Key HR Metrics You Should Be Tracking

Human resources manager pointing at data and graphics

HR isn’t only responsible for hiring, firing, and tracking benefits. An important role in HR is to monitor performance and measure productivity to ensure that employees reach their potential and maximize productivity while maximizing the company’s cost benefits. HR also tracks whether the organization is meeting its established goals and mission. They do this by utilizing HR metrics, which are benchmarks an organization uses to measure the effectiveness of its human resources. This aids them in building a work environment that is productive, diverse, and profitable.

Some of the HR metrics commonly employed look at employee turnover, cost of benefits per employee, and cost per hire. The statistical data gleaned from these metrics can help you manage and improve performance. Here are some key HR metrics you should track to maximize employee efficiency and reduce costs. 

The Value of HR Metrics

HR metrics offer rich insights that can inform your strategy for talent acquisition, employee engagement, and more. Here are some of the key benefits of HR analytics. 

Monitor performance

HR metrics give you a clear understanding of whether your activities are productive. By analyzing the performance of your sourcing channels, you can tell which of them produce the best hires and, in turn, focus more of your efforts there. Analyzing turnover rates by role and department can show where your recruiting efforts must be refined. 

Optimize ROI

In today’s economy, every business wants maximum returns from every dollar spent. HR metrics can help recruiting teams demonstrate their impact on company leadership and allocate budgets more effectively.

Improve decision-making

HR metrics empower you to make decisions based on data rather than guesses or gut feelings. Data-based decisions lead to better business outcomes through more accurate hires, stronger performance, and higher retention.

Harness predictive insights

Predictive insights are an exciting new development that can reduce manual data analysis and improve HR results. By combining your historic data with machine learning capabilities, you can make intelligent assumptions about things like your future hiring needs or a candidate’s likelihood of success.

Promote compliance

HR metrics can help you stay on the right side of the law by revealing potential compliance issues like policy violations or rising complaint volumes. You can proactively mitigate these issues and reduce your risk of unwanted consequences by staying aware of them.

How to Establish Key Human Resources Metrics

Your KPIs, or key performance indicators, will be used to measure your organization’s HR performance. They’re how you’ll communicate information between stakeholders, and they should be tied to the business results you want to achieve. Here are some tips to consider when selecting your key human resources metrics. 

Align KPIs with organizational goals

Naturally, tracking the metrics that indicate how your performance is stacking up against organizational goals makes sense. You can’t make smart operational choices without data to inform your decisions. Thus, you must decide which KPIs most closely align with your desired business outcomes.  

Consider how success is defined

At the end of the day, nobody is happy if company leaders aren’t happy. What executives want to see needs to factor into the metrics you focus on. If you just got a new CEO committed to improving retention, turnover, retention rate, and new hire success are critical metrics for your HR team. Consider your organization’s definitions for success as you establish HR KPIs. 

Don’t get tunnel vision

While a low time to hire sounds great, a single metric doesn’t tell the full story. Some industries, positions, and seniority levels, by necessity, take longer to hire than others. If you get too hung up on time to hire alone, you could miss out on other important indicators like training expenses and new hire success. A well-rounded view is necessary to accurately understand your HR performance. 

Most Important HR Metrics

1. Cost per hire

Companies must hire new employees, and the hiring process costs money. Cost per hire, which is the average expense incurred in looking for and interviewing candidates and eventually hiring the best one, is an important metric to determine whether the value to the organization is worth the cost.

Cost includes internal talent acquisition and training, as well as external agency fees, job postings, etc. To calculate cost per hire, divide the total cost of your hiring process by the number of new employees. The importance of the cost per hire metric is that companies can use it to create recruitment budgets and stick to them. The goal for HR is to optimize cost per hire without negatively affecting the quality of resources being hired.

2. Time to hire

Time to hire measures the average number of days between the time a candidate applies for a job and the time that same candidate accepts the job offer. It’s highly indicative of your hiring efficiency, which is important since speed is a major factor in winning top talent. Time to hire also has meaningful implications for candidate experience since candidates appreciate an organized and well-run hiring process. 

To calculate time to hire, find the number of days that elapsed between application and accepted offer for all new hires within a given time frame (typically a year) and take an average of them. If your time to hire begins to lag, or if you’re far outside of the average time to hire, it’s worthwhile to take action to improve your recruiting efficiency. 

3. Job offer acceptance rate

The offer acceptance rate measures the portion of candidates who accept offers extended by your company. Calculate it by dividing the total number of accepted offers by the total number of offers you made in a set time frame. The average offer acceptance rate is around 75%, but it’s always better to aim for closer to 80 or 90%. 

Offer acceptance rate sheds light on the quality of your offers, but it also indicates how well you’re communicating your employer value proposition. Are your salaries up to snuff? Are you offering benefits that appeal to candidates in your market? Are you conveying those benefits in a way that resonates with candidates?

Offer acceptance rate also plays into hiring accuracy since well-vetted, well-matched candidates will be more likely to accept than those who aren’t a strong fit in the first place. 

4. Revenue per employee

Knowing how much revenue each employee generates is important to you. You may have a lot of high-performing employees in the office, but the revenue per employee is low. This could indicate that you have an inequitable distribution of work. The formula for calculating revenue per employee is the total revenue divided by the number of employees.

If the revenue per employee increases over time, this is an indicator that the company is becoming more productive. This is what you should be striving for, but if the company’s revenue per employee is lower than that of similar organizations, this means the company might not be as productive as it could be. You can then look for ways to raise the revenue per employee.

5. Employee productivity 

Employee productivity has increased in importance over the last year or so because of the rise in the number of employees working from home. The knock against remote work has long been that workers aren’t as productive when away from the office, surrounded by a number of possible distractions. In reality, many employees are even more productive at home, where they don’t have to worry about getting ready in the morning to go into the office, commuting, and doing other things. Employee productivity can be calculated by measuring performance against quarter or year goals. 

Employee productivity is valuable as it helps you gauge which employees perform well. It allows you to pinpoint the obstacles that might be negatively affecting productivity. You can then focus on helping those employees who are struggling to perform better. This helps not only the employee but the company as a whole. 

6. Workforce diversity

With society as a whole striving for diversity and inclusion, the same is true in the workforce. HR departments should recognize that companies must be conscious of hiring employees from all walks of life. Even if an organization has the best product out there, not having a diverse workforce can hurt sales, recruitment, and overall company health.

Tracking workforce diversity can be done in various ways, including by gender, ethnicity, age, and years of service within your organization. The more diverse the workforce is, the more varied the experiences each individual will bring with them. A positive diversity rate can help improve employee retention and turnover.

Related: Hiring for Diversity

7. New hire turnover

New hire turnover encapsulates how many employees leave their position within the first year. Obviously, this is something all recruiters work to avoid, so the lower this number is the better. To calculate new hire turnover, divide the number of employees who left before their first anniversary by the total average workforce size for a year’s time. The result is a percentage that expresses new hire turnover. 

Hiring accuracy, company culture, management, and training and development can all impact new hire turnover. If one of your goals is to improve retention, tracking this metric over time is a good metric to measure the success of your efforts. 

8. Voluntary employee turnover

Generally, the lower your employee turnover rate is, the better it is for the organization. Higher turnover rates mean higher costs per employee because the cost of retaining employees is always less than the cost of hiring and training new ones. But getting rid of those who are underperforming or not a good fit for the company can also be a good thing.

Tracking the voluntary turnover rate can help you understand what motivates quality employees to leave and what you can do to prevent that. Calculate your voluntary turnover rate by dividing the number of employees who leave voluntarily by the total number of employees. You typically want the turnover rate to be around 10-15%. Any higher might be a reason for concern. 

You can track employee turnover as a whole, but another way to track it is by looking at employees who leave the organization in the first three months, the first six months, or the first year. If this rate is high, look at what factors are causing it.  

9. Pay equity

Pay equity is generally related to workforce diversity. Even if you have a diverse workforce, if the pay equity is slanted significantly in favor of one group over another, it serves to nullify or greatly lessen the impact of the workforce diversity metric. A diverse workforce is only effective if compensation is fair among diverse groups. Discrimination based on race, gender, or any similar parameter indicates an unfair pay policy. 

When two people with similar work experience are doing similar jobs, and they have a significant difference in pay, that is pay inequality. Pay disparity should only be based on factors such as experience, skills, and seniority. Even though state, federal, and local laws exist to protect employees against discrimination, it still persists in the workforce. You should have policies to only look at things like experience, attitude, and ability, not the color of someone’s skin, age, or gender.

A benefit of pay equity, along with diversity and inclusion, is that it can help lower employee turnover rates and increase employee retention rates as people stay at workplaces that value diversity.

Related: The Pros and Cons of an Open Salary Policy

10. Rate of employee absences

A certain amount of absenteeism is expected and shouldn’t cause concern. It’s a consistent pattern of unplanned leave or absences from work that you should be focusing on. Divide the number of unscheduled absences by the number of employees to arrive at the rate of employee absences. A high absence rate can indicate low morale or other issues and can lead to reduced productivity, disrupted workflow, and loss of trust.

You can address this issue quickly and efficiently by looking at the four core reasons for a pattern of absenteeism: compensation, communication, benefits, and engagement. Another way to track employee absences is by each team manager, which helps to identify issues that might be present on a particular team.

Related: Employee Incentive Programs to Motivate and Engage Your Staff

11. Overtime percentage

A high overtime percentage can mean several different things. Generally, it’s either common in a particular role, intermittent when meeting deadlines, or a sign of inefficiency in the workplace. Delving into why the rate is high is important. Calculate the overtime percentage rate by dividing the total overtime pay amount by the total payroll.

Using the overtime percentage metric, You can understand how well the workforce is being utilized and where issues might be occurring. Inefficient usage of time by employees that leads to overtime can be corrected by implementing better time management techniques. A situation where there aren’t enough employees for the amount of work a company has, leading to consistent overtime, indicates a need to hire more employees. The key is to determine why overtime is required and implement a solution. 

12. Healthcare cost per employee

Organizations build health insurance costs into the budget for each employee. Tracking the healthcare cost per employee can help you understand and determine the amount of money that should be allocated for healthcare per employee. To calculate the healthcare cost per employee, take the total healthcare costs for the organization and divide it by the number of employees who sign up for healthcare.

Healthcare costs in the United States are very high. Job seekers looking for an open position in your company want to know how good the health insurance is. The best candidates might pass on an offer simply because the benefits aren’t good enough. To attract and retain a productive workforce, you should make sure that the healthcare costs per employee are reasonable and balanced. The challenge is figuring out ways to cut costs and provide employees maximum benefits. 

Related: Ways to Lower Your Employee Benefits Cost

13. Training expenses vs effectiveness and efficiency per employee

This metric helps you track development costs and can help you make better choices in developing personnel. Training expenses that result in more effective and efficient workers is your goal. You can assess the effectiveness of training by measuring what people learned. This is done by setting training goals and monitoring whether employees are reaching those goals after training. Another way to measure effectiveness is over a period of time.  Effective training should help the employee improve their job, raising their performance level. 

Measuring the efficiency of training helps you track employee satisfaction with training processes. Training that benefits the employee will lead to more productivity and better employee retention. On the other hand, a lack of development opportunities can lead to employee dissatisfaction and turnover. 

Related: Highly Effective Strategies for Employee Retention

HR Analytics Tools

HR analytics tools come in all shapes and sizes. A few of our favorites include:

  • IntelliHR. This highly configurable platform consolidates your HR data to provide insights on HR performance and workforce trends, driving better decision-making.
  • Visier. Visier uses visual dashboards to communicate data that streamlines workforce planning, talent acquisition, and performance management.
  • BambooHR. If you’re looking for a more comprehensive HR solution, BambooHR is a strong option. It offers tools for analytics in addition to hiring, onboarding, payroll, benefits, and more. 
  • Qualtrics. Qualtrics is a robust platform for understanding your employee experience, and facilitating employee surveys, feedback analysis, and sentiment tracking. It’s most appropriate for medium- to enterprise-level organizations.
  • Excel. An oldie but goodie. Excel’s powerful organization and analysis activities can help you create highly customized reports, track performance, and forecast staffing needs. It’s also highly affordable. 
  • Tableau. Tableau’s advanced data visualization capabilities give recruiters an interactive way to identify HR trends, assess employee performance, and make strategic decisions.

4 Corner Resources Can Help You With HR

HR metrics are an important tool and can significantly impact your company if you use them. By analyzing the data and drawing conclusions from it, you can increase productivity, reduce costs, and improve employee satisfaction, all of which benefit your organization. 

If you’re looking for an experienced HR team to help your company grow, outsourcing with 4 Corner Resources is a great option. We’ll track all of these metrics for you, helping you to hire better. Contact us today to see how we can help.

Pete Newsome

About Pete Newsome

Pete Newsome is the President of 4 Corner Resources, the staffing and recruiting firm he founded in 2005. 4 Corner is a member of the American Staffing Association and TechServe Alliance, and the top-rated staffing company in Central Florida. Recent awards and recognition include being named to Forbes’ Best Recruiting Firms in America, The Seminole 100, and The Golden 100. Pete also founded zengig, to offer comprehensive career advice, tools, and resources for students and professionals. He hosts two podcasts, Hire Calling and Finding Career Zen, and is blazing new trails in recruitment marketing with the latest artificial intelligence (AI) technology. Connect with Pete on LinkedIn