The answer may surprise you. It can take anywhere from a few days to several months, depending on the position and the company.
The time to fill is one of the most important metrics in recruiting because it tells you how long it takes to find and hire a new employee. For your recruiting process, it’s crucial as it will indicate how quickly you can scale your business.
There are a number of ways to reduce the time to fill, but some common methods include:
- increasing the number of job advertisements;
- sourcing candidates for open jobs from multiple channels;
- hiring employees who are a good fit for the company culture;
- reevaluating open positions and HR policies connected with a recruitment process.
A similar metric to time to fill is the time to hire. This metric measures the amount of time it takes from when a candidate is first contacted until an offer is extended and accepted. If you track data connected with this metric, you can use it to improve your hiring process.
#7 Labor costs
From a cost per hire through extra education level to full time equivalent (FTE) and fringe benefits – those are only some of the labor cost categories you should include in your HR reports.
Labor costs can be a significant expense for any business, so it’s important to track them carefully. Keeping an eye on them within your human resource management can help you find ways to reduce them.
There are a number of ways to reduce labor expenses, but some common methods include:
- reducing the number of hours worked;
- finding new ways to track productivity;
- involving human resources in the budgeting process.
- automating HR processes.
Some expenses, such as cost per hire, can usually be reduced by improving your recruitment process. Other expenses, such as fringe benefits, may be more difficult to reduce, yet you can e.g., start decreasing them for a given period as a temporary solution. However, if you keep track on all of your labor costs, you can find ways to save money and improve your bottom line.
Best practices for keeping HR reporting intact
#1 Use an HR software
It may be difficult to track all key HR metrics manually, but fortunately, HR professionals can make their lives much easier by using HR software. The best HR reporting software will have a built-in analytics tool that can help you track, measure, and improve your recruitment process.
You may be amazed by Sloneek’s HR dashboard. Since it aims to provide insights for busy HR professionals, the software includes a reports section with all the key HR metrics you should track. The data is easy to understand, and it can be customized to fit your specific needs.
If your HR department doesn’t use an HR tool yet, it’s really high time they started.
#2 Train your human resources team on HR metrics
Make sure your human resources team is trained on HR metrics and knows how to use the HR software. They should be able to interpret the data and use it to improve your recruiting process, but also to make actionable data-driven decisions about your workforce.
- if a specific number of employees indicate that they are unhappy with their current job, your HR team should be able to use this data to improve the situation,
- if lost productivity impacts your business, your HR team should be able to find the root cause of the problem and solve it with respective managers.
- if the number of employees started to decrease, your HR team should investigate the reasons and find solutions.
- if a compensation report indicates that your company is not competitive enough, your human resources team should indicate to a sales team to negotiate better contracts with vendors.
- if the average time of getting new hires on board is really long, your HR team may want to reevaluate a recruiting report to see where the problem lies.
In order to do this effectively, they need to understand which HR metrics are most important and how to use them.
#3 Designate an HR data analyst
Data is useless if it’s not properly analyzed and interpreted. That’s why you need to have at least one designated HR analyst in your team who will be responsible for generating insights from the data.
Someone of that job type can usually easily find patterns that others wouldn’t see and draw logical conclusions.
This person will be responsible for creating HR reports and analyzing them to identify areas of improvement. They should also be able to present their findings to the rest of the team and make recommendations on how to improve your HR process.
This person should have a deep understanding of HR metrics – and no matter if it’s a new employee or someone who was in your team already, they need to be trained on how to use the HR software and how to generate insights from data.
If you don’t have an HR analyst in your team yet, it’s really time to consider adding one. They will be a valuable asset to your team and will help you make better decisions about your workforce.
Rediscover HR reporting
Small businesses sometimes overlook HR reporting because they don’t have the time or resources to do it properly.
Measuring time per employee, cost per employee, or productivity per employee is a good start, but if you want to be able to make only good decisions about your workforce, you need to start tracking HR metrics.
Don’t know where to start? Sloneek can help you kick your HR reporting off –> check what we have up our sleeves.