Top 5 HR Metrics to Track in 2018
Organizations are constantly measuring employee success by keeping tabs on specific performance metrics, assessing their quality of work, and monitoring their contribution to organizational goals. With that said, it is equally important to routinely observe HR’s productivity, and hold them accountable for the results they deliver. Like how sales professionals are responsible for meeting quotas, organizations should be setting measurable, cost-related targets for HR to reach and be mindful of while on the job.
These targets are known as HR metrics, and allow organizations to put numbers behind a usually qualitative department. With HR metrics, executives can look through the numbers and see where HR is succeeding or failing, and can precisely pinpoint areas of improvement. Instead of saying, “We seem to be spending a lot of money on new hires lately,” HR metrics allow executives to say, “Our average cost per hire for the past 2 months has been $5,216, which is more than $1,000 the national average. Let’s look for ways to cut costs in the recruiting process.” With the right data points, organizations can budget and work more efficiently.
Let’s take a deeper look at the top 5 HR metrics to track this year.
Employee turnover is probably one of most popular, widely known HR metrics out there. While many have heard the term before and realize that high turnover is a bad thing, not many really understand what the term really means. According to Chron, “Employee turnover refers to the number or percentage of workers who leave an organization and are replaced by new employees.” This number tells employers how effective they are at retaining employers.
You may be wondering how this HR metric is calculated. Fortunately for employers, it’s not too complicated. According to SHRM, “Turnover rate is calculated by taking the number of separations during a month divided by the average number of employees, multiplied by 100.” In this explanation, ‘separations’ refers to when an employee and employer relationship comes to an end, and ‘month’ can be substituted for any amount of time the employer wishes to track the turnover for.
Turnover rates vary by industry. CompensationForce outlined this by saying that while the average turnover among all industries in the United States is 17.8%, the nonprofit space, for example, only experiences a turnover of 15.7%. In fact, the DATIS 2018 State of Workforce Management survey report found that 42% of Health and Human Service organizations have a turnover rate over 20%. To limit turnover and retain top performers, all employers, regardless of industry, must implement strategies to keep employees engagement and satisfied.
Early Employee Turnover
Early employee turnover is like the employee turnover we just discussed, but with a slight twist. As you can probably tell by the name, early employee turnover is a percentage of employees that leave within their first year on the job. Many experts believe that this is one of the most import HR metrics out there for employers because it indicates whether they’re hiring employees that are a bad match for the organization or the position.
A high early employee turnover rate can be hurtful to employee morale. Imagine a workplace where new-hires leave the organization, on average, after 6 months of service. While this scenario may be more common in food service jobs, it can significantly impact the culture of organizations in other, more professional industries.
Organizations experience high early employee turnover rates for a few reasons. One major cause of early turnover is a poor recruiting strategy, where employers are hiring candidates who are a poor match for the position, or the organization as a whole. This could be the case as the DATIS 2018 State of Workforce Management also revealed that only 22% of employers think their recruiting strategy is ‘Excellent’ or ‘Very Good.’ The other major cause of early employee turnover is from the perspective of the employee, and comes about when the employer oversells the position, or fails to maintain a healthy work environment.
Time to Hire
There are several HR metrics can help employers better understand and improve their recruiting process. The average time to hire is one of them. This metric highlights how efficient an employer’s recruitment process is and provides insight into the difficult of filling certain position’s within their organization.
Calculating time to hire for positions within your organization is fairly simple. SHRM provides an easy-to-use Excel file to calculate time to hire averages. However, it’s not too hard to simply count the days yourself for each recruiting cycle. First, the employers must choose a start date to measure from. This could be when a manager submits a job opening for approval, when HR approves a job opening, or when the job opening is posted to online job boards. Whatever date is chosen should be consistent among all time to hire calculations. The end date is typically when a candidate accepts a job offer.
Like employee turnover, time to hire varies by industry, and according to research by Glassdoor Economic Research, the average time to hire continues to increase. The article states that the average time to hire is 22.9 days, almost twice as long as it was in 2010. To keep organizational operations running smoothly, executives need to implement recruiting strategies that decrease their average time to hire.
Cost Per Hire
An organizations cost per hire is the average amount of money is spent hiring and onboarding a new employee. HR is under constant pressure to reduce their organization’s cost per hire. This is much easier said than done when considering all the different costs included in hiring an employee, which are made up of everything from employee referral payments and recruiter salaries to the cost of the time spent interviewing candidates. The cost per hire varies by position, as some positions take a lot more time and resources to appropriately fill.
Fortunately, there is a unique formula for calculating cost per hire. Employers must take the sum of all recruiting costs divided by the number of hires in a specific time period. Employers can also apply this formula to specific positions or departments.
To reduce these costs, employers have to be smart about the way they go about their hiring process. They need to analyze the costs of each step and list them in order from highest to lowest. From here, it’s easy to see which areas of the hiring process are impacting cost per hire the most, and executives can begin brainstorming ways to decrease costs without decreasing candidate quality
Almost all organizations offer their employees paid time off, and understand that their employees are likely to miss a few days throughout the year for personal reasons. However, when occurring frequently, unscheduled absences can negatively impact employee morale and productivity, while putting other employees under pressure to pick up the slack. Some even claim that absenteeism is a predictor for employee turnover. It’s important for organizations to track absenteeism within their workforce, and take action employees who are taking advantage of their personal day policy.
In organizations with hundreds of employees, it can be hard to track the amount of days each employee has missed throughout a given time period. With Time and Attendance software, however, all managers can view their employees’ hours and absences with just a couple clicks of their computer mouse. They can also track which absences were approved, and which were not.
HR metrics are key to monitoring HR performance, and creates a results driven atmosphere that can be found in today’s sales departments. By holding HR accountable for their responsivities and setting measurable targets, organizations can be aware of areas where HR can improve, and continue building on areas of HR success. Implementing modern, sophisticated HR software with workforce analytics capabilities can capture the HR metrics mentioned above, and display information on easy-to-read dashboards. With HR metrics, organizations can realize their true potential.