Metrics or Key Performance Indicators (KPIs) have been used in organizations – particularly by marketing teams – to measure progress toward a particular goal for quite some time. But they can provide value to other departments, too. In the field of human resources, there are a number of different metrics that can be followed in order to measure the success (or failure) of your department.
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For example, HR metrics can help drive strategy and automate administration, if done well. They can offer a powerful way to track progress toward the elements of the organization that relate to people and allow HR teams to stay focused on what matters.
If you're responsible for leading an HR department, then you know that tracking HR metrics is essential to the success of your team. After all, how can you manage what you don't measure? By tracking key HR metrics, you can identify areas where improvement may be needed and make changes to ensure that all employees feel valued by their company! This article will serve as a resource for HR on which KPIs and metrics are most important in 2023, how to measure them, and how to improve on these KPIs for a happier workforce and better internal performance.
What Are HR Metrics?
HR metrics (used interchangeably with "HR KPIs") are the numbers and data that help you track and measure the performance of your human resources department strategies. By tracking HR metrics, you can identify areas that need improvement and make changes to ensure that your department is running as efficiently and effectively as possible.
There are a variety of different types of HR metrics that you can track, but some of the most common include employee retention rates, time-to-hire, DEI, and average cost-per-hire. We'll expand on these in a moment. For now, understand that tracking these and other HR metrics will give you a clear picture of how your department is performing and where there is room for improvement.
Why Is Tracking HR Metrics So Important?
There are a number of reasons why tracking HR metrics is so important. For the sake of brevity, we've condensed the list down to two main points.
First, these stats help you identify areas where your department needs to improve. Maybe your employee retention rate is low or it's taking your team longer than usual to fill open positions. Or maybe you'll see that your employee retention rates are low and take a closer look at why employees are leaving and what you can do to keep them from leaving in the future. By tracking HR metrics, you can quickly identify these issues and take steps to address them.
Tracking HR metrics also enables you to make data-driven decisions about the future of your department. When you have hard numbers to back up your decisions, it's easier to get buy-in from upper management and other stakeholders. This can lead to lots of opportunities to level up your team, including training, new hires, and software adoption
Types of HR Metrics You Need to Track
There are countless HR metrics you could be tracking... so how do you know which ones you should be tracking? Here's a rundown of the most important HR metrics you need to keep an eye on!
Employee Retention/Turnover Rate
Employee retention rate tells you how many employees are leaving your company and why. It's important to track this metric because it can help you identify problem areas in your company and make changes to improve retention. For example, if you notice that a lot of employees are leaving because of low pay, you might want to consider increasing salaries or offering more competitive benefits packages.
The employee turnover cost is a measure of how much it costs to replace an employee who has left your company. This metric is important because it can help you assess the financial impact of losing an employee. To calculate your employee turnover cost, simply take the total cost of recruiting and training a new employee and divide it by the number of employees you lost during that time period.
Employee Position Duration
Are employees staying in their positions for years without a change? This can lead to them feeling bored, overlooked, or disengaged and can be linked to them leaving the organization. On the other hand, if employees are only staying in their positions for short periods (e.g. 3 months), that needs to be examined further – training is costly and institutional knowledge is difficult to retain with high turnover.
This metric can be a bit less straightforward. To start, you can look at the tenure data, but you’d need to conduct additional analysis to determine how long an employee was in a specific position before moving to another one or exiting the organization in order to get a clear insight.
Time-to-hire is the amount of time it takes to fill an open position. This metric is important because it can help you identify staffing bottlenecks and make changes to improve the efficiency of your hiring process. For example, if you notice that it's taking a long time to fill positions because your background check process is slow, you might want to consider using a different background check provider or reevaluating the overall process.
Cost Per Hire
How much do you spend on each hire? This includes the work of the recruiter/hiring manager, any recruitment tools (e.g. job listings, events), and onboarding or training to get hires up to speed on how things are done in your workplace. While this is a matter of totaling spending across these different functions, understanding how much you spend on average can help you determine how much you’re investing in talent acquisition and what your return on investment is from new hires.
You might find interesting differences across teams, departments or functions. For example, perhaps Sales teams are more expensive to train than others but the R.O.I. and average position duration suggests that it’s a wise investment, whereas another team who is equally costly experiences high turnover and short position duration.
By understanding how much it costs to bring on new employees, HR can make better decisions about where to allocate the budget and resources related to hiring and recruitment. By making more informed decisions about hiring practices, HR can identify many areas where cost savings can be made.
Employee Pay Gap
Pay equity across gender and race/ethnicity continues to be a problem in 2022 and any organization that’s invested in DEI efforts should be tracking this. It’s quite simple: you obtain and compare the average salaries between a minority group or a key demographic and everyone else. Please note that while the below example is for gender, you can replace “female and male” with virtually anything else, particularly racial groups, age groups, religious groups, or any other key demographic.
Total female salaries/number of women = average female salary
Total male salaries/number of men = average male salary
(Average male salary – average female salary / average male salary) x 100 = employee pay gap.
Employee Salary Average
Similar to the pay gap metric, the employee salary average can also allow you to compare average pay across groups. You can calculate this by team, function, demographic, or any other variable, and use it to identify or further investigate differences that suggest inequity. For example, you might find that there is a gap between two different demographics, but it’s accounted for within the role (e.g. everyone in that role has approximately the same salary, but that role happens to be largely filled by one demographic) – and while that may point to other issues that might be worth investigating, it can be one additional layer to the story.
To calculate it, complete the following:
(Sum of salaries in key group)/ (amount of employees) = salary average
Employee Engagement Score
The engagement score measures how engaged your employees are with their work. This metric is important because engaged employees are more productive, have better attendance, and are less likely to leave your company.
There are many different ways to calculate an engagement score. If you find that you’re lagging on employee engagement metrics, pulse checks and further analysis are a great way to improve them. There are dozens of reasons why an employee can be disengaged – offering them free bagels on Fridays when their Team Lead is causing their disengagement will only further frustrate them. It’s best to find out what elements of the workplace they’re looking for improvement in. It’s also key to splice this data by demographic as you may find that certain groups are feeling excluded while others are thriving.
eNPS: Employee Net Promoter Score
Employee net promoter score, or eNPS, asks: On a scale of 1-10, how likely are you to recommend this company as a place to work? Employees who select between 0-6 are considered “detractors,” employees who select between 7-8 are considered “passive,” and employees who select 9-10 are considered “promoters.”
The score is simple to calculate the score and goes as follows:
(Numbers of promoters – number of detractors/number of respondents) x 100.
40-50 is considered an excellent score, while 10 to 20 is acceptable, and 20 to 30 is satisfactory. The best way to approach this score is to allow people to leave a response explaining why – giving you actionable information to follow up on.
This metric is not always straightforward. While you can take the approach of simply asking employees to rate their satisfaction on a scale of 1-10, there are broader and more holistic ways of measuring this. For example, an employee might be satisfied with their role, but not their manager – or satisfied with their team but not with their pay. A more robust way of collecting this metric could be:
On a scale of 1-10, how satisfied are you with your job overall?
With the company?
With your role?
With your compensation and benefits?
With your colleagues/peers?
With your manager?
Diversity, Equity, and Inclusion Metrics
DEI metrics can help determine inequity or a lack of inclusion and belonging. To be clear, this list isn’t exhaustive. For example, the Employee Net Promoter Score and Employee Satisfaction can also shed insight into this, depending on how you splice the data.
And along those lines, we recommend slicing most, if not all, of your HR metrics by key demographics. How long someone stays in a position, how much is invested in acquiring and training them, how satisfied they are, and how often they advance or experience promotion – these are key areas that are often disparate for certain minority groups.
If you determine a lack of equity through these metrics, that’s a huge sign that something in your organization needs to change. Perhaps the policies and procedures need to revise for equity, or the culture needs to actively improve in terms of building inclusion and belonging – either way, these metrics are significant and be measured and addressed in an ongoing and continuous way.
Having satisfied employees who think your company is a wonderful place to work is a great thing – assuming they’re good, productive employees. However, there is no one way to track productivity. Ultimately, it will depend on your business and goals.
A Sales team might track productivity through hitting sales targets, while an Accounting team may track through another means entirely. But one way to gain insight across functions is to use a quality metric. To do this, you would identify three key metrics for the role, and get an average on how an employee performs across those metrics. After assigning a score from 1-5 for each metric, you would complete the following calculation:
Metric 1 + Metric 2 + Metric 3 / Number of Metrics
This offers a bit of a natural buffer for fairness. After all, employees are humans who can’t be perfect at everything. Allowing them some grace by measuring multiple (key) areas can allow their strengths to make up for a slight weakness.
Absenteeism can have a profoundly negative impact on an organization. It describes unplanned and frequent absences from work – and it doesn’t include planned absences, advance absences, or normal vacation or sick time. It’s costly to the organization, it’s inconvenient, and detrimental to the team morale, and it often suggests the employee is experiencing high levels of burnout and stress. In order to understand this metric, calculate the following:
(Average number of employees x missed workdays) / (Average number of employees x total workdays) x 100
New Hire Performance Evaluation
Another important HR metric to track is your new hires' performance evaluation. This metric allows you to see how well new employees are performing in their roles and identify any training or development needs they may have. For example, if you notice that new hires are having trouble understanding your company's products or services, you might want to consider providing more training on those topics. Many HR departments establish a 30-60-90 Day performance program to track this metric.
Learning and Development ROI
These are metrics that help you understand how employees are faring in terms of their positions and careers including their entry into the organization and their continued progression. This metric allows you to compare the cost of training and development programs with the benefits they provide (e.g., increased productivity, improved morale, etc.). This information can help you determine whether or not training & development programs are worth the investment for your company.
If employees aren’t scoring well against these metrics, it’s best to analyze your organizational chart and determine barriers to advancement. Are people staying in their roles because they’re genuinely content or because they don’t have any other options? Are there clear pathways to advancement within different teams or do employees feel like the entry level is the highest ceiling for them? Are people able to make lateral moves to explore new skill sets or are they experiencing interference from within their current teams?
Benefits Cost Per Employee
This is a measure of the total value of benefits provided to employees. Knowing this helps you budget, and also lets you know if there are any areas where you can optimize your offerings. Tracking this metric is important for the health of your business.
Benefits Utilization Rate
Do you ever wonder if your employees are really using their benefits? well, there's a way to measure that. it's called the benefits utilization rate. This can give you an idea of how often employees are using the benefits and how helpful they find them. If the utilization rate is low, it may be time to reevaluate your benefits package, which can save the company money and help with employee retention.
Employee Career Path
When employees enter the organization, how do they progress? Do they remain in the same positions, never advancing or achieving promotion, or do they make lateral moves? This is a metric that can also shed insight into DEI goals – for example, if you discover that only certain groups seem to advance to promotional opportunities.
To calculate this metric:
Total number of promotions / All role changes
Role changes include combined promotions and lateral movements.
Employee Salary Change
An employee who remains at the same salary year after year is likely to leave the organization eventually. Even modest cost-of-living or market-level increases are better than nothing, but ideally: they’d be experiencing salary changes as a result of promotion and advancement. To understand this metric, calculate the following:
(Sum of base salaries in current time interval – sum of base salaries in previous interval) / (Sum of base salaries in previous time interval) x 100
How to Track HR Metrics
Now that we've discussed some of the most important HR metrics, let's move on to how to track them! Once you've decided which metrics you want to track, the next step is to set up a system for tracking them.
One option is to use a spreadsheet or Google Sheets document. This method works well if you only need to track a few simple metrics. However, if you need to track multiple complex metrics, then using a dedicated HR software solution might be a better option. There are a number of different software programs available that can help you track all sorts of different HR metrics; find one that meets your specific needs and budget.
Once you have a system in place for tracking HR metrics, make sure to update it on a regular basis so that your data is always accurate and up-to-date. And finally, don't forget to actually do something with the data once you've collected it! Use it to inform decision-making within your department so that you can continuously improve its performance. Sharing these metrics with your company's leadership is an awesome way to highlight the ongoing success of your team of HR heroes!
Adopting People Analytics Metrics
Ultimately, these metrics are a fantastic way start to creating an HR report card, and an HRIS can help. Now that you’ve identified the key elements to measure, this data can be gathered and analyzed as often as quarterly with the help of automation. This practice is called People Analytics.
Historically, there wasn’t much data that companies could collect on their employees, but with Modern HRIS like GoCo, you not only get data on employee tenure, absenteeism, compliance and retention, but you also can learn about dissemination and future planning for your workforce. With employee and workforce data and custom reports within GoCo, you can analyze data on how to better retain potential new recruits, payroll trends, employment brand image, hiring patterns and more. Choose from hundreds of available fields, save your reports for easy re-use, filter and sort data and export to CSVs. The use-cases are endless: pull top performers, employee swag preferences, and more to identify where your KPIs are thriving and where you can improve in the HR process.
Fully automate your HR with GoCo.