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Improve Your Workforce — and Bottom Line — with HR Metrics

Business people working together on their laptopMetrics are a key performance-measurement tool for many businesses. Companies use metrics data from a variety of areas — finance, customer service, sales, and even HR — to determine whether they are meeting their objectives and to guide crucial business decisions. Why are HR metrics important, and how can your clients use them to improve their workforce and bottom line?

Why HR metrics matter

Essentially, HR metrics is the practice of assigning monetary value to various aspects of employee performance. HR metrics are useful for measuring an organization’s performance overall and for uncovering HR-related issues that can have a major impact on a company’s bottom line — for example, revenue per employee, benefits costs, and cost of employee turnover.

“Metrics are more important than ever,” says HR Pro Eric Cook, host of the HR Support Center Training On-Demand video, “The Importance of HR Metrics.” “Business owners, managers, and HR professionals need to understand the numbers behind their workforce and business decisions.”

If your clients are not capturing and using HR metrics, they’re missing out on valuable information about the state and efficiency of their workforce and their company as a whole. In particular, HR metrics can provide insights a business can use to improve recruiting strategies for better hiring results, decrease employee turnover, and enhance employee engagement.

Getting started with HR metrics

If any of your clients are interested in using HR metrics, the first step is determining what to measure. The Society for Human Resources Management (SHRM) advises organizations to select and define those HR metrics that align with their business strategy. From there, they will need to define a formula for each metric. For example, the formula for the turnover rate metric is:

Total separations/Average number of employees = turnover rate

What are some key HR metrics that are useful for businesses?

  • General HR metrics — May include revenue per employee, profitability, benefits costs, and employee counts (which can be important in determining which federal regulations and requirements apply to your client’s business).
  • Compensation metrics — May include metrics such as pay range and compra-ratio (an employee’s salary divided by the market rate for their role), which can help a business identify and mitigate potential turnover risks.
  • Recruiting metrics — These metrics focus on the costs of obtaining a new employee and could include advertising costs, agency fees, travel costs, and others. Tracking recruiting metrics can assist in determining the costs of hiring new employees versus retaining existing employees.
  • Turnover metrics — Turnover metrics deal with the flow of employees into and out of an organization over a specific period of time and the costs associated with the loss of employees through retirement, terminations, and resignations.
  • Employee engagement metrics — Employee engagement metrics focus on the degree to which employees care about their jobs and are committed to the organization’s success. Such metrics are directly related to turnover, efficiency, and the business’s overall financial health.

Collecting the data

Businesses often have much of their HR metrics data on hand — in sources such as payroll records, performance evaluations, customer service data, exit interviews, front-line managers, and employee surveys. Industry experts recommend businesses enlist the services of a third-party administrator for conducting employee surveys. Employees are more likely to be honest when their responses will be anonymous and submitted to a third party. The third-party administrator can also ensure results are delivered in an objective way.

Metrics can help your clients see how their workforce and business are performing and provide data useful in making informed business decisions, better allocating resources, and predicting problems and trends. Help your clients to take advantage of this critical business tool with help from their HR Support Center resources.

Want to learn more about how HRAnswerLink’s HR Complete can give your clients peace of mind and ensure compliance? Simply contact Alicia in the Client Experience department at alician@hranswerlink.com.
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