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9 Key HR Metrics to Track, and How to Improve Them

Allen Brown by Allen Brown
August 8, 2021
in News
Reading Time: 8 mins read
four people watching on white MacBook on top of glass-top table

Photo by Mimi Thian on Unsplash

Are you a manager or HR professional?

You’re in charge of making sure your company is running smoothly. And that means keeping an eye on the numbers. But there are so many HR metrics to track, and it can be tough to know which ones matter most.

We’ve got you covered with nine key metrics every HR pro should monitor, plus tips for how to improve them.

Read on to learn.

  • 1. Employee Engagement
  • 2. Employee Absence Rate
  • How can you improve on this metric?
  • 3. Employee Retention Rate
  • 4. Employee Productivity
  • 5. Overtime Expense
  • 6. Diversity and Demographics
  • 7. Cost per Hire
  • 8. Time To Fill
  • 9. Cost-per-Assessment
  • The Most Important HR Metrics

1. Employee Engagement

Employee engagement is an indication of how much employees care about their jobs and the organization.

Engaged employees are more satisfied, productive, positively oriented toward their jobs and work environment, and loyal to the company. When you improve employee engagement, it leads to higher retention rates, improved quality of hire (and reduced hiring costs), happier customers, lower staff turnover costs, and greater sales revenues. In short, improve employee engagement and watch your business bloom.

One key factor influencing employee engagement is job satisfaction — how satisfied people are with their job overall. You can measure this by surveying employees on various factors: work-life balance; respectful treatment from managers; fairness of compensation; opportunities for growth, career development opportunities, etc.

Once you measure job satisfaction, one thing you can do to improve it is giving employees more opportunities to grow in their careers by establishing a formal career development program. Not only does that keep people happy in the current position, but it also helps them get prepared for future positions.

Another way to influence employee engagement is employee recognition. When your organization values and rewards great work, it attracts highly engaged talent.

Employee recognition programs not only recognize employees who go above and beyond, but they help create an environment where employees feel valued because of their contributions. This leads to better performance from those involved in the program—and everyone else, too.

2. Employee Absence Rate

Nothing impacts an organization’s productivity like employee absence. So it’s important to know how often people are away from work and what the reason is — it could be a sign of future problems.

For example, if your employee absence rate is high in December, the odds are that most of those absences will carry over into January. That’s because employees who take time off at the end of the year usually aren’t ready to go back right when the new year begins.

A benefit of learning this early on? You’ll have time to plan for it—and that can save you a lot of headaches later on.

How can you improve on this metric?

First, understand the point of different types of absence. For example, some absences are planned: Vacation, paid time off (PTO), and sick days are all planned leave. Other absences may be unplanned: Emergency room visits, injury at work, family emergencies, etc.

The first thing to do is segment your PTO into “Usable” and “Unusable.” Don’t allow people to carry over unusable PTO from year to year. That’s simply money being wasted.

Next, look at how much vacation time employees take each month. This will help you get a sense of how much PTO they’re actually taking and if it needs to be adjusted for maximum productivity. If you notice one group is taking a lot more vacation than others, look to see why.

You can also measure how long employees are out on leave and the average number of sick days per employee.

3. Employee Retention Rate

Retaining good talent is expensive. But you can minimize those costs by making sure you retain your best employees. Here’s how:

First, set a high bar for job satisfaction. When people are not satisfied with their jobs, they’re going to start looking at other opportunities.

Second, recognize the cost of losing talent. It’s not just the time and money spent on recruiting new talent. Your business can also lose customers, sales revenues, and goodwill while searching for a replacement.

Then build tools that make staying with your company better than leaving it. A formal career development program is one example. Others include bonuses (for top performers), flexible work hours or telecommuting options, etc.

The number of employees in an organization may seem like an insignificant metric. But there are several indirect measurements you can track from it, including the employee acquisition cost, average tenure with your company, and even turnover rates.

The best way to calculate your employees is by milestone. So if you’re a small company, list them all out by number. For a larger organization that has hundreds or thousands of employees, break it down by division.

This will help you find where you have opportunities for improvement because some divisions may be receiving a lot more applicants than others. Or they may be losing employees much faster than others.

4. Employee Productivity

How much time do you spend looking at employee productivity? If your answer is “Not enough,” then it’s time to take a closer look.

Productivity may be one of the least understood metrics in business. But no matter what line of work you’re in, there are always different ways to measure productivity. It could be revenue per person, clients served per person, percentage of deliverables on schedule, average response time for customer service requests, etc.

For example, if your team manages social media accounts for multiple organizations, how quickly can they respond to customer questions? Or are more often than not responding too late and ignoring the issue entirely? This could be an indicator that your workers need additional training to improve their response times.

You can even track how long it takes for employees to do their jobs. If you notice a group is consistently taking too much time to complete their tasks, there’s probably a root cause that needs addressing. Allocate some time right now to examine the problem and see if this metric has any value in your business.

To make the tracking process easier, you need advanced employee onboarding HR software like the one from WorkBright.com.

5. Overtime Expense

If you’re starting to see this metric creeping up, take a closer look at what’s happening in your company. If overtime is only being used occasionally, that may not be an issue. On the other hand, if it’s becoming the norm for some departments or roles (like customer service), you should figure out why.

For example, are your employees overworked? Are they receiving insufficient training? Is management trying to cut costs by increasing workloads rather than adding people?

Whatever the reason, taking action now will help save money in the long run and improve morale at work.

You can improve this metric by instituting a flexible work schedule. For example, if you’re in sales and lots of businesspeople travel frequently, consider incentivizing your team with time off when sales targets are met. This could help balance out the workload.

You can also track where overtime dollars are spent to find areas for improvement.

Ask yourself: Are salary costs rising anywhere? If so, what types of workers are receiving raises (and why)? Or is it simply pay increases that have gone up?

That’s usually an indicator that something isn’t quite right on the management side, and maybe a new hire needs to be made.

6. Diversity and Demographics

Does your company have a diverse workforce? Or does everyone look the same and act the same way?

If you want to attract and retain creative, innovative people, having a diverse environment where unique ideas are encouraged is key. And it’s just good business sense.

After all, you never know what brilliant idea someone will come up with that can revolutionize your entire industry. Or how much of a market there might be for something new.

Lastly, don’t forget to track metrics like gender and age range. Employees want to work for an employer who values their diversity because it helps bring fresh perspectives into the workplace. Plus, it’s simply the right thing to do.

If you’re not tracking this data already, now would be a good time to start.

How do you improve your diversity and demographics?

Treat your employees like valuable assets that deserve respect. You might start by making sure HR processes aren’t negatively impacting any groups. And even though the pay gap is slowly closing thanks to policies like equal pay, it’s never a bad idea to make sure everyone feels equally valued at all times.

7. Cost per Hire

Some of the most important metrics for HR leaders are related to employee costs. Cost per hire, for example, is one metric that HR leaders should watch closely because it reveals how much you’re spending to acquire a new hire — and whether it’s worth it.

Consider: What is your overall cost per hire? And what is the net cost per hire (after accounting for any savings in training costs)?

If your organization has a high cost per hire ratio and low net cost per hire ratio, then you know there’s room for improvement.

Why does this matter? For one thing, if you have employees who aren’t contributing enough value or whose performance isn’t up to par, then they’re costing more than they’re bringing in. That puts a strain on your talent acquisition budget and doesn’t do much for employee engagement, either.

This is another key reason why cost per hire matters: It helps you identify weaker performers ahead of time (i.e., before they become costly liabilities).

How can you improve these metrics? First, try to reduce the cost per hire by using advertising channels that drive high-quality candidates. Or at least those who are qualified enough to pass the four-stage candidate screening process.

After all, each time you reject a candidate after going through the full screening process costs money—both in terms of hiring costs and lost productivity from having to train new people.

But even if you’re getting top talent via more efficient recruiting methods like social or behavioral screening, it doesn’t necessarily mean that your talent acquisition team is delivering the best results. Or even that everyone on the team is performing at the top level.

8. Time To Fill

This metric measures how long it takes to fill a position after a requisition was posted.

It’s a great way of measuring how well your recruitment efforts are working. If it takes longer than you’d like to fill open positions, there may be something wrong with recruitment strategies or tools.

There may also be something wrong with the work environment: Do employees feel valued? Are they motivated enough to find candidates and get them through the hiring process?

Maybe your managers need stronger interview skills (and more time on their calendar for interviewing). Or perhaps you need better pre-screening and assessment tools so that you can better assess candidates’ fit.

Quality of hire is also a factor. If it’s taking longer to fill positions because your organization isn’t getting the right quality of applicants, then that’s another area where you need to improve.

Some organizations have seen huge improvements in their time to fill ratio by introducing stronger screening tools for internal and external hires (e.g., job boards).

9. Cost-per-Assessment

Similar to cost per hire, this metric helps you determine whether your recruitment process is wasting money on unnecessary steps.

By tracking the overall cost per assessment, you know where you can make improvements. This applies not only to the cost of recruiting but also to any other aspect of HR that requires assessments (e.g., employee engagement surveys and leadership development programs).

So how do you improve these metrics? It all comes down to optimizing your processes to be more efficient while still achieving desired outcomes. That way, instead of running multiple assessments, managers can focus more time on high-value activities like training opportunities.

The Most Important HR Metrics

Tracking key HR metrics can help your organization improve its talent-related practices. And to a greater extent, when you’re trying to fill in new positions and optimize employee engagement levels at the same time.

The good news is that there are plenty of free resources online that help employers measure the effectiveness of their HR systems. So if you find yourself struggling with certain metrics, now you know where to look.

We hope you found this post helpful. Please feel free to share it with others who might benefit. Good luck out there, and remember to keep visiting our blog.

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