Human Resource Metrics

HUMAN RESOURCE METRICS 2

Human Resource Metrics Introduction

Human Resources Metrics are an important aspect of any strategic Human Resources

Department and organization. There are numerous metrics, both economic and non-financial

that an organization can draw upon to measure and evaluate the efficacy of organizational

strategies. Human Resources professionals must be able to employ analytical skills to help them

understand the data and utilize metrics as an essential competency to remain relevant in the field.

Further, Human Resources professionals must be able to influence top leaders in their

organizations by communicating insights into the data the will help guide the organization in

reaching the strategic goals of the organization.

A General Discussion on HR Metrics

Human Resources professionals have a vested interest in being able to demonstrate how

the Human Resources function adds quantifiable value to their business. They must possess the

skills needed to apply measurement techniques to real world corporate scenarios and the soft

skills to engage in collaborative approaches to problem solving. In order to achieve this, Human

Resources professionals must understand the importance of measurement and recognize the need

to align human capital with the strategic goals of the organization. They must also be able to

identify the correct metrics that need to be measured and evaluate the effectiveness of current

Human Resources initiatives and programs that are currently in place. Once they have taken the

time to understand and evaluate, Human Resources professionals can then use the data to help

support and drive the strategic direction of the business.

The main types and categories of Human Resources metrics have a lot to do with whether

or not a company is profitable based on their human capital and revenue. It’s important to

quantify Human Resources data to support business directives and decisions made based on the

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HUMAN RESOURCE METRICS 3

various data sets. Reporting on these metrics helps to ensure businesses are diverse and

representative of the communities in which they serve. Quantifying puts numbers to the stories,

it’s no longer based on just a gut instinct. There are statistics behind the data. These

measurements help determine the progress an organization is making toward their strategic

business objectives. These metrics further help guide the strategic objectives and business

direction of the organization.

Suggested Metrics for a Mid-sized Company

In conducting research into what Human Resources metrics should be analyzed and

regularly reported for a mid-sized company of 1000 to 3000 employees, I found that revenue per

employee, time to hire, cost per hire, employee diversity, turnover rates (involuntary and

voluntary), absence rate, healthcare cost per employee, training ROI, Workers Compensation

rates & costs, and total compensation to revenue are all important data sets to measure. While

some of these data sets are must haves, such as revenue per employee and turnover rates because

they tie directly to the bottom line profit of the company, some such as training ROI are more of

a want or nice to have, since not all companies have internal training programs available to their

workforce.

In terms of what is important to measure and why, let’s begin with the most important

metrics. It’s important to measure data such as revenue per employee to determine if the staffing

levels of your organization are adequate, or if you are under or over staffed. It’s important to

measure time to hire because there are costs associated with the vacancy, the longer the position

is vacant, the higher the cost to the organization. It also help measure whether or not the

recruiting function in the organization is effective or needs improvement. It’s important to

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HUMAN RESOURCE METRICS 4

measure cost per hire to determine if you are getting the biggest return on investment when

filling the vacancy, or if you need to employ a different strategy in where and how you hire.

Measuring both involuntary and voluntary turnover is important, as this is an indicator of

how you are doing in both attracting and retaining talent within the organization. If voluntary

turnover is high, you may have leadership issues, or you may not be offering a competitive salary

or benefits package. If involuntary turnover is high, you may have issues in the recruiting

process in assessing culture and team fit in to the organization, or you may need to look at

revising disciplinary policies and procedures.

Monitoring and measuring the absence rate will help Human Resources professionals

determine if they have attendance issues, and if so, what those issues may be stemming from.

It’s important to measure healthcare cost per employee to determine if you have a competitive

offer in the market for your industry and in your geographic area. It also helps when going out

for a request for proposal to other benefit partners to ensure you are getting the most from your

benefit partners and the costs remain comparable to going rates in the industry.

Monitoring Workers Compensation rates and costs is important to help guide the strategic

direction in safety in the workplace. If costs are high, more training may be needed in employee

health and safety. This can also assist in determining what the most common types of injuries

there are in the organization and illuminate root causes for injuries that will lead to the

opportunity to correct those processes through administrative and engineering controls. Safety

programs, policies, and incentives can all be implemented to control and even lower these costs.

These measurements can be utilized to show the relationship between Human Resources

programs that are implemented and the reduction in Workers Compensation rates & costs.

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HUMAN RESOURCE METRICS 5

While measuring the ROI on training is important, I would not classify this as the most

important metric to measure. Not all companies have structured training programs and policies

in place, although it is a highly recommended practice. If the organization has a structured

training program in place, it’s important to measure the ROI to ensure training dollars are not just

being thrown down the drain. An organization should monitor how much knowledge is being

transferred and applied back on the job. The company should be able to understand the financial

gain or other benefit realized from any type of training program that is implemented. An

organization should most definitely have required training in place such as harassment and

violence prevention and continually measure the effectiveness of the program.

Collecting Comparative Data on Human Resource Metrics

When it comes to collecting comparative data on Human Resources metrics, an

organization has many options to choose from, both public and private. One of the best sources I

would recommend for a local business is membership with an Employer’s Council. Employer’s

Councils are private member based organizations that collect data from their members on such

things as turnover, benefits, training initiatives, compensation, performance management,

attendance, tenure, and the like. With membership in a private firm such as this, companies can

rest assured they are getting quality data that is essential to making good business decisions that

are data driven. Data gathered from this type of organization provides breakdowns by industry,

geographic area and other relevant factors, in order for companies to have a like for like

assessment between them and the competition. Membership in an organization such as the

Employer’s Council also helps companies precisely ascertain business conditions and

purposefully benchmark their budgets and confidently implement vital strategic business

decisions.

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HUMAN RESOURCE METRICS 6

Companies can obtain public information to compare and contrast how they’re doing

from organizations such as the department of labor & OSHA and the Bureau of Labor Statistics.

OSHA is responsible for measuring and monitoring statistics in the health and safety of the

workforce. Over the span of forty years this government public service organization has helped

partner with states and employers to ensure the employees are safe in the workplace and return

home to their loved ones without incident or injury. This partnership has had a dramatic effect

on workplace safety and helped to reduce accidents and fatalities over a number of industries.

Through the Bureau of Labor Statistics, another public government agency, the “Injuries,

Illnesses, and Fatalities (IIF) program produces a wide range of information about workplace

injuries and illnesses. These data are collected and reported annually through the Survey of

Occupational Injuries and Illnesses (SOII) and the Census of Fatal Occupational Injuries

(CFOI)” (BLS.gov). Private professional organizations such as the Society for Human

Resources Management is also incredibly helpful in providing Human Resources metrics that

should be monitored and measured to stay ahead of current trends in the market. They also

manage to do this at relatively low costs to employers and Human Resources Professionals.

PwC is another private company who collects data to keep their survey on the pulse of

the workforce. They collect data in order to utilize and gain insights to make better and more

informed business decisions. They can also help companies understand emerging technologies

in statistics that will help companies rethink the way they operate and conduct business

operations. They provide data on such things as diversity, recruiting, culture and innovation.

This data can be filtered and manipulated based on industry, company size, and geographic

location, making this an invaluable tool to employers.

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HUMAN RESOURCE METRICS 7

I would recommend a mid-size organization utilize a mix of both public metric data, data

collected from reputable private organizations, and also utilize an internal Human Resources

Dashboard that continually monitors the important data in your chose Human Resources

Management system.

Conclusion

Human Resources metrics are important because they help analyze the effectiveness of

strategic initiatives and outcomes. Human Resources professionals must first partner with

executive leaders to help determine what the right Human Resources metrics are to measure

within their organization. Metrics such as employee turnover, compensation, health & safety,

performance management, recruiting & onboarding are all examples of categories that can be

measured and managed within the Human Resources Department. Depending on the size and

industry of the business, this will be slightly different for all companies, making it even more

important to have a strategic Human Resources leader at the helm of the strategic planning

process. In other words, it is essential and imperative Human Resources Departments have a

seat at the table and are seen as more than simply administrative or there for culture and morale

issues. Certainly these things play a part in aspects of your business such as turnover and the

ability to attract and retain the skilled workforce that will keep your business competitive.

There are numerous ways companies can obtain the comparative data needed to measure

their effectiveness throughout the organization and in their industry. Based on the library and

web based research I have conducted, I would recommend a combination of sources in both

public and private firms that produce reputable data. Examples of these types of private

companies to obtain data are from local Employer’s Council, PwC, and a national organization

such as the Society for Human Resources Management. Businesses can obtain public statistical

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HUMAN RESOURCE METRICS 8

data from agencies such as the Department of Labor, OSHA, and the Bureau of Labor Statistics

to help drive strategic health and safety initiatives in the company.

The expected outcomes for monitoring Human Resources metrics is increased process

efficiencies, increased operational proficiencies of the business, and highlight the need for

further strategic realignment. Human Resources metrics help to realize issues within their

business that can be tackled by the use of employee analytics. Human Resources professionals

must utilize quantitative and qualitative methodologies to analyze data sets and employ more

visual and storytelling insights to work collaboratively with leaders in the organization to drive

strategies within the company. After all, if you’re not measuring it, you’re not managing it, and

you’re unlikely to see further progress in your business. Leveraging this type of data and Human

Resources metrics enables your business to work smarter, and not harder.

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