Visitors: 0

HR Metrics

    Mithlesh Dhar

    0/5 stars (0 votes)

    HR, human resource management and team-up concept HR, human resource management and team-up concept,  company network with people icons, business team working as background human resource stock pictures, royalty-free photos & images

    Human Resource metrics are measurements used to determine the value and effectiveness of HR initiatives, typically including such areas as turnover, training, return on human capital, costs of labor, and expenses per employee.

    Why HR Metrics Matter?
    Nowadays in several organizations, we see management asking for HR Reports. This is because HR's work has now changed from normal operations to more strategic decision-making.

    This has also changed the perspective of HR from a cost center to a profit center. To keep this perception going ahead, there is a requirement for more data-driven insights, which in turn requires HR Metrics to be in place.

    This also means that HR metrics are no longer pleasant things but a must-have in today's work environment.

    1. HR Metrics help in Strategizing:
    Professionals working with organizations believe that it is easy to strategize new policies etc when you can measure their impact. This is because, something that cannot be measured, becomes impossible to understand and hence they cannot be controlled.

    Also when we can measure outcomes of certain policies, we can go ahead with those policies more deterministically as we are confident that those policies will help in generating more profits for the organization.

    Several decisions in HR cannot be made on gut or instinct, this is because it affects the workforce of the organization, therefore, if we can measure insights and outcomes, we can be more accurate in strategic decision making.

    2. Management Team Requires more Insights:
    These days, HR's work has shifted from operations and administrative work to more strategic work. Therefore, HR's are supposed to provide more insight into the workforce and how they interact with each other.

    Insights like - 

    • Sentiment of Organization
    • Policy Implementation Outcomes
    • Performance of Employees
    • Effect of PMS on Profitability of Organization
    • Training ROI

    and several other reports are need of the hour. This is because HR has to make decisions concerning the profitability of the organization. Therefore, they are required to guide the management team with insights about factors that are pushing departments towards the goals of the organization.

    Several HR Teams think about going towards attrition analysis which is just one part of descriptive analytics when HR's can also give an idea about questions like;

    • Why employees are leaving our organization?
    • Where are the employees going?
    • Which companies are poaching our employees?
    • What are the major 3 reasons for attrition in our organization?


    Answers to the above questions make it much easier for us to management to take action on things that are negatively impacting the overall attrition rate of the organization.

    3. Employee Experience is the new normal:
    Gone are the days when employers were king and they used to mention "my way or the highway". As the world has become more connected, employees have now become more aware of their rights and it has become more important as an employer to provide them with the best experience possible.

    Online portals like Ambition Box and Glassdoor have provided an open platform, where people can rate organizations and can ensure that people get an idea about how the culture of a particular organization is.

    Candidates have now started to look for specific comments and issues in organizations, which might depict negativity in the organization's culture, and employees don't want to be associated with those organizations.

    Therefore, it has now become important to understand that employee experience has become more important than employer branding these days. One theory that suggests that humans are more negatively biased, brings to our notice the power of negative comments on a company profile. One negative comment can play a Havok during recruitment, and it becomes difficult to source good candidates.

    The efficiency of HR functions
    It is often required of human resource departments to show the organizational value of money and time spent on human resources management training and activities. The value of reporting and analysis of HR performance in various areas aims to improve the organizations' function and internal temperature. 

    HR's challenge is to provide business leaders with actionable information that helps them make decisions about investments, marketing strategies, and new products. HR metrics are a vital way to quantify the cost and the impact of employee programs and HR processes and measure the success (or failure) of HR initiatives.

    They enable a company to track year-to-year trends and changes in these critical variables. It is how organizations measure the value of the time and money spent on HR activities in their organization. 

    The following are some of the examples of the efficiency of the HR functions:

    1. Cost per hire
    2. Time to fill
    3. HR expense factor

    Effectiveness of HR functions
    It shows whether the HR practices have a positive effect on the employees or the applicant pool. This is very important for HR because they are regarded as the leader for acquiring, developing, and helping to deploy talent. 

    The following are some of the examples of the effectiveness of the HR functions;

    1. Training ROI
    2. Absent Rate

    Developing Core Competency
    Metrics help in developing core competency by demonstrating the connection between HR practices and the tangible effects on an organization's ability to gain and sustain competitive advantage.

    This approach often treats employees as human capital instead of an expense.

    The following are some of the examples of the effectiveness of HR functions:

    1. Revenue Factor: It indicates the effectiveness of company operation with the use of the employees as their human capital.
    2. Defects Rate:  It indicates the number of defective products in the operation. The lower the defect rate, the more effective the HR practices in developing companies' core competency in terms of reducing cost.

    HR Metrics and Human Capital
    Human Capital is another big topic nowadays HR practices. HR no longer only assesses their effectiveness and efficiency and the contribution to the company, but also they are starting to measure how those practices can positively affect the human capital (employees) in the organization.  Based on corporate culture, organizational values, and strategic business goals and objectives, human capital measures indicate the health of the organization.

    There is a special tool for HR to measure human capital and it is called Key Performance Indicators (KPIs). It helps measure human capital outcomes, such as talent management, employee engagement, and high performance illustrates the firm's business, financial and strategic goals, and promotes partnership with senior management for organizational success. 

    Human Resources & Metrics
    Human Capital is important to an organization because they are the people who are actually working for the organization. They build the company's core competencies and competitive advantages to the organization. With effective management of the human capital, a company can achieve the maximum outputs from its own human capital and be superior to other competitors.

    Some organizations are unaware even of how many people they have in their organization. The problem with HR is that they have been held unaccountable in the initiatives and programs they promote across the organization. Typically, nobody in the organization, let alone top business leaders of the organization are aware of the impact of these programs whether positive or negative. 

    This is because HR leaders have not been delivering metrics that show the value of their programs or investments. HR metrics is important because it allows organizations to make the connection between the value of what HR is doing and the outcomes of the business. If HR professionals don't measure their function's effectiveness and providing decision-making leaders the data they need, HR will continue to be undermined and eventually sidelined when it comes to having a seat at the table. Therefore, many experts urge HR professionals to use the data they have in front of them and understanding how metrics and analysis could give HR an advantage as an overall better strategic partner. This will allow them to help business leaders solve the people's problems that matter to the organization.

    Before HR metrics, many of the HR activities and processes were difficult to quantify, making it hard to fully understand the real employee costs associated with each HR function. For Example, "a decade ago, if someone looked for turnover rate by performance category, it could be a two-week project". With HR Metrics, more specifically Retention Metrics, HR leaders are able to quantify variables such as turnover rate, average tenure, the rate of veteran workers, or the financial impact of employee turnover. These results can indicate how much separating employees are costing the company and help the company to create proactive plans to prevent future loss of top talent.

    More importantly, metrics enable leaders and decision-makers in organizations towards more efficient and better delivery of HR services.

    HR Metrics & Data
    Executives tend to make consistently better decisions when they use facts gathered from their organizations in objective ways. Many of the important decisions made by executives affect the business and the bottom line; therefore, in order to convenience executive leaders that organizations are benefitting from their people or on the contrary, losing money and wasting resources, HR will need to provide palpable evidence. This evidence can be found in HR metrics.

    The key to finding the right metrics for your organization's needs is to identify the overall business needs as organizations may differ in terms of the metrics they use. Metrics used by the organization need to show data on how human capital strategy is effective and that organizations are acquiring, developing, and deploying the proper talent. Organizations that have trouble deciding what metrics to use for their organizations can always enlist the help of a specialist or consultant to do a company-wide assessment of their organization.

    Measuring Key Data with HR Metrics
    As long as you have employees, you will have turnover, both voluntary and involuntary, and any turnover experienced by the organization is money and resources being lost. Most companies have no idea the impact turnover has on the organization but when the cost of turnover is 15%, 25%, or 35% of an organization's profits, it has a big impact on organizations as a whole. By having your organization use metrics, organizations will be surprised by how much their HR functions can save on hiring, staffing, and separation costs.

    Below are some suggestions for organizations interested in tracking talent through metrics should consider the following:

    • Percentage of performance goals met or exceeded, showing if the organization is meeting the performance goal aligned with its mission.
    • Percentage of employees' rate at the top performance appraisal level who are paid an above-average salary.
    • Percentage of top-performing employees who resign for compensation related reasons 
    • Turnover percentages of low-performing managers.
    • Percentage of employees in performance management programs that show improvement within a year.
    • Percentage and rate of involuntary turnover in key positions.

    Having HR metrics is the first part and a critical one and obtaining the data is another but being able to make meaning and provide a compelling story as to what the data means in relation to the business strategy is just as crucial.

    Software and Outsourcing HR Metrics
    For the most part, HR professionals in many companies probably don't need to purchase additional software to create valid metrics. The trick is knowing where to look and how to extract data. If using the correct HR information systems, most information systems should include reporting tools that can provide data on learning and performance management or financial systems. However, organizations have to ensure that the data they have upheld integrity and are quality data.

    While HR systems are one way of obtaining metrics, many organizations because of lack of resources or time, or simply because they don't know where to begin can enlist the help of a retention specialist or purchase metric systems designed solely for HR Metrics.

    The HRIS systems (Workday, Successfactors, Oracle HR, etc) provide often strong reporting tools within the systems to reflect the cost of people. While talent acquisition systems (like Taleo, etc). If the HR department wants to create data around organizational insight, engagement, culture, and in general the opinions of the employees.

    1. HR Metrics