HR has to continuously monitor performance and measure productivity so that employees reach their potential and maximize productivity. There is also a consistent need for the organization to gauge whether it is living up to its established vision and mission. Human Resource Metrics is an important tool that can help achieve and contribute towards the holistic development of the organization as well as its resources.

In this article, we will be talking all about Human Resource metrics and how they can be used to measure, predict and improve the performance of HR initiatives.

What are Human Resource Metrics?

 

Human Resource metrics, also known as HR metrics or HR statistics, are the benchmarks that enable the organization to measure how effective its human resource capital is. It helps them in their decision-making process, on how to create a work environment that is productive, diverse, and profitable.

Examples of Human Resource metrics or HR statistics are employee turnover, benefits participation rate, cost per hire, and so on.

In a way, HR statistics is one measure of employee performance to figure out how well HR management is performing. It also helps the HR department take better decisions about the performance of other departments.

Why are Human Resource Metrics Important?

As established, Human Resource metrics are the key statistics that help understand how effective the current human capital is and what can be done to improve it. There are a couple of reasons why this is important:

Sets Clearer HR Expectations

Knowing HR statistics at the start of the year is beneficial for HR management as they know exactly what pain points to address and what strengths to play upon for better utilizing human capital. It also equips them with relevant answers backed by statistics when asked about their decision-making process.

Reduces Employee Attrition

Knowledge of HR statistics helps the management come up with better employee development plans. This helps employees believe that the organization is not just interested in its benefit but is equally invested in employee growth and development. Fostering immense loyalty, and as a result, a higher retention rate and a lower attrition rate.

Justifies Expenses

HR expenditure can be cumbersome. Knowing Human Resource metrics will help them justify certain costs, whether those are being utilized towards a project, plan, or person.

Predictive HR metrics helps organizations make better and more informed decisions. Employees are happier and work better, thereby increasing overall productivity and return on investment. Overall, it is important to know people’s metrics, even if in some HR statistics examples.

2020 was a rollercoaster and 2021 promises to be more challenging than ever.
These 11 HR metrics can help organizations utilize their human resources more efficiently.

11 Human Resource Metrics to Look Out for in 2021

Key HR metrics are recorded for two key purposes; to maximize the efficiency of the employees and to reduce the costs therein. Basically, to improve the profits of the organization. In 2021, we go several steps ahead. We are listing down the hr statistics that you should definitely use to your advantage this year.

Human Resource Metrics #1
Cost Per Hire

Cost per hire measures the average expenditure incurred in looking for qualified candidates, interviewing them, and eventually hiring the best. These can be both internal and external costs. While the internal costs entail in-house talent acquisition and training costs, the external costs are more concerned with hiring agency fees, job posting, etc.

There was no standard cost per hire measurement till the early 2010s. In 2012, the Society of Human Resource Management (SHRM) and the American National Standards Institute (ANSI) came together to standardize the cost per hire formula.

Their cost-per-hire formula is quite simple:

CPH= (Internal Recruiting Costs+External Recruiting Costs)/The Total Number of Hires

Why is Cost Per Hire an Important HR Metric?

Companies that focus on this metric use it to create recruitment budgets and adhere to them. To draw a reasonable inference, HRs need to look at complementary data like time to fill and industry benchmarks of cost per hire.

There needs to be a focus on the cost of hire optimization without affecting the quality of resources being hired.

Human Resource Metrics #2
Revenue Per Employee

After assessing the cost per employee, it is important to know how much revenue each employee generates. Consider this a cost vs benefit analysis of human resources. It is calculated using a simple formula:

Revenue per Employee= Total Revenue/Total Number of Employees

One thing to remember is that there is no static benchmark for revenue per employee. This metric’s benchmark data varies significantly, with company age, geography, subsidies industry, and revenue.

Why is Revenue Per Employee an Important HR Metric?

In general, a higher revenue per employee is indicative of a more productive company. But it is important to note that this metric needs to be used in conjunction with other ratios to analyze any firm. Benchmarking should only be done with companies operating in a similar industry and geography, as each industry may have a significantly different cost structure.

Human Resource Metrics #3
Employee Productivity Rate

An employee productivity rate is one of the most important HR metrics to look out for and has especially gained importance with the rise of remote working in 2021. Calculate it using a simple formula:

Employee Productivity Rate= Company Revenue/Total Employees on Payroll

Why is Employee Productivity Rate an Important HR Metric?

Employee productivity rate is an essential metric because it helps the HR department assess which employees are performing well. This, combined with various other unique factors to each employee, helps HR zero in on the hurdles that could affect productivity. The goal of this metric is not to fire non-performing employees but to find out which employees are struggling.

Human Resource Metrics #4
Diversity and Inclusion

human resource metrics

2021 is not the year to have homogenous workforces. With the rise of the black lives matter movement, affirmative action for people of color, and other diversity-oriented social movements, companies need to do better. Hiring employees from different walks of life is the key to having a diverse and productive workforce.

B2C companies in particular need to focus on workforce diversity because consumers are getting smarter. It isn’t just enough to have a kickass product or service; employee handling and diversity are becoming key growth drivers for consumer companies.

Calculate specific group diversity rate by using a simple formula:

Group Diversity Rate= Total company hires (Within a specific period)/Hires done for the specific category

Why is Diversity and Inclusion an Important HR Metric?

A diverse workforce may come in various forms. They can be a mix of multiple ethnicities, generations, and more. Different people bring varied experiences along with them, which is beneficial if you wish to expand globally. Your organization should be representative of the diverse societies we live in. A positive diversity rate can help improve employee retention and turnover too.

Human Resource Metrics #5
Employee Turnover

Employee turnover refers to the rate at which old employees leave your organization. The lower it is, the better for the organization. The reason being, a higher rate of turnover will lead to higher costs per employee. HRs can reduce employee turnover by increasing the employee retention rate.

HRs need to track two employee turnover rates.

The first one is the normal rate. Here is the formula for the same:

Normal Employee Turnover Rate= (Total employee resignations/Average number of employees)*100

The second one is the employee turnover rate for the recruits who leave the organization in the first three months. It can be calculated by using this formula:

Employee turnover rate (first quarter)= (Employees who leave in the first quarter/Total number of employees who leave)*100

Why is Employee Turnover Rate an Important HR Metric?

The cost of retaining existing employees is always less than the cost of hiring and training new ones. Generally, an employee turnover rate ranging between 10-15% is considered healthy. Anything more can be a matter of concern.

An annual employee turnover rate can help identify if there is a problematic trend of high attrition within the company. On the other hand, a higher employee turnover rate during a specific period can help identify if the HR department can do away with some of the current practices that are not working favorably. This is because most of the people are leaving within the first three months of their joining the company, which is an alarming sign.

Human Resource Metrics #6
Pay Equity

Consider this an extension of the diversity and inclusion metric. Pay equity is an important term. In a world that is becoming more diverse and accepting, your diversity and inclusion metric is only effective if it is followed with reasonable compensation. There should be no discrimination based on race, gender, or any such parameter. The goal is to have a pay policy that is fair and just. This does not mean that there should be equal pay. It means that there should be a pay parity.

A pay disparity occurs when two people in similar jobs have an inordinate variance in pay. Ideally, the disparities should only be based on genuine factors like experience, skills, and seniority. But often, it may occur due to a case of discrimination. Even though there are state, federal and local laws against such discrimination, they continue to persist.

Hiring policies should be simple. When you hire a person, look at their experience, attitude, and capabilities and not where they come from, the color of their skin, or their gender.

Why is Pay Equity an Important HR Metric?

If you wish to expand globally, pay equity is an important metric to consider, along with diversity and inclusion. Acing the pay equity metric will also help you lower your employee turnover rate and increase your employee retention rate as people stay at workplaces that value diversity.

Human Resource Metrics #7
Absenteeism

Absenteeism refers to unplanned leave or absence from work and is often chronic. This is one of the most basic HR statistics to look out for, especially in a remote working scenario. One has to understand that absenteeism is different from other leaves of absence due to the lack of prior notice.

Calculate the rate of absenteeism by using the simple formula:

Absenteeism Rate= (Number of unexcused leaves during the period/Total period)*100

Why is Absenteeism Rate an Important HR Metric?

Unannounced absenteeism can lead to many issues, mostly disrupting the flow of work and trust. It is important to address this metric to solve it fundamentally. The best way to handle it is by addressing the four core reasons; compensation, communication, benefits, engagement. The knowledge of this metric helps the HR department address this issue effectively.

Human Resource Metrics #8
Employee Referral Program Success Rate

human resource metrics

An employee referral program is a brilliant way to hire trustworthy candidates with the help of current employees. Referral numbers are easily available in the database, and if you track the metric well, it can be quite rewarding. Keeping a tab on how many referrals have been successful can help you improve your hiring processes.

Calculate the success rate with a simple formula:

Employee referral program success rate= (Number of referrals/Number of open jobs)*100

Why is Employee Referral Program Success Rate an Important HR Metric?

If referrals are bringing in better candidates and providing better results than the usual hiring process, the HR department can offer bonuses to further cash in on it. Referrals can significantly reduce hiring costs by minimizing the external costs of hiring.

Human Resource Metrics #9
Overtime Percentage

Overtime may seem a metric of hard work on the surface, but when you delve deeper, it could be a sign of inefficiency as well. To understand whether it is dedication towards work or simply the inability to cope with the deadlines, you need to know the metric well.

Calculate your employee overtime percentage by using this simple formula:

Employee Overtime Percentage= (Overtime pay amount/Total payroll)*100

Why is Overtime Percentage an Important HR Metric?

The employee overtime percentage helps you understand how well you are utilizing your current full-time workforce.

There are times when inefficient usage of time by the employees may lead to overtime, which can be easily solved by time management techniques. Another reason may be the existence of too much work for too few employees. A higher overtime percentage, in that case, may indicate that there is a need for hiring more full-time employees so that there is no burden on the existing ones and work quality improves.

Knowing overtime percentage helps the HR department to figure out whether or not they actually require overtime.

Human Resource Metrics #10
Profit Per Employee

Profit per employee is an interesting metric and particularly useful in the sales departments. This is because profits and employee performance are closely related in the sales department. Profit per employee is mostly measured over 12 months.

There is a simple formula to calculate this metric:

Profit Per Employee= (Net profit over the last 12 months/Number of full-time employees)*100

Why is Profit Per Employee an Important HR Metric?

Measuring profit per employee is essential because this helps compare companies within the same industries. Everything, from geography to labor costs affects this ratio. Profit per employee helps HRs understand what steps they can take to improve employee efficiency. These could be an escalation in training and development or changes in processes and automation.

Human Resource Metrics #11
Healthcare Cost Per Employee

Every organization’s budget includes health insurance for the employees. This metric helps understand how to spend and allocate the amount on employee healthcare, per employee.

Calculate it using this simple formula:

Healthcare Cost Per Employee= Total healthcare cost/Total employee sign-ups for healthcare

Why is Healthcare Cost Per Employee an Important HR Metric?

Healthcare in countries like the United States is quite high. Health insurance can be a key benefit that candidates actively seek in full-time jobs. The organization has to make sure that the healthcare costs per employee are reasonable and balanced.

It is important to know this metric so that the HR department can come up with ways to cut costs but also ensure that employees get the maximum benefit. Further, this can be an expensive line item on the company’s Profit & Loss statement. Knowing the right way to curb it without compromising employee benefits can be beneficial for the company.

Should your Company Track Human Resource Metrics?

Human Resource metrics ensure that HR departments are able to manage human capital in the best possible manner. It also provides actionable insights to improve HR performance.

Consider HR metrics as the health benchmarks of your organization. Like heart rate and BMI can measure human health Human Resource metrics help understand whether HR initiatives are moving the needle.

Are your HR metrics working well for you? Do connect with us on social media and let us know.

 

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