HR metrics are measurements used to determine the effectiveness and efficiency of HR policies.
Metrics help compare different data points. For example, if turnover was 5% last year and is now 7.5%, it has increased by 50%. The former are data points, the latter is the metric.
Metrics don´t say anything about a cause, they just measure the difference between numbers.
HR analytics, also called people analytics, is the quantification of people drivers on business outcomes. Analytics measures why something is happening and what the impact is of what’s happening.
HR metrics are indicators that enable HR to track and measure performance on different aspects and ultimately predict the future. However, not all HR metrics are created equal.
How to get from metrics to analytics
Now you have a basic understanding of the difference between metrics and analytics, we’ll finish with how to get from metrics to analytics.
- Start with your data: As you know now, metrics are the relations between data points. In order to start with metrics, you need to have your data right. Smart HR system design and high data quality are key components to improve before you invest into getting your metrics ready for HR reporting
- Getting the metrics right: This step sounds easier than it is. Measuring basic data is easy but keeping track of more complicated metrics, like the % of unwanted turnover, is something a lot of companies are struggling with, as it requires them to combine multiple systems (their main HRIS and their performance system in this case).
- Select the relevant KPIs: The second step is to select the HR Key Performance Indicators that matter most for your business. These KPIs should be connected to business goals. For each KPI a target score should be specified.
- Identify areas where analytics adds value: You can leverage the data and metrics to add value using analytics. This starts by identifying a business case that, when solved, would add value to the business. This means that your outcomes need to be actionable.
- Implementation of results: Once you’ve completed your first analytics project, you can implement the results in the organization. At this point, you’ve leveraged your HR data to create value for the organization and you’ve added to the organization’s strategic goals.
Time to hire (time in days)
An important metric for recruitment is the ‘time to hire’. This measures the number of days between a candidate applying for a job, and them accepting a job offer. Time to hire gives insights into recruiting efficiency and candidate experience.
Recruitment efficiency measures the speed at which HR processes a candidate assessment, interview, and role acceptance. If your organization has a long time to hire, it reflects that your processes are inefficient. Having a long time to hire, reflects on candidate experience. Candidates may drop out of the recruitment process if it is long. Wouldn’t you rather wait two weeks than two months to start a new job? The best candidates are in demand and do not need to wait.
Cost per hire (total cost of hiring/the number of new hires)
Like the time to hire, the ‘cost per hire (CPH)’ metric shows how much it costs the company to hire new employees. This also serves as an indicator of the efficiency of the recruitment process.
Cost per hire can be time-consuming to work out. There used to be a huge variation in how companies calculated this metric until The Society of Human Resource Management and the American National Standards Institute agreed on a standard formula.
Early turnover (Percentage of recruits leaving in the first year)
This is arguably the most important metric to determine hiring success in a company. This early leaver metric indicates whether there is a mismatch between the person and the company or between the person and his/her position.
Revenue per employee (Revenue/Total number of employees)
This metric shows the efficiency of the organization as a whole. The ‘revenue per employee’ metric is an indicator of the quality of hired employees.
Performance and potential (the 9-box grid)
The 9-box grid appears when measuring and mapping both an individual’s performance and potential in three levels. This model shows which employees are underperformers, valued specialists, emerging potentials, or top talents. This metric is great for differentiating between, for example, wanted and unwanted turnover.
Billable hours per employee
This is the most concrete example of a performance measure, and it is especially relevant in professional service firms (e.g. law and consultancy firms). Relating this kind of performance to employee engagement or other input metrics makes for an interesting analysis. Benchmarking this metric between different departments and managers/partners can also provide valuable insights.
An engaged workforce is a productive workforce. Engagement might be the most important ‘soft’ HR outcome. People who like their job and who are proud of their company are generally more engaged, even if the work environment is challenging and pressure can be high. Engaged employees perform better and are more likely to perceive challenges as positive and interesting. Additionally, team engagement is an important metric for a team manager’s success.