HR metrics are similar to performance metrics. Just like your sales department needs to meet a quota, your HR person or department should also have measurable targets and cost-related production items they are responsible for. These items are known as HR metrics and are a great way to put a quantity behind what is usually a quality or intangible area of the business.
To minimize headaches often associated with HR, we highly recommend you use a payroll provider like Gusto, which provides many automated reports and forms without you having to worry about it. Click here for a free 30 day trial.
Top 7 Overall HR Metrics
These are the top overall, and perhaps even classic, HR metrics that companies use to evaluate HRs performance, especially if your HR is outsourced. They help you evaluate how HR is doing with hiring and employee engagement. Some of the metrics here are cost-related but listed here because of their classic nature:
Metric 1: Overall employee turnover
What It Means: How many employees voluntarily leave (aka quit) your company each year.
How You Calculate It: Add the number of employees at the beginning of the year to the number at the end of the year. Divide by 2 to find the average number of employees, then divide the number of employees who were let go or quit during the year by the average number of employees to find the employee turnover rate.
Step 1: Find Average # Employees
Average # Employees =
(Total # Employees Beginning of Year + Total # Employees End of Year) / 2
Step 2: Tally up how many employees quit throughout the year
Step 3: Divide Step 2 by Step 1 for the turnover rate.
For example, if you had 100 employees in January 2016, and you now have 88 employees in January 2017, then your average number of employees equals (100+88)/2 = 94. Between January 1, 2016- December 31, 2016, you had 22 employees quit. This would make your turnover rate equal of about 23%, which is very high. You want 10% or less. Click here to learn more about turnover rate and tips on how to reduce it.
Metric 2: Early turnover (employees leaving within 1 year)
What It Means: How many employees voluntarily leave (aka quit) your company within a year of starting.
How You Calculate It: Same as metric 1, but only use the number of people who have started within the last year.
Metric 3: Level of employee engagement
What It Means: How passionate and engaged your employees are in the workplace.
How You Calculate It: Good question- it’s hard to put a number here. This metric is more of a “yes/no/partially” metric. Most companies can tell when employees are engaged, versus when they are not, but you can’t really put a number here. Check out our employee engagement survey with free template for a way to try to calculate it.
Metric 4: Cost of HR per employee
What It Means: If you have an HR person or more than 1 person, this is how much you pay the HR team versus how many total employees you have.
How You Calculate It: The total salary & benefits package of your HR team divided by the number of employees. This is an efficiency metric and your ratio will depend on your style of business. For example, if you have all salaried, full time employees, you probably will need an HR person by the time you hit 30-50 people; if you have a restaurant with a lot of part time hourly staff, you might not need an HR person until far more due to their part time nature (i.e. no benefits).
Metric 5: Employee absenteeism
What It Means: This is how often your employees call in sick or do not show up to work (note: this is NOT for pre-planned vacations or Paid Time Off aka PTO). Employees who are absent a lot are generally not happy with where they work.
How You Calculate It: You can simply add up the number of days or hours missed; if you want, you can then take that number and divide it by the number of employees for an average. You want to see fewer than 5-10 days missed per year (i.e. 5 days sick leave is about normal).
For example, if I ran a report in Gusto, or in a time and attendance software system, I could easily see my company’s total number of days where employees missed work. If I have 100 employees, and my report says that 884 hours of work (which is 110.5 days with 8 hour days) were missed by calling out, then my absenteeism is equal to 110.5/100 = 1.1 days missed per employee, which would be an incredible number to see!
Metric 6: Training spent per employee
What It Means: How much money you spent on training for your employees.
How You Calculate It: Take how much money you spent on training and divide it by the number of employees you had that participated in those trainings. This is also an efficiency metric, as well as it can reveal uneven training spend. If you want to get fancy, you could also take it a step further and calculate the ROI of your training costs.
Metric 7: Diversity/EEOC metrics
What It Means: You may be tracking this already if you have payroll software, recruitment software, or HR software of some kind. If you have over 100 employees, you also need to report your diversity numbers every September to the EEOC. You will want to track how many people self-identify into the protected classes, like race and sexual orientation, across your employee base. However, remember, no one is obligated to self-disclose their identification.
How You Calculate It: Do a survey on the basic protected classes for identification for every employee. Here is a good resource for that if you have to file, but you also can use it as a sample for what you should ask if you are smaller. You could try a free survey tool, like Survey Monkey or Survey Hero, to collect your own anonymous data.
Top 7 Recruiting & Performance Focused HR Metrics
These HR metrics really hone in on recruiting and performance. If you are a performance-driven company, such as a company with sales or client quotas, this section should be really useful for you.
Metric 1: Time to hire/average time to hire
What It Means: Recruiting processes can take far too long at some companies and it can mean that you lose talent. Having a recruitment process is around 4-6 weeks to fill positions is desirable in order to save time and money. The time to hire is from when a candidate starts the interview process until they accept your offer.
How You Calculate It: Look up the number of days that each job you offered took to be filled from the time the candidate started interviewing, and then divide it by the number of jobs.
Metric 2: Cost per hire/total hiring cost
What It Means: Similar to above, you should be also tracking what you are spending on recruiting, such as applicant tracking systems, recruitment software, or sponsoring job posts. You also should include the man hours it takes for recruiting (i.e. reviewing resumes, phone screens, and interviewing).
How You Calculate It: This may be more of an estimate or an average, especially if you include people’s salaried time on hiring. Do your best to add up all the time and expenses for recruiting in one year, and then divide that cost by the number of hires.
Metric 3: Offer acceptance ratio
What It Means: This is a simple metric of how many people you offer jobs to accept them versus how many decline. This will tell you if your offerings are off- i.e. compensation is too low, no benefits, etc…
How You Calculate It: Divide the number of offers accepted over the number of offers given.
Metric 4: Above average performance management yield ratio
What It Means: This is a measure on how many people are performing at a high level per your performance review system.
How You Calculate It: Unless you have a performance management system in place with a quantified scoring system (i.e. points of 1-5 or 1-10), this one will be hard to calculate. If you have a points review system, you will want to figure out the cut off for an above average performer, i.e. 70 out of the 100 points, and then calculate how many employees meet that out of the total number of employees.
Metric 5: Employee referral program success
What It Means: If you have an employee referral program as one of your recruitment strategies, you’ll want to make sure it does what it’s supposed to- create referred employees.
How You Calculate It: Calculate how many roles you’ve had open and the number of referrals you’ve interviewed (they don’t have to go all the way to offers, but they could- it depends on what you define as a successful referral). If you’ve had none, you might want to rethink your referral program entirely and ask your employees why!
Metric 6: Performance versus potential (9 box grid method)
What It Means: The 9 grid method compares performance versus potential of employees. One of the companies we look at in our performance management buyer’s guide, Cornerstone, uses this method for their performance review software.
How You Calculate It: You can try Cornerstone’s performance software (which has a free trial), or you can try use the PDF from here. We recommend using these examples because creating your own 9 grid system can be a bit complex; using an example might help you to then customize one for your company.
Metric 7: Average time until promotion
What It Means: This is how long it takes for an employee to either be promoted for exceptional success. It sounds like an odd metric, until perhaps you think of how many people leave you around the 2-5 year mark after not getting a promotion!
How You Calculate It: Take your employee base and calculate how long it took for any of them to be promoted, and if they have been. If you don’t do promotions, consider doing this calculation with pay raises instead. Then divide the amount of time by the number of employees that were promoted (or given a raise).
Top 5 Bottom Line-Focused HR Metrics
All of these HR metrics directly impact, you guessed it, your bottom line. Even if you don’t have an HR department or person, these are useful metrics to hold your business accountable to.
Metric 1: Revenue or profit per employee
What It Means: Another straight-forward metric, this is a truly important one for small businesses. You will want to make sure you aren’t over or under staffed by using this metric, as well as you should have some perspective on your overall bottom line with your employee base.
How You Calculate It: Calculate your yearly or monthly revenue or profit and divide it by your number of employees.
Metric 2: Overtime cost
What It Means: This is pretty simple- how much do you spend in overtime wages per year? Does it go up each year? This can tell you if you are under or over staffed as well as if you should consider a employee scheduling software or time and attendance software to help remedy this.
We also recommend using payroll software, like Gusto, that will automatically run reports like this for you.
How You Calculate It: Add up your overtime wages paid each year, or over a set period (you could even do this every month).
Metric 3: Timesheet/scheduling match
What It Means: Here you are looking for the number of hours needed to be in alignment with the number of hours worked. This can also give you insight into over or under staffing, or absenteeism rates. This is most useful for retail shops, restaurants, and other shift based sales businesses.
How You Calculate It: Calculate the number of hours that should be worked in one week if all shifts are covered. Calculate the number of hours actually worked that week, and notice the difference. Your goal should be less than 5% difference.
Metric 4: Healthcare costs per employee
What It Means: Another straightforward metric, you will want to make sure you are spending an amount that you are cognizant of and that is in your budget for healthcare.
How You Calculate It: Measure what you contribute to your employees’ healthcare over a month or a year and divide it by the number of your employees who are utilizing your healthcare.
Metric 5: Billable hours per employee
What It Means: If you have a small project management firm, or marketing firm, or another business where you bill out to clients, you will want to use this metric to figure out if your staffing is in alignment with your client needs. Law firms also commonly use this and have a minimum number of hours per lawyer needed each month.
How You Calculate It: You can do this over a week, month, or other set period of time. Take the number of hours you billed out and divide it by the number of your employees. You will want something around 35 hours billable per week minimum for full time employees (less than that and they are spending too much time on internal issues most likely).
Top 6 Soft Skills-Centered HR Metrics
These HR metrics are centered around what we call “soft skills”. These are things that are really hard to measure with numbers, but you certainly know if they are not there or if they are lacking based on employee morale, the bottom line, or even a general feeling. Our employee engagement survey can help you get a handle on these if you want some help.
Metric 1: Communication
What It Means: Communication across verbal, electronic, and written channels should be strong, respectful and consistent with the company culture you are trying to create. A high level of communication means there are very few incidents of miscommunications- Johnny heard this, but Suzie meant this.
How You Calculate It: An employee survey could be a good option for learning more about the communications at your company, or you might ask clients for their opinion on this (if that’s relevant to your business). You could try a free survey tool to ask employees about how view communication at your business by using a free tool like Survey Monkey or Survey Hero.
Metric 2: Innovation
What It Means: Is your team still continually inventing new ways to excite customers, sell products or even inventions that are products themselves?
How You Calculate It: If innovation is low, you’ll certainly know it. On the other hand, you don’t want innovation to mean ridiculous, throw caution into the wind for a pipe dream for products either. You might measure by successful product or market launches in your last year, out of all the launches you did.
Metric 3: Environment
What It Means: What kind of environment does your office have, and is it one that people enjoy working in? Some companies like quiet office spaces, others thrive on loud, open office spaces. Neither environment is bad nor good- it depends on who is working there!
How You Calculate It: Again, an employee survey could be a good option, or you can also go with a general gut instinct- are people happy coming to work and in their spaces?
Metric 4: Collaboration & teamwork
What It Means: A classic goal for improvement is for companies to be more collaborative and use teamwork more wisely. But how can you measure this?
How You Calculate It: Perhaps you implemented a new team weekly meeting to measure teamwork. Has it been effective in increasing a team environment? Ask your managers and your employees what they think!
Metric 5: Mission/vision alignment of work
What It Means: One of the most important parts of performance management is connecting individual and team goals to the mission, vision, and goals of the business. Does your team feel like what they do matters to the business and to the business’s purpose?
How You Calculate It: Again, a survey may be best on how to calculate this point, or a general raise of hands during a meeting. If you think this is an area where you are lacking, you will want to have a goal setting session to link what people do to the mission and vision of the business as soon as possible to keep employee engagement high.
Metric 6: Employee Wellness
What It Means: You will want to evaluate if your environment allows employees to take care of themselves in physical, mental, emotional and spiritual senses.
How You Calculate It: Do your employees seem to be dejected, in a bad emotional place, or smoking a lot of cigarettes? These are signs of low employee wellness. You might want to explore things like providing a good PTO plan, recognizing employees, or sponsoring employee wellness initiatives like a group discount to a gym or in-office free yoga classes.
How to Track and Use HR Metrics
As the HR Bartender puts it, remember that:
- Metrics are focused on tracking past performance.
- Analytics are about using past data to generate predictions or insights.
- Data are statistics collected for use in analytics.
So when you think about which HR metrics to choose for your HR person, team or department, think about which ones relate to topics where you can track performance, relate it to your company goals, and then use the data to improve. You can read all about goal setting in our performance management guide.
HR Metrics Example Table
|HR Metric||Company Goal(s) It Could Link To||What You Want to See|
|Overall employee turnover||Reducing costs|
Better employee/manager relationships
|Reduced turnover number from year to year; ideally, your voluntary turnover is 10% or less (i.e. people who have to move away)|
|Above average performance yield ratio||Increasing revenue|
Increased client satisfaction
Overall better company organization
|More high performers each year (which you could see via performance review scores)|
|Revenue per employee||Increased revenue|
Business or financial stability
|Higher revenue per employee is the goal (without working your people into the ground!)|
Reducing employee turnover
|A continuously “better” or high-functioning environment (hard to measure, but you know if you are in one or not)|
The Bottom Line
Having metrics behind all roles is a key part of performance management. It is especially key to have HR metrics since HR is traditionally seen as a cost center and not a place where the company can “move the needle”. Having HR metrics will give you the insight you need into if your HR department or person is making a difference at your business.