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Understanding the Importance of HR Metrics: A Strategic Guide for HR Leaders

Understanding the Importance of HR Metrics: A Strategic Guide for HR Leaders

Data in, decisions out. Our world today is controlled by data. Data is collected on each of us daily through our phones, what we watch on TV, where we swipe our cards, and in so many more instances we don’t even realize.Did you also know that data is collected on you at work as well?

Human Resources (HR) professionals no longer simply manage employees. They must now utilize data collected on their workforce, market trends, and other data points to make strategic decisions that boost the business growth. This is where HR metrics come into play. HR metrics are quantifiable measures that can be tracked, analyzed, and utilized to make better data-driven decisions. By collecting HR metrics, the business leaders will have gained valuable insights into the health of the company’s workforce and its HR processes.

But what are the key HR Metrics that every HR leader should know and stay abreast of?

What are HR Metrics?

Metrics are data points collected to be utilized to make informed decisions. When it comes to HR metrics, these are data points that can aid HR professionals in measuring the effectiveness of HR functions. These functions include, but are not limited to, recruitment, retention, performance of the organizational workforce, and engagement. All metrics can offer valuable insights into what they are directly related to. When it comes to HR metrics, they can help the HR professionals gain valuable insights into the company’s employee base, help make trends apparent, bring light to challenges that may not have been evident, and take decisions from blind decisions to data-informed decisions.

Why HR Metrics Matter

There is nothing in the world that grows, flexes and changes faster than the corporate world. This constant change is felt by the HR department as they are expected to justify their impact on the bottom line. HR metrics are the data points that are needed to understand the impact that HR is having on the bottom line. When they are collected, analyzed and applied correctly the HR department will be able to:

Align HR strategy with business goals: Talent management metrics are one example of HR metrics that can help align talent strategies to the organization’s overall objectives.

Improve decision-making: By having data that shows trends within the organization and outside the market, HR leaders will be able to make strategic decisions regarding recruitment, retention, training, promotions, engagement, and more.

Enhance employee experience: HR metrics are not only beneficial to HR professionals. They can also benefit the employees.By tracking different metrics such as employee engagement, turnover, and satisfaction; the data can be used to create more supportive and engaging workplaces for their employees.

Monitor performance: By collecting HR metrics on the organizations key performance indicators (KPIs) for individual employees, teams, and departments, HR leaders can help drive productivity and push the organization forward.

Key HR Metrics to Track

There are many HR metrics that can be tracked. Determining the right metrics to track for the issue at hand is essential to maximizing organizational impact. Some of the most important HR metrics are listed below:

  • Employee Turnover Rate: This metric is crucial in understanding how quickly employees are leaving the company, how long someone is staying with the organization once hired, and helps understand why employees are leaving. The top reasons that employees leave an organization are poor management, lack of growth opportunities, feeling unsupported, and not being provided the proper tools needed to complete their jobs.
    • How to Calculate: The employee turnover rate is calculated by dividing the number of employees who have left the company by the average number of employees during the period being analyzed, then multiplying the number by 100 to get a percentage.
  • Time to Hire: The time to hire metric is important for identifying bottlenecks in the recruitment process.The longer a position is open, the more costly it can be to an organization due to reduced productivity.By collecting this information and analyzing it, an HR professional will be able to see where there are stops or hangups in the hiring pipeline. For instance, if the Time to Hire metric is longer for positions that are in one department or have the same hiring manager, the HR professional would be better able to have conversations with the department leaders or the manager that is backed by data and not easily brushed off.
    • How to Calculate: Track the number of days from the time a requisition is requested, to being posted to the Applicant Tracking System, through the interview process, all the way through the job offer acceptance. To have good data it will be necessary to track these same metrics over time.By doing this the HR leaders will be able to compare the metrics tracked on different positions to determine where bottlenecks occur.
  • Cost per Hire: This metric is directly related to the Time to Hire metric. This one will show the financial investment required to hire new talent. This metric will include advertising of the open positions, any agency fees if a recruitment agency is utilized, organizational recruiter and/or HR department wages for hours worked on filling positions, to onboarding and training the new hire.
    • How to Calculate: This metric is calculated by adding the hiring costs and dividing that number by the number of new hires in the period being analyzed.
  • Employee Engagement Score: The employee engagement score is important to track because engaged employees are inherently more productive, motivated, and less likely to leave the company.
    • How to Calculate: The data collected for this score would be gathered through employee satisfaction surveys, employee engagement surveys, work-life balance, Net Promoter Score, and employee loyalty and retention, as examples.
  • Absenteeism Rate: Tracking the absenteeism rate is essential due to the cost to the company. When employees are consistently absent, other employees have to pick up their slack, and productivity is directly affected. Frequent absenteeism is a good indicator of poor workplace morale, dissatisfaction, lack of loyalty, and even issues with management.
    • How to Calculate: This metric is calculated by dividing the total number of days employees were absent by the total number of available workdays, then multiplying by 100.
  • Employee Net Promoter Score (eNPS): This is a metric that will gauge the employees’ likeliness in recommending their company as a great place to work to their friends, family, or the general public. This score is one of the top indicators of overall employee satisfaction.
    • How to Calculate: This metric can be calculated by providing a scale of 0 – 10 and asking the employees how likely they are to recommend the company to others.Subtract the percentage of detractors (scores 0 – 6) from the percentage of promoters (scores 9 -10).

Using HR Metrics to Drive Business Success

Now that you have all of these metrics, what do you do with them? You use them to make informed decisions and push the business forward. HR professionals will be better equipped to spot trends within the organizational workforce. For instance, if turnover or absenteeism suddenly increases in a specific department, the HR leaders will be alerted to potential issues with leadership that need to be identified and addressed.

HR metrics will aid the organizational leaders in developing benchmarks. These benchmarks will act as baselines to measure against, which will help in understanding if the company is improving or falling behind.These benchmarks can be utilized to guide the organization forward in well-defined phases.As the initial benchmarks are met, the goals can be changed to move the needle more in a positive direction.

Metrics will also help predict future challenges. HR leaders can use the metrics to anticipate and plan for potential problems. It is like having a crystal ball, which provides insight into the health of the company and will provide the ability to take proactive steps early on.

Best Practices for Implementing HR Metrics

You now know what HR metrics are, how they can benefit the company, and what important ones to track. Now what? Now you must take this knowledge into implementation.

First, focus on the relevant metrics. What issue are you trying to identify and answer? Figure that out first so you can track only the metrics needed to answer the question at hand. If you don’t you will overwhelm yourself and waste time tracking metrics that are not required for what is being sought.

Next, automate the data collection. This can be done by harnessing the power of the HR tech stack already in the organization. This can be any HR software already being used by the organization, and it will reduce the potential errors that come with manual effort.

Review and adjustment are the next steps in the process. HR metrics are not static. As the organization evolves, the metrics being tracked need to evolve as well. To do so, the HR leaders need to stay apprised of the metrics being tracked and the strategic goals of the organization, and they will need to adjust the metrics to remain aligned with the business objectives.

Finally, don’t keep what you learn to yourself. It is important to share the insights you learn with the leadership. HR metrics are useless if they are not informing decisions made at all levels of the organization. Communicating the findings with the leadership team will demonstrate how HR contributes to the success of the organization.

Conclusion

We live in a data-driven world. For that reason, HR metrics are no longer nice to-haves; they are essentialfor driving the business forward. HR leaders can develop and align people strategies with business goals by tracking and analyzing the right metrics. They will be equipped to create a more engaged, effective, and loyal workforce. It is important to focus on what matters most to the organization, utilize automation as much as possible, and ensure that you review and adjust as needed to keep moving forward.

Author Bio:

Charles Harden is a freelance content writer at SutiHR who frequently writes articles on Cloud Computing/SaaS, HR, Business, and ERP trends.

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