Human Resources & Payroll Blog

How to make data-driven decisions: HR metrics to watch

Jan 23, 2020 11:00:00 AM / by John Duval

data-driven-hr

From the outside looking in, it may look like HR managers rely mostly on soft skills to do their jobs. This assumption is partly true; communication, conflict resolution, and teamwork are all necessary for managing employees and creating a safe and positive workplace. 

But as any veteran HR manager can attest, that’s not the whole picture. Payroll, recruiting, benefits management— among other aspects of the employee lifecycle— are also key HR responsibilities, all of them requiring attention to detail and critical, data-driven thinking. 

Using information gathered from these two sides of the job, HR managers are often called upon to help make important choices about how to move the company forward. When making these big decisions that affect a lot of people (and cost a lot of company dollars), data is an HR manager’s best friend. 

While daily human interactions are impossible to quantify, there are plenty of HR metrics that can be measured. Whether you’re new to HR or you have years of experience, looking at concrete data can help you get a big-picture idea of how well your HR initiatives are performing. Here are some metrics to watch:

Time to hire (in days)

The longer a position remains open, the longer a team is working at less than full productivity. While it’s important to find the best people to hire for any open position, if you find that it’s consistently taking longer than you’d like (and that this metric isn’t improving), it may be time to consider outsourcing some of your recruiting practices or adjusting your hiring process to speed things up. 

Cost per hire 

To get this metric, divide the total cost of your hiring process by the number of new employees. In a competitive talent market, a high cost per hire isn’t necessarily a bad thing, as long as it results in long-term placement of high-quality employees. 

However, if you find that your company is spending more per hire than other companies in your industry only to have people leave within their first year, it may be time to take a closer look at company culture to find what needs improvement.

Voluntary turnover rate 

Turnover rate can tell you how many employees leave your company in any given year. While this is interesting to know, it’s not specific enough to be useful. After all, not all turnover is bad; occasionally employees are dismissed for good reason, making their absence a net positive. 

A more useful metric is voluntary turnover rate. To get this number, divide the number of employees who leave voluntarily by the total number of employees. Track this number over several quarters (or ideally, over several years) to give you an idea of whether your company needs to make changes to improve retention.

Early turnover

Early turnover is a subset of voluntary turnover rate that tells you the number of employees who leave within their first year at the company. To get this metric, divide the number of employees who leave voluntarily within a year of being hired by the total number of employees at the company. 

A high early turnover rate should be a red flag; it may indicate that some major changes need to happen in the company’s onboarding and training practices, or that there are some major problems with the company’s culture overall that should be addressed. Make sure you’re gathering data in exit interviews with all employees who leave voluntarily, especially those who leave soon after being hired. 

Turnover rate per manager

If you’re looking to get more specific information about your company’s turnover rates, you may want to drill down even further to find the turnover rate for each individual team. As the saying goes, “people don’t quit their jobs, they quit their managers.” Knowing which managers consistently have higher voluntary turnover rates on their teams can help company leaders identify weak spots in the organization and remedy it with more management training or a reorganization. 

Overtime expense

For any company with non-exempt employees who are entitled to overtime pay, it’s important for HR managers to keep an eye on the total cost of overtime work. Some industries have busy seasons where extra overtime is to be expected, but if overtime pay is consistently high, that may be an indicator that it’s time to hire some more people to manage the workload. 

Employee satisfaction

Using employee satisfaction surveys, HR managers can get a snapshot of how happy or unhappy employees are with the company. This data should be collected regularly so that it’s useful in guiding decisions about company culture, compensation, and management. 

Training effectiveness and training cost

These two metrics are best considered in tandem; together they tell you how well your company is spending its investments in training employees. Determining the effectiveness of training depends on the nature of your industry; in some cases, a test or quiz will work, but in others, a combination of self-reporting and manager evaluation may be needed. If your company is consistently spending a lot of money on employee education with less-than-ideal results, it’s time to rethink your training initiatives.

Healthcare costs per employee

Health coverage isn’t just a legal requirement; it can also be one of the best recruiting advantages in an employer’s toolkit. But spending a lot of money to cover each employee doesn’t necessarily translate into the best coverage. 

While healthcare costs have risen every year for nearly every company, it’s still important to monitor prices to make sure you’re getting the best value for your investment. Monitor your company’s cost per employee; if you find that it’s risen significantly without providing additional value, it may be worthwhile to talk to a healthcare broker about comparing alternate insurance plans. 

Empower yourself with good data

As an HR manager, you can’t improve what you don’t measure. With the delicate balance of soft skill and hard science involved in your job, it can be tough to make informed data-driven decisions. Using these concrete metrics can help you make good choices for your workforce and identify when things need to change. 

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