HR metrics, explained
Everything you need to know about HR metrics and why they matter.
HR metrics are measurements used to determine the effectiveness of HR processes.
They provide answers to questions like:
HR metrics are usually collected and processed by data engineers or HR analysts. Later, they are organized into HR dashboards where the data is visualized and standardized so that anyone can access and actually read it.
The science that helps collect, process, and analyze data is called people analytics. With the right data, people analytics can help identify trends and threats in all areas of HR and eliminate the pain points.
HR has long been considered a “soft” business area based on “gut feeling”. It often happens not because HR leaders don’t want to back up their findings with data, but because they lack the essential metrics.
If they had access to reliable data they could make informed decisions and improve the position of HR in the organization.
To be an equal business partner in board meetings, HR leaders need to present some numbers, and talk about specific metrics, values, and quantitative insights. It is how HR Business Partners role is considered today: being a person who builds communication and dialogue between people and business through data.
Human capital is something extraordinary in today’s job market. It is what can help outperform the competition. This is why HR analytics is no longer at the bottom of the list of organizational needs. The demand for reports is high, and measuring HR and its impact on an organization is critical.
Imagine you have a problem with high people turnover. Without data, you are not able to determine the reasons. You are literally blind – and you can’t address the problem you are trying to solve.
This is what happened to Kuba Filipowski, Chief Strategy Officer at Netguru. Eventually, the problem was solved thanks to HR analytics. You can read how they did it here.
As we mentioned, it is people analytics that helps make informed decisions and reducing guesswork in workforce planning and organization. It transforms and processes employee-related data to improve business outcomes. In other words, people analytics uses metrics about your workforce to tell meaningful stories that can impact your business. It gives your business a strategic direction based on evidence, rather than guesswork and intuition.
Key HR metrics in planning and recruitment
The number of job openings in your company, expressed as a percentage of job openings compared to the total number of jobs in a particular department or in the company as a whole.
A high percentage of open positions may indicate high demand or low market supply. If you are using people analytics tool with adjustable filters, you can also see which department is the most understaffed or growing the fastest. Seeing how many junior and senior positions you are looking to fill can also help you better plan your hiring process.
The number of applications per job vacancy.
The number of applicants per job opening gives an indication of the popularity of the job. A very large number of applicants can indicate two things: either a high demand for jobs or a job description that is too broad.
The number of applications per job opening is not an indicator of the number of suitable candidates. This is measured by another metric – candidates per hire, which we explain below.
The ratio of applications submitted to the total number of applications started.
The application completion rate measures the success of the recruitment system. It may be of particular interest if your company uses a dedicated online recruiting platform that requires candidates to enter their information and CV. If your application completion rate is low, it may mean that candidates are not getting on with the system and are dropping out. The reasons could be a non-user-friendly interface, poorly organized questions, inappropriate questions, technical issues, etc.
The number of candidates interviewed before one is hired.
Candidates per hire measures the effectiveness of your recruiting methods. Some companies set a goal of 3-5 interviews per open position to save the hiring manager’s time and resources.
With Human Panel, you can filter how many candidates are in your pipeline for a given position by department and stage of the funnel. You also have access to all candidate profiles.
The percentage of candidates who accepted a formal job offer.
The offer acceptance rate tells you how attractive your final offer is to a candidate. A low acceptance rate may indicate compensation problems or a poor interview.
The goal of most companies is to have a high acceptance rate of offers. A rate of over 90% shows that there is a good match between the company’s requirements and the expectations of the selected candidates.
The number of candidates who are rejected at each stage of the recruitment process and how many resign on their own.
The number of days between the time you contact a candidate and the time a candidate accepts your offer.
This HR metric shows you how much time you spend recruiting and how quickly you can select the right candidate once you have multiple candidates in your pipeline. It can also show you how efficient your recruitment process is.
The number of days between the time you post (or receive approval for) a job posting and the time a candidate accepts your offer.
This metric is mainly used for business planning and shows what the supply/demand ratio is for certain jobs. It also shows how long your overall hiring process takes.
The number of days between the candidate’s acceptance of your offer and the time a new employee begins to make a meaningful contribution.
In today’s market, attracting and retaining talent is extremely difficult. The onboarding process can make the difference between a new employee’s success or failure. A study by Gallup shows that companies with a good onboarding process increase new employee retention by 82% and productivity by over 70%. Effective onboarding also reduces mistakes and increases employee retention.
Cost per hire is the average amount of money you spend to hire an employee. In other words, it is used to measure how much it costs you to fill a job opening.
To calculate the cost per hire, you should add up all your expenses – both internal and external. Then divide that total by the number of hires in a given period.
Hiring source indicates the percentage of your new hires that came from a particular source or channel – e.g., job boards, referrals, direct approach, internal promotion, etc.
Knowing your best hiring sources will help you allocate your budget more effectively. For example, if you hired 10 people last month and half of them came through referrals, two through job boards, three through direct hire and none through the outside agency, you know which channel is efficient and which is not. This way you can direct more resources to the most valuable channels and drop those that do not bring candidates.
Quality of hire is defined as the value a new employee brings to your organization. In other words, it shows how much a new employee contributes to the long-term success of your company.
Hiring quality directly impacts the long-term success of the company and is also useful for evaluating the performance of the talent acquisition team within the organization. Improving the quality of hiring means less turnover, more productivity, a better company culture, and greater overall business success.
Candidate experience is a qualitative and quantitative metric that reflects the applicant’s overall impression of the hiring and onboarding process.
From the moment candidates see your job posting to the moment they actually start a job, they form an opinion about you as an employer. They often share their opinion on various websites or among their friends, which can affect your reputation as an employer. Even if they decline your offer, they may recommend your company to others or rate you on Glassdoor or another website.
Recruiting is a process that resembles a sales funnel – it starts with sourcing candidates and ends with signing a contract. Many companies measure the effectiveness of the various steps in the funnel, which allows them to identify roadblocks and money wasters and optimize the entire process.
With people analytics, you can analyze each stage of the funnel and measure HR metrics and parameters such as:
Candidates by department
This metric allows you to see how many candidates you have in your funnel, based on department.
Candidates by status
Track where your candidates are in the funnel.
Candidates by recruiter
See how efficient your recruiting team is and the workload of your staff.
The total number of employees in organization or within a specific department.
Knowing your headcount is fundamental for planning and talent management. It’s also useful to track headcount change in time and headcount by contract type and seniority. Note that tracking the number of full-time employees shows how many employees are embedded with the employer and gives you an overall impression of your ability to attract and retain a diverse workforce.
With Human Panel, you can track total headcount and current headcount. Current headcount does not include employees on long sick leaves, maternity leaves etc.
The characteristics of your workforce such as age, gender, education level, position, and tenure.
Apart from the basic demographics, employees profiles include such information as salary, employee NPs, performance level, organization level, absense, or overtime hours.
Salary bands and ranges by tenure and department.
Planning your workforce budget can be a challenging task. With the right data, you can compare salaries across departments and roles, put them against market benchmarks and see how many employees are below or above salary band.
Average monthly or yearly cost per employee that includes basic salary, employment taxes and benefits. It is typically in the 1.25 to 1.4 times base salary range.
The typical costs include:
A common practice is calculating employee hourly rate.
Average monthly or yearly cost of benefits per employee. The benefits can include health benefits (insurance) as well as vacation time, meals, gym memberships, and paid leaves.
To correctly caclulate the cost of benefits per employee, you should also track the benefit participation rate, total benefits spend, and annual change in benefits spend. The range and cost of benefits depend strictly on the country legal system and obligations of the employer.
The cost associated with having vacant positions, resulting from voluntary turnover and involuntary turnover.
The cost of vacancies can include various factors and there is no universal formula to calculate it. What you should take into consideration is the lost revenue or paying current employees overtime due to staff reduction. Note that filling the vacancy is often be more cost efficient than paying overtime.
Billable hours represent the amount of time employees have spent on tasks that are invoiced to clients. Non-billable hours are the hours spent on tasks that don’t get invoiced. They are most often dedicated to different internal tasks.
Tracking all your employees’ time helps you see the full picture of how time is spent within your organization, especially if you work on projects for specific clients. It is crucial for analyzing the efficiency and profitability of projects and clients as well as of the entire company.
All the above metrics can be easily tracked with Human Panel. If you want to see how they work in action, sign up for a free demo – all you need to do is to fill this short form below:
The rate of unplanned absence due to sickness or other causes. The rate can be measured for an individual, team, or the company as a whole.
An absence rate of 1.5% is considered normal. A lower rate may indicate employees are afraid of taking unscheduled absences, preferring presenteeism that could indicate issues with company culture. A higher rate may indicate another range of issues impacting employee wellbeing.
Cost of unscheduled leave and absences.
Cost of absence may include such factors as sick leave, cost of replacement staff, loss of production, quality loss, and the time managers spend on dealing with the absence.
An additional formula that measures employee absence. It’s a number that represents how many unplanned absences an employee has taken during the last working year.
If you use a people analytics software like the one offered by Human Panel, the system calculates the absence rate and the Bradford factor for you.
It is not a metric itself but can help you in visualizing the structure of your organization with all employees, leaders, teams, and departments.
The number of leaders in relation to teams, departments, and employees.
The number of employees who leave your organization within a given period.
This metric is often shown as turnover rate, defined as the percentage of employees who left a company over a certain period of time. It usually includes voluntary resignations, dismissals, and retirements. It doesn’t include internal movements like promotions or transfers.
The turnover rate including only those employees who leave your organization voluntarily.
The number of employees who leave the company in their first year on the job.
New hire turnover is nothing out of the ordinary – about 20% of employees leave within the first 45 days of employment. There are ways to reduce high employee turnover and identify the reasons for first-year turnover. Learn more about turnover or sign up for our free demo:
With Human Panel, you can track the turnover by leaders, departments, tenure, and job grades. It’s also possible to distinguish between leader vs non-leader turnover.
Regrettable turnover is when an employee’s departure from a company has a negative impact on the team or organization. Non-regrettable turnover means a departure that did not hurt the company.
Offboarding is the process that leads to the formal separation between an employee and a company through resignation, termination, or retirement.
The total amount of revenue divided by the total number of employees.
This metric shows the efficiency of the organization as a whole. The revenue per employee metric is an indicator of the quality of hired employees.
You can track employee performance through self-assessments, peer reviews, manager assessments, or a combination of all three.
This metric shows which employees are underperformers, valued specialists, emerging potentials, or top talents.
With this metric you can see the goals employees have set, how these goals connect to larger company goals, and the progress employees have made.
The total amount your organization spends on HR functions divided by the total number of employees.
The number of employees who would recommend your company as a good place to work versus the number of employees who wouldn’t, indicating overall employees satisfaction.
This metric is considered one of the most efficient indicators of employee satisfaction. With Human Panel, you can track th eNPs by department, team, and project.
Engagement might be the most important “soft” HR outcome.
You can measure engagement through surveys and 360-degree evaluations.
Productivity is usually defined as the ratio of the volume of output to the volume of inputs.
To assess an employee’s score, their peers, subordinates, customers, and manager are asked to provide feedback on specific topics. This feedback often represents an accurate and multi-perspective view of an employee’s performance, skill level, and points of improvement.
Most companies conduct a 180-degree or 360-degree feedback evaluation, with detailed questions. Apart from assessing employee’s performance, employees assess their leaders, managers, and the company as a whole.
The total cost of your organization’s training courses and programs.
Cost of training and development per employee divided by average remuneration in the company.
The metric which shows how effective the training was.
The average amount of time it takes for an employee to complete a given training program.
The number of employees promoted in relation to the total number of employees.
Average time in months since last internal promotion.
How many jobs have a defined career path?
How many employees have access to coaching and mentoring?
The above list of key HR metrics is not exhaustive. There are many other metrics that you can track within your organization. It al depends on your needs and the problems you want to solve in your company.
To begin your people analytics journey, you need to understand what business problem you are trying to solve. Is it a high turnover rate? The rising cost of recruitment? Or perhaps declining employee satisfaction? This question-based mindset is crucial for getting rid of “gut feelings” and starting making informed decisions about human resources.
When used effectively, human resource metrics can play a key role in an organization’s success. With people analytics, HR can take its place at the executive table and contribute meaningfully to the profitability of the business.
Follow Human Panel on social media