How to measure HR effectiveness with 12 key metrics

It would be hard to find a business executive today who doesn’t believe that their people are the organization’s most valuable asset. So why don’t so many of those same leaders view human resources as a strategic function? Why HR leaders still Do you have to fight for a seat at the table?

According to Gartner, 58% of organizations say that a lack of relevant metrics tracking HR progress is one of the main barriers to effective strategic planning. To earn their rightful place in high-level conversations, HR leaders must be equipped with a set of definitive metrics on which to base strategic business objectives and demonstrate ROI of HR initiatives.

The role of HR in organizational performance

Historically, the human resources department has been viewed primarily as an administrative function. So instead of inviting their HR leaders into important decision-making conversations, many top executives only come to them after the fact, when it’s time to execute on the plans that have already been made.

As champions of people and culture, the HR team must be involved in establishing internal programs and processes to help employees thrive. Unfortunately, when HR doesn’t have a say in strategic planning, the employee experience suffers.

Most other business functions have a standard set of metrics that show how effective your team is and how they are contributing to the company’s bottom line (eg, sales revenue, customer service ratings, etc.). But the best metrics to demonstrate the value of human resources have not always been so clear.

Let’s change that.

12 metrics to measure HR effectiveness

To align your people operations strategy with business goals and earn your rightful place at the strategy table, consider the following HR success metrics.

recruitment time

Hire time refers to the amount of time between when a candidate is sought and when they accept an offer from your company. (This is slightly different from time to fill, which refers to the time it takes to hire from the date a new job is posted.) In both cases, the sooner you can get a great new hire through your recruiting process, the better.

By tracking time to hire or time to fill, your team can find ways to streamline the hiring process and remove bottlenecks that are slowing things down. Showing improved efficiency of your average time to hire is a great metric for HR professionals to tout.

cost per rental

Cost per hire includes the total hiring costs (internal and external) of each person your company hires. Costs can include software fees, advertising expenses, relocation costs, recruiter salaries, and more.

As with time to hire, finding ways to make recruiting more efficient can reduce costs and is another great metric for demonstrating HR value. (It’s also helpful to reference when applying for program support to increase retention. The less turnover you have, the less you’ll have to spend to fill open positions.)

Employee Engagement Rate

Gallup’s State of the World Workplace 2022 report shows only 21% of employees are engaged at work. Employee engagement is critical to productivity, performance, and retention, and can be directly linked to business profitability. This is a metric that HR leaders and executive teams need to pay attention to.

A science-backed employee engagement survey can provide metrics to gauge the state of engagement across the organization and at the department or team level. By tracking these numbers over time, HR leaders can see where there are challenges and duplicate what works to improve engagement.

income per employee

Revenue per employee is the amount of money each employee generates for the company, on average. You can calculate it by dividing the total revenue by the current number of employees.

Think of revenue per employee as a productivity ratio. The more productive the employees are, the more money the company makes. This metric can help you measure the success of HR programs that aim to increase productivity. If the number tends to go up, your initiatives are proving to be effective.

Employee Net Promoter Score (eNPS)

The Employee Net Promoter Score (eNPS) is used to track the loyalty and pride of employees in an organization. Rate how enthusiastic employees are about their workplace by asking a simple question: “On a scale of 0 to 10, how likely are you to recommend our organization as a place to work to others?”

While it’s a pretty crude metric, eNPS can give you a good overall sense of employee satisfaction and engagement. It’s a solid metric for HR leaders to track, as fluctuations in eNPS can indicate changes in employee sentiment (either positive or negative). Organizations with high eNPS also have a competitive advantage as it speaks to employer branding and whether or not people choose to work there over other companies.

Dismal turnover rate

Unfortunate turnover occurs when a high-performing employee that the company would have liked to keep decides to leave unexpectedly. (Someone who is fired or laid off is not considered regrettable.) The percentage of departures that fall into this category over time is your woeful turnover rate.

Tracking woeful turnover metrics can help you understand more about high-performing employees leaving your company so you can investigate what might be driving them away. Identifying your top performers and focusing your retention efforts on them can help you lower your dismal turnover rate.

manager effectiveness

Managers have a huge impact on their teams and organizations. According to our 2022 Workplace Report, more than 53% of employees say unsupportive management is a top reason for leaving a company. On the other hand, more than 57% say that supportive management and a good boss are two of the most important factors for stay in your company.

By tracking the performance of managers across the organization, HR teams can identify those who are successful and provide manager training and coaching to those who may struggle.

Several metrics can help you hone manager effectiveness, including:

  • Turnover rates by manager
  • Engagement Scores by Manager
  • Performance Review Completion Rate by Manager
  • Goal achievement rate per manager

Employee retention rate

As mentioned above, keeping your top-performing employees should be one of your top HR strategic priorities. But it’s also important to track overall employee retention. Our research shows that more than 80% of business leaders believe that a decline in employee retention poses a risk to the success of the company.

To calculate your retention rate, take the number of employees who stayed employed for a specific time period and divide it by the number of employees you started with, then multiply by 100. (Do not include new hires that started during that period.) . )

For example, if you had 400 employees on January 1, and still employed 385 of those people on December 31, your annual retention rate would be 96%. Tracking year-over-year retention can help you track workforce growth.

Absenteeism rate

Absenteeism refers to chronic or habitual absence from work that is unplanned or unannounced. It can even include employees who are consistently late, leave early, or take long lunch breaks.

Absenteeism can be a major red flag, signaling lack of employee engagement and low job satisfaction. It can also be hard to track, especially for salaried or remote workers who aren’t punching the clock.

HR teams need to partner with managers to monitor unexcused absences, habitual tardiness, and other signs of absenteeism in their teams. Tracking these absenteeism reports can help you identify trends over time across different teams and departments.

Training efficacy

If your organization is investing in training and professional development for employees (and hopefully it is!), chances are your leaders want to see that those programs are really working.

By setting OKR objectives (objectives and key results) around your training and development initiatives, you can measure the effectiveness of your programs and show executives how those efforts are impacting the business.

Internal mobility rate

Deloitte Global Human Capital Trends The survey found that only 6% of executives believe they are great at moving people from one role to another. (59% rated themselves as inadequate or fair.) That’s not very encouraging, considering that career growth is so important to most employees today.

Internal mobility can significantly improve employee engagement and retention and reduce unfortunate turnover. After all, if a top performer in your organization doesn’t see a way forward internally, why wouldn’t she look elsewhere to advance her career?

HR can track the internal mobility rate by calculating the total number of internal moves (promotions, department/role changes) and dividing by the total number of employees (x100). The higher the percentage, the better the organization is at giving employees opportunities for growth.

HR cost per employee

People operations can be expensive (and for good reason!). But data-driven business leaders want to see where those dollars are going and whether they are being used efficiently.

According Gartner 2023 HR Budget and Efficiency Benchmarks According to the report, HR functions spend an average of $2,524 per employee per year. The top spending areas are recruiting ($425 per employee), total rewards ($213 per employee), and learning and development ($188 per employee).

Tracking HR spend and leveraging technology and automation can help you identify opportunities to reduce costs and maximize the efficiency of your team, which the C-suite will appreciate.

Measure the effectiveness of human resources with 15Five

According GartnerHR technology is the number one area HR teams plan to increase their investments in 2023. While technology can’t replace humans in HR, you can. can make your work more manageable and allow your team to work more efficiently.

With the right HR SaaS software, you can check on employee well-being, get ongoing feedback, develop high-performing managers, and enable a more dynamic performance management cycle.