As automated data collection, reporting, and artificial intelligence (AI)-powered analysis become increasingly common in business practices, the need to track human resources (HR) metrics also becomes increasingly integral to business success. Business leaders who adapt to the data-driven business environment can better maintain a competitive edge in every aspect of operations, including human resources and human capital management.
Dive into the best HR metrics to track across functions, how to measure them, and how knowing your HR numbers supports strategic decision-making.
What Are HR Metrics?
HR metrics are tools used in business analytics, specifically in human resources analytics. These metrics consist of specific data that has been compiled and organized to provide unique, actionable insights into a company’s human resources function. Analysts define parameters for calculating HR metrics to provide quantifiable data that enables the assessment of performance, effectiveness, and efficiency with regard to human resources policies and procedures and their impact on a business’s success.
For example, some common HR metrics include cost per hire, employee retention rate, and revenue per full-time employee.
How HR Metrics Drive Strategic Decision-Making
Sometimes, certain goals of a human resources department may appear at odds with the business’s larger goals (profitability) and strategy (cutting costs). For instance, when HR wants to spend more on employee compensation and benefits or implement a more flexible workplace structure to improve employee satisfaction — which often also improves employee performance — management and finance might not see the benefits of seemingly costly policy changes.
However, HR metrics can be used to measure, quantify, and track the actual impact of various human resource capital management strategies to determine whether increasing incentive pay, operating with a hybrid office, or approving a more flexible work schedule benefits both the employees and the business. In this way, HR metrics align entire businesses, across departments, toward the same goals. In turn, this helps leaders make informed decisions that holistically benefit their companies.
Like all types of metrics measured and tracked in businesses (such as operating, liquidity, and profitability), different HR metrics help support strategic decision-making by:
- Providing quantifiable information.
- Revealing measurable results of HR policies and procedures.
- Measuring the effects of human capital management strategies.
Executives can use the measurable outcomes revealed through key HR metrics to evaluate policies and procedures, identify successes, correct failures, and make informed, data-driven decisions to drive more effective human capital management strategies through the HR department.
The following sections explore various categories and types of the best HR metrics to track.
Recruitment Metrics That Reveal Hiring Efficiency
Every business function requires time and money, meaning that increasing efficiency is vital to maintaining productivity and profits. Tracking recruitment metrics ensures HR’s talent acquisition strategy is effective and efficient to save resources while minimizing lags in productivity due to understaffing.
Time to Fill
This measures the average time it takes to fill an open position. Keeping this number relatively low is key to maintaining uninterrupted operations. HR can improve this metric by optimizing the hiring process, from position posting to onboarding.
Cost per Hire
To calculate the total cost of hiring a new employee, add up all of the internal and external recruitment costs over a specific period of time, then divide the sum by the number of new hires made during the same period. This metric helps support HR budgeting, and keeping the number within a reasonable range ensures a strong recruitment return on investment (ROI).
Quality of Hire
Quality of hire is a long-range measure of a new hire’s performance based on an initial assessment of their potential. It requires HR to document and score new hires based on a set of standards and then measure their performance, productivity, retention, and engagement going forward (i.e., how much they contribute to the business’s success). Over the long run, tracking quality of hire helps HR departments improve recruitment and retention strategies while maximizing employee ROI.
Retention and Engagement Metrics That Protect Talent Investment
According to a recent Gallup report, replacing employees comes at a significant cost: replacing leaders and managers can cost around 200% of their salary, replacing professionals in technical roles is approximately 80% of their salary, and replacing frontline employees averages 40% of their salary. Employee attrition is one of the biggest hidden costs that businesses incur, and it extends beyond the cost of needing to hire new employees to replace those who leave; employee turnover results in production lags and morale dips that have a broader negative impact on the bottom line.
Therefore, keeping track of retention metrics helps business leaders minimize the cost of turnover by improving retention rates through strategic hiring practices and greater employee engagement.
Turnover Rate
Turnover rate tracks the rate at which employees leave their jobs. Measuring this should entail a distinction between voluntary turnover (employee resignations) and involuntary turnover (terminations or layoffs), separating the metrics and tracking trends (increases, decreases, or stability) to identify areas for improvement.
Employee Engagement Score
In terms of measurement, an employee engagement score differs between organizations. It combines metrics like turnover and retention rates, attendance, punctuality, and performance with employee feedback from engagement surveys, pulse surveys, exit and stay interviews, and one-on-one meetings to determine engagement. Employee engagement is an essential metric for businesses because high engagement leads to lower attrition, higher productivity, better workplace culture, and overall better business performance.
Employee Net Promoter Score (eNPS)
Businesses use eNPS as a standard way of measuring employee satisfaction and loyalty. The metric is based on the employee-provided answer (a rating on a scale of 0 to 10) to a single question: “How likely are you to recommend this company as a great place to work?”
- 9-10 Promoter
- 7-8 Passives
- 0-6 Detractors
Subtract the percentage of detractors from the percentage of promoters to determine the business’s eNPS.
Performance and Productivity Metrics That Show Business Impact
Employee performance and productivity directly influence a business’s profitability. Measuring how efficiently and effectively each individual works helps businesses create models of successful workers — and use these to help individuals who are lagging improve their performance.
Goal Attainment Rate
A good business strategy outlines an overall, long-term goal accompanied by a game plan of smaller, short-term benchmarks designed to work toward the long-term goal. These benchmarks are usually departmental or employee-based, and measuring goal attainment rate reveals how effectively teams and individuals achieve their objectives. In general, this measures how effectively the whole company is working toward its larger goals.
Performance Rating Distribution
Performance rating distribution uses a bell curve to visualize employee performance across departments or levels of a business. This helps eliminate discrepancies in the subjective nature of performance reviews while assessing fairness across the organization.
Revenue per Employee
Simple to calculate (Total Revenue / Number of Employees), revenue per employee is a solid tool for assessing overall productivity and operational efficiency. Businesses can compare their numbers to industry benchmarks, monitor trends as their rates change, and use the numbers to identify when they should revise resource allocation.
Absenteeism Rate
The rate at which employees miss work can be an indication of burnout, disengagement, or health issues in your workplace. Keep an eye on high rates or increasing rates as an indication that improvements may be needed.
Learning and Development Metrics That Build Future Skills
Human resources departments are responsible for the workforce and ensuring employee development and their preparedness for meeting the future needs of businesses. Learning and development (L&D) metrics assess the success of strategies for onboarding and upskilling employees.
Training Completion Rate
This metric tracks the percentage of employees who successfully complete their training programs out of the total number enrolled. The rate indicates how engaged employees are with the training programs. In industries where training is crucial to meeting standards and regulations, the metric can also be an indication of compliance or non-compliance with these requirements.
Time to Competency (Time to Proficiency)
Directly related to onboarding and training efficacy, this metric measures the amount of time it takes individuals to gain the necessary skills and knowledge to independently and effectively meet their job requirements. Time to competency or proficiency impacts training costs, productivity, and business competitiveness.
Training ROI
Expressed as a rate, Training ROI = (Benefits – Costs) / Costs * 100. Calculating and tracking the return on the expense of training costs justifies the L&D investment. To calculate it, businesses will need to total the costs of training (e.g., materials, delivery, development, and employee time) and then identify and quantify the benefits of training (e.g., increased sales, customer satisfaction, and employee satisfaction, along with reduced errors).
Compensation and Benefits Metrics That Align Pay With Value
Compensation and benefits data help align HR’s operations with the business’s financial planning and strategy. Keeping track of these metrics and comparing them to market expectations helps maintain fairness, competitiveness, and employee satisfaction while optimizing resource allocation and utilization.
Salary Range Penetration
This metric exists to help maintain salaries within a fair and competitive range by measuring how far an employee’s salary has entered the reasonable range based on their job description, level, experience, and other qualifications. Monitoring salary range penetration helps to preserve employee satisfaction and workplace morale by controlling salary compression (i.e., the shrinkage of pay gaps between varying employment levels).
Benefits Utilization Rate
This rate measures the percentage of employees who take advantage of the various benefits offered by their employers. Tracking benefits utilization rates helps leaders assess the effectiveness and desirability of their benefits packages so they can invest in benefits and perks that employees value, understand, and want to use.
Pay Equity Ratio
This ratio compares the pay of groups that are performing similar work at similar levels, such as men compared to women. Tracking pay equity metrics helps business leaders reduce discrimination by providing equal and fair compensation.
Leveraging Technology to Track and Report HR KPIs
Human resources professionals have the chance to leverage the robust features and capabilities included in HR management technology. These systems automate data collection to support tracking and reporting. HR professionals may access personalized dashboards where they can easily visualize key HR metrics, implement governance practices, and ensure accuracy and accessibility across their organizations.
Moving Forward With HR Metrics
With an endless supply of HR metrics available, HR managers must identify the metrics that are most important and relevant to their businesses and unique goals. This enables them to focus on the data that matters most while supporting their leadership decisions with measurable results. Using HR metrics effectively enhances strategic decision-making and workforce planning.
Strategic Planning for Your Future: Study Human Resource Management at Johnson & Wales University Online
At JWU Online, both undergraduate and graduate students study human resource management to develop a solid foundation in HR knowledge, skills, and tools while developing their core competencies to become more effective leaders in the business world. Begin developing your skill set for success in HR by earning a Bachelor of Science in Business Administration in Human Resource Management or continuing your education with an MBA in Human Resource Management.
For more information about completing your degree online, complete the Request Info form, call 855-JWU-1881, or email [email protected].
