HR departments don’t directly generate profit, yet the outcomes they deliver are consistently monitored and evaluated to help keep companies aligned to their strategic goals. In other words, senior management should to be aware of how well HR departments are doing their jobs, including periodic reviews of their overall effectiveness.
With this idea in mind, HR projects should be scored against measurable outcomes and metrics. The 10 metrics below are easily applicable to any business and provide a foundation for further analysis and strategic planning.
Employee satisfaction can be abstract; conducting an organization-wide survey is often the only way to accurately measure how satisfied your company’s employees are. Don’t neglect the collection of this metric. Satisfaction at the workplace makes a significant impact on corporate culture and productivity. It also determines your ability to retain the top performers.
· Satisfaction rate: the percent of employees who are satisfied with job conditions
Employee absence isn’t only a matter of corporate culture. High absence rates may indicate decreasing happiness and fulfillment.
· Absence rate: The number of days absent in month/average number of employees during the month x number of working days.
Turnover rate demonstrates how many employees leave your company in a given year. A high or growing rate of turnover should be treated as an alarming trend, pointing at existing and pervasive issues within your organization.
· Turnover - Number of employees leaving jobs in 12 months/average number of employees during 12 months
Turnover costs show how much money you lose due to turnover.
· Costs of separation+ vacancy+ hiring new person+ training
· Tenure – average number of years the employee has been working for a company.
HR strategists commonly consider talent (that is, your employees) as investments, so it’s crucial for companies to understand how this investment is paying off.
· ROI = (total benefits – total costs) x 100
To be on top of the recruiting process within the organization, senior management might request the following metrics. The first presents the recruiter’s success in finding qualified candidates for interviews. The second demonstrates expenditures on hiring a new team member.
· Yield ratio: % of applicants that went to the next stage of recruiting process
· Cost per hire: Recruitment costs/compensation+ benefits
Curious to know the average amount of money generated by one employee? Use the formula below.
· Revenue per employee: Revenue/number of employees total
Additionally, the HR to staff ratio is monitored in progress to get to know whether the existing HR team is big enough to cover the growing needs of your company.
· HR to staff ratio: Number of employees/ number of HR team members.
HR can determine the success or failure of processes within your company. By analyzing the key metrics of the HR department will help you determine how connected HR projects and processes are connected with to the financial results of your company. To be proactive in hiring, managing turnover and productivity, HR strategists, and top managers develop short-term and long-term HR plans based on these business metrics. The analysis and optimization of weak points will help you reduce costs per employee and uncover performance issues.
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