The Matter of Metrics

HR Metrics: Turning Data into Business Success

In today's fast-paced business world, data is your secret weapon for success. While many businesses crunch numbers to boost profits and outshine competitors, they often miss a game-changing opportunity: leveraging HR metrics. These powerful insights are your transformation blackbelt to improve performance, align your workforce, and supercharge productivity. So, let's dive in and see if we can turn your numbers into your next big advantage!

Turnover Much?

Turnover rate is the number of employees who leave your organization over a given period.
It can signal a multitude of organizational issues: poor management, limited growth opportunities, inequitable compensation, low employee engagement, deficient work-life balance; it goes on. It also comes with cost drivers for recruitment, onboarding, training, and productivity loss. Tracking turnover and addressing the underlying causes will improve operations, maintain productivity, save on hiring, boost moral, job satisfaction, and employee engagement.

Target: This figure is dependant on industry, but generally a 10% (or under) annual turnover rate is considered a healthy target.

Average Time to Fill 

This is the average time it takes to fill an open position, and it matters because a lengthy hiring is a warning sign! It also creates productivity gaps, hinders work, can result in candidate frustration and dropout, and has the potential to raise employee stress levels and overwork, not to mention increase resource and support costs. Conversely, a rushed process can result in poor or inadequate hires, increase turnover, and incur more cost.  Hiring activity data can indicate where your business is on the scale, highlight poor recruiting practices, forecast costs, set expectations, and pinpoint where the delays and bottlenecks are occurring in the talent acquisition pipeline. 

Target: This can vary by industry, but a good average is 42 days, 30 for market leaders.

Employee Engagement Levels

This measure indicates how involved, enthusiastic, committed, and motivated your employees are to contribute to organizational success. It is a difficult measure to assess because it relies on data collected primarily through surveys and can fall subject to social desirability biases, fractional response rates, mistrust, and inaccurate evaluation methods. Even so, this data remains a must-have. Acquiring a third party, like Cohesion HR, for assistance will ensure a quality survey with accurate results that can alleviate mistrust and create a psychological safety net for respondents. Your employees are best poised to tell you what's got them down, what's working for your business, and what's not  This infomation is an invaluable and a catalyst for improvement. Engaged employees are more productive, create positive work environments, and are less likely to leave. Improvements will bring enhanced collaboration, innovation, and build a stronger customer loyalty, driving better outcomes, success, and profits for your business. 

Target: This can be a tricky target due to measuring, input method, industry, and people factors. Current Gallop surveys indicate that the average engagement level for Canadian and US business is from 21% (ouch!) to 34%, so certainly room for improvement!  Typically, engagement levels between 50% to 70% are considered good for business.

Absenteeism Rate

This measure indicates the percentage of work-days missed due to employee absences and can be indicative of larger issues such as burnout, lack of engagement, environment problems, or personal factors. Excessive absenteeism impacts business productivity, disrupts work, and can negatively impact social working relationships. Reducing this leave through discussion, intervention, and support programs can improve productivity, identify business issues, and reduce costs. The data will help you pinpoint the type, volume, location, team, roles, and cost of absenteeism, and provide avenues for further investigation.

Target: Average absenteeism rates in Canada and the US range from 3-5%. Typically, anything 2% or under is considered a good benchmark.

Cost Per Hire is ...?

So, how much does it cost to hire talent. Do you know your business average cost per hire? This measure is the total cost associated with hiring a new employee and can include the following:

·        Advertising and job board fees 
·        Recruitment agency fees (if applicable) 
·        Employee referral bonuses 
·        Salary of recruiters and HR staff 
·        Background checks and drug testing 
·        Travel expenses and time for interviews
·        Application and software costs
·        Onboarding activities (photo ID, documentation, tours, access, setup) 
·        Training and orientation costs

Cost per hire gives you a comparator against your turnover rates while supporting budget and workforce planning. It also indicates the quality of your recruiting practices, identifying areas that could potentially be streamlined and where excess cost is happening.  It can also be a great catalyst for turnover reduction efforts; a big bonus!

Target: This one is a challenge! There are many factors that come into play such as industry, company size, location, management level, support resources needed, agency fees, role complexity, etc. An executive hire, for instance, could cost $50K while a junior assistant could be $3000. There are numerous factors to consider but sources indicate that typical hires in Canada and the US range between $3000-$7000 per hire, and a good, generalized benchmark would come in around $4500-$5000 per hire.

Revenue per Employee

This metric is calculated by dividing the total revenue by the number of employees. It serves as an indicator of how effectively your workforce is driving business performance and profitability. By highlighting the efficiency with which employees contribute to the company's success, this metric can uncover opportunities for improvements in departmental performance, processes, worker utilization, and competitor comparisons. Additionally, it provides valuable insights for making informed decisions around hiring, layoffs, and resource allocation, ensuring that your organization remains agile and competitive.

Target: This is another industry sensitive measurement.  Sources indicate that for medium to large-sized publicly traded organizations with several hundred to thousands of employees across the tech, manufacturing, retail, and service industries will range between $200-$500K; however, these figures are generalized. Fair warning!

Training Return on Investment (ROI)

This measure compares the benefits gained from training to the cost of delivery. Effective training initiatives can significantly boost employee performance, reduce errors, and enhance skill sets, that, in turn, lead to improved job performance, productivity, and job satisfaction = happy employees! However, without systematically evaluating these programs and measuring the ROI, organizations could be investing in initiatives that fail to add any value or align with strategic business objectives. By evaluating the outcomes of these programs and assessing the ROI, companies can ensure that their L&D activities are cost-effective and contributing positively to the business. This evaluation helps identify the value-add programs that make an impact.

Target: Realistically, 100%, at the very least, is what businesses would want to see, but ideally, ROIs anywhere from 200% to 400% are your target. Other factors do weigh in here like the training evaluation framework or model used, the industry, and the type of training (E.g. compliance, skill development, performance, or leadership/strategic).

Diversity and Inclusion Metrics

These metrics indicate the diversity of your workforce and the inclusivity of your business culture. By tracking diversity and inclusion metrics, you'll be able to identify improvement areas and create a workplace culture that attracts, retains, and empowers talent. These metrics typically include the percentage of employees from different demographic groups, promotion rates and levels, compensation equity, and role distribution. Inclusion can be measured through surveys assessing whether employees feel valued and have a sense of belonging.  This data collection can also partner with the employee engagement surveys discussed above.

All these data points are important analysis considerations for your business.  A diverse and inclusive workplace celebrates individuality, enhances job satisfaction, boosts engagement, and reduces turnover. It brings different perspectives and improves decision-making, fuels creativity, enhances company reputation, and opens the door to new markets. Failing to measure and improve your D&I practices can lead to missed opportunities, employee turnover, revenue losses, and gives you a less engaged workforce overall. Fostering it, will allow your business to attract top talent, drive innovation, and improve your company’s reputation, identity, and profits—all of which will contribute to your business growth, customer base, and resilience.

Target: There is no easy rule of thumb here because so many factors and categories come into play, and vary by business. There are composite scores that combine diversity, inclusion, and equity metrics together, but the cost and complexity can be significant. Yep, I know you are after a benchmark. Some reputable sources: McKinsey, Fortune, Bloomberg, and Gallop report, a 30-35% workforce demographic for underrepresented groups is a generally an agreed norm, and inclusion survey scores are considered very business positive in the 80-85% range.    

Performance Management Scores

These metrics are typically derived from your performance management system and customer feedback surveys. These metrics provide insights into satisfaction levels, productivity, goal, objective achievement, and individual performance. They also provide concrete measurements to facilitate performance discussions and provide progress indicators. Regularly tracking performance management scores enables businesses to identify high performers, uncover leadership potential, gauge customer sentiment, identify warning signs, and recognize areas where employees may require additional support or training. By doing so, organizations can pinpoint weaknesses in processes, outcomes, sales, or strategies, and implement targeted actions to enhance results and productivity. This proactive approach not only fosters continuous improvement but also aligns organizational efforts with strategic objectives, ultimately driving business success.

Target: These targets depend on your business and the rating system implemented. If you don't have any established, Cohesion HR can help!

HR-to-Employee Ratio

The HR-to-employee ratio is a key metric that tells you how many HR professionals you have relative to your total workforce. Why does this matter? Well, it helps you assess whether your HR department is staffed to meet the needs of your employees, and it gives you an easy formula when you need to rapidly scale up or scale down.

If you have too few HR staff, you might find yourself spinning plates, not meeting employee needs, experiencing low employee satisfaction and engagement, and even increased turnover. On the flip side, inflated HR departments mean you're overstaffing--big time, and wasting big money, and your Finance Dept. is gonna come knocking... By optimizing this ratio, you ensure your HR team is running efficiently and providing essential support without straining resources, and this contributes to a leaner, more effective organization. Agile, anyone ...

Target: According to Bloomberg's HR Department Benchmarks and Analysis report, the average HR-to-employee ratio is 1.4 HR professionals per 100 employees. For larger organizations, this ratio is adjusted to 1 HR professional per 200 employees. For payroll, a good measure is 1 pay administrator per 400 employees depending on the payroll complexity and if operations are in-house or processed by a pay provider.

Take away ..

Understanding and tracking HR metrics is not just a numbers game—it's about transforming data into powerful insights that drive your business forward. By concentrating on the right metrics, you can make informed decisions that boost profitability, streamline resource allocation, and ensure your workforce is perfectly aligned with your business goals. Investing in HR metrics isn't merely about refining HR processes; it's about safeguarding the future of your business and unlocking its potential.

At Cohesion HR, our data ninjas specialize in helping organizations like yours harness the power of HR metrics and set you on the right course with the business insights you need to supercharge your workplace. Now is the time! We'll help you transform your data, propel your business, and build a foundation for success! 

Cohesion HR – Connecting the data dots!