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HR metrics use the power of data to quantify the costs and measure the success of HR processes and initiatives. Since HR decisions directly impact your employees and thus your startup as a whole, leveraging data is a powerful way to make informed decisions about when to keep current practices in place and when to pivot.
In order for your startup to be successful, you’re going to have to take a strategic approach to your HR department, which is tasked with overseeing your recruitment, your employee satisfaction, and employee performance. Measuring data in areas like compensation, turnover, training, recruitment, and more will help you evaluate the true effectiveness of these processes.
Many of the world’s top companies pride themselves not just on their revenue but on their successful human resources initiatives. Take Google, which is consistently ranked as one of the best places to work. They’ve renamed their HR department “People Operations” and tasked the team with, among other things, making sure employee satisfaction remains high in order to retain top talent in the competitive tech space.
When Google’s HR metrics revealed that women who had given birth were leaving at twice the rate of Google’s average departure rate, Google was able to change course and extend their maternity leave policy from 12 weeks to 5 months in order to prevent future turnover. This is just one example of how HR metrics can help your startup recruit and retain top talent.
Technology makes compiling data easier than ever, so no matter the size of your HR team, you should be calculating HR metrics regularly. You should also have your department combine these numbers quarterly and annually so that you can measure your success (or failure) over time and identify trends in the data.
Take your startup to the next level by using tips from the world’s top companies. You can jump to our infographic to learn how 10 of the world’s top companies are leveraging HR, or keep reading to discover more on HR metrics and how your startup can start utilizing them today. You can also jump to a specific HR metric below or keep reading to discover 21 common HR metrics and how to calculate them:
Compensation HR Metrics
Recruitment HR Metrics
Training and Development HR Metrics
Retention HR Metrics
Additional HR Metrics
Analyzing compensation analytics let you know the true and total cost of your employees beyond just their salary. The most common reason startups fail is because they run out of cash, so having accurate metrics to track costs is vital to success. Additional costs such as overtime, bonuses, and benefits can tack on a lot more costs than you intended during the initial salary offering.
Knowing the true cost of an employee also helps you evaluate what you’re willing to pay for certain positions and whether or not to keep an underperforming employee.
Some key HR metrics that impact compensation include:
Compensation revenue ratio: Paying your employees a great wage is something every employer should aspire to do, but in order to keep a profitable business, you need to be aware of your compensation revenue ratio. This is the amount you are paying your employees compared to the amount of money being generated by your company.
How to calculate: Compensation ÷ revenue
Benefit costs: Having a robust benefits package is a great way to retain top talent. Keeping track of the actual cost per year of your benefit program will allow you to shop the market more accurately and track employees total cost.
How to calculate: Total cost of employee benefit program ÷ the total number of employees
Overtime spend: Analyzing your overtime spend will give you insight into when it’s time to hire new employees. It can also give you perspective on the current state of your company culture. For example, if everyone is regularly working overtime, there’s a good chance they don’t feel a strong work/life balance.
How to calculate: Total cost of employee overtime ÷ the total number of employees
Variable pay as percent of salary: In addition to compensation, a lot of times companies reward employees with commission and bonuses. This variable pay is a huge motivating factor for employees to perform better. It is also a great added bonus during the hiring process for recruits, as it means they have an opportunity to make more money than the salary offer.
How to calculate: Annual variable pay cost ÷ annual salary
Worker’s compensation incidence rate: Sometimes, workers comp is a complete accident. Other times, it can reveal safety problems that can cost your company money and employees. Track how often workers’ compensation incidents are appearing annually to make sure you’re operating a safe work environment for employees.
How to calculate: Number of injuries per 100 full-time employees ÷ total hours worked by all employees during the calendar year x 200,000
As a business owner, it’s vital to invest in your people. The best way to build an effective team is through your recruitment and hiring process. Employee turnover can cost you big so streamlining your recruitment process to find effective employees who intend to stay for the long term is essential.
Hiring top talent is the #1 priority for CEOs as innovation leads company growth. A study by company review website Glassdoor revealed it takes an average of 52 days to fill an open position and that U.S. companies spend $4,000 on average to fill it.
Here are some of the most common HR metrics for employment:
Cost per hire: Your cost per hire is the average amount of money spent on hiring a new employee. This metric is important to consider when you set your recruiting budget for the year.
How to calculate: Recruitment costs ÷ (compensation cost + benefits cost)
Time per hire: In the business world, time is money. Most companies prefer a shorter recruitment process because that means your HR team has streamlined the process. It also helps prevent productivity loss by filling gaps faster.
How to calculate: Total days taken to fill a job ÷ number hired
Job referral investment: Your job referral percentage can reveal a lot about what your current employees think of your company. After all, employees are likely to refer friends and family if they think it’s a positive work environment!
Job referrals are also a great way to hire talent as 82% of employers rate job referrals as the best return on investment for recruiting. Typically, employers offer a referral bonus for employees so you’ll want to calculate that as well.
How to calculate: The return of your employee referral program ÷ the cost of it
New hire failure rate: Turnover among new hires is pretty common. A report in Forbes revealed that 20% of new employees leave within their first 45 days of employment. There are many reasons why new hires leave but keeping track of the data will help you improve your onboarding process in the future.
How to calculate: Total # of employees who leave after 90 days ÷ total number of employees who left
Diversity hires in customer-facing positions: According to Glassdoor, 67% of employees want to join a diverse team. You also want to make sure that diversity hires are also in customer-facing positions, as this will help with recruitment and future sales.
How to calculate: Total # of diversity hires for customer-facing positions divided by total number of hires
Yield ratio: How much time are your recruiters wasting speaking to candidates that don’t fit the bill? Track your yield ratio to see what percentage of people interviewed make it to the next round with your yield ratio.
How to calculate: Percent of applicants that make it to the next round ÷ total number of applicants interviewed
Often times, companies pay extra for their training and development activities. This investment can be a big payout for employers as 7 in 10 employees say that training and development opportunities influences their decision to stay in a role.
While it’s important to offer training and development activities, it’s also important to measure the success of these programs so that your startup can change course if needed. Here are some great training and development HR metrics to start tracking today:
Cost of training and development activities: Having your HR department handle training and development activities is a great way to streamline employee growth. You’ll want to track the cost of the programs that you choose and then use some of the additional calculations below to track their effectiveness.
How to calculate: Total cost of program ÷ number of activities offered
Training efficiency: In order to see how effective your training and development programs are, your HR department will want to measure the training efficiency of your activities. There’s no use in wasting money on training costs if they are not effective for your employees. You’ll want to find your own way to measure training effectiveness based on a sample size of employees, such as 25% of your staff.
How to calculate: Training expenses per employee ÷ training effectiveness
Performance goal success rate: Performance goals are a great way to track employee performance and let them be involved in their growth process. Once these goals are set, a great way to locate standout employees is by tracking the percent of goals they accomplish.
How to calculate: Total # of performance goals met or exceeded ÷ total # of performance goals
Wellness utilization percent: Investing in employee health and wellness is a sign of a great employer. Finding programs that work for your team is also essential. Have your HR department track how many people are taking advantage of these training and development benefits to see their effectiveness.
How to calculate: Total number of employees utilizing a wellness program ÷ total number of employees
You can learn a lot about your company’s culture by taking a deeper look into your retention rate. Keeping top talent is the #1 concern of CEOs and if your startup has a culture problem, you’re likely to lose your top performers and fast.
Here are some calculations to help you track metrics surrounding your employee retention:
Employee turnover cost: In addition to tracking the rate at which employees are leaving, it’s also important to track the cost this is having on your company. This is a great way to encourage implementation of additional processes designed to boost employee satisfaction.
How to calculate: Total costs of separation + vacancy + replacement + training
Employee turnover rate: While in today’s booming job market turnover is common, a high employee turnover rate is still a revealing measure of your company culture. Keep track of how often employees are leaving and which departments they are leaving from.
How to calculate: Number of employees exiting the job during 12 month period ÷ average number of employees during the same period
Length of employment: You know you are doing something right if employees stick around. Having great retention rates is a great sign of positive company culture. Keep track of your employees tenure by averaging the length of employment.
How to calculate: Total # of years of service of all employees ÷ the number of employees
In addition to compensation, recruitment, and training and development, here are some additional popular HR metrics to take into consideration:
Absence rate: Your absence rate can reveal a lot about your culture. For example, companies that have more overtime tend to have increased absenteeism due to burnout. It can also reveal problems in your recruitment process, if you aren’t hiring reliable employees.
How to calculate: Total number of absence days ÷ workdays
Cost of HR per employee: HR departments range in size depending on revenue and number of employees. Keep track of how much you are spending on your HR department per employee to make sure you are investing enough into human resources.
How to calculate: Total salary + benefits package of HR team ÷ total number of employees
Employee satisfaction: Whether you realize it or not, your employee satisfaction rate affects most other key HR metrics. For example, dissatisfied employees can affect employee turnover rate, training effectiveness, team productivity, and more. Sending out regular anonymous employee surveys is a great way to gauge satisfaction.
How to calculate: Positive company survey reviews ÷ total number of survey reviews
Empathy index: With the rise of the millennial workforce, having a company with a positive image is more important than ever. A recent survey even revealed that 60% of workers would take a pay cut to work for an empathetic company. Calculate your internal empathy index to get a gage on whether your current workforce feels your company is leading in this area.
How to calculate: Number of employees who rate your company as empathetic ÷ total number of employees
In a perfect world your company would have the time, money, and resources to improve every area where your HR metrics fall short but the reality is, unless you are a huge corporation, you may not have the capability to do it all. Every organization is built differently so it’s important to invest your energy into the HR metrics that most closely align with your vision.
If you are emphasizing people analytics as a major part of your company culture like many top employers are now doing, then placing extra emphasis on measuring employee satisfaction, retention, and training is necessary.
Sometimes, money is tight. This can be especially true when your startup is first launching or you are experiencing a period of strife. Here, compensation metrics will go a long way to help you track the true cost of every employee and the benefits and programs that you’re offering. You can compare these costs to other metrics such as employee performance to decide who to let go in the event of layoffs.
In HR, key performance indicators (KPIs), otherwise known as HR metrics, are strategic analytics that allow you to measure the success of your HR initiatives and programs. It’s not enough to implement HR practices you believe will be successful, you need to prove that they work in order to have an actionable HR strategy.
KPIs also allow companies to measure the HR departments contributions compared to the rest of the organization. Having insight into your company’s HR successes and problem areas will allow you to change course when needed. It will also help you come up with a budget for your HR department which can impact how many HR employees you have, what technology your HR department can utilize, and more.
Take it from the world’s most successful startups: HR metrics will help your startup prepare for a successful future. Keep reading for more HR tips from 10 of the world’s top companies.
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