I’ve spent a fair bit of time recently looking at various iterations of what are loosely called ‘HR analytics’ or ‘HR metrics’. The more I look at these clusters of figures, the more I’ve come to realise that not only are most of them nothing to with HR as a function in the organisation, but not many are metrics either.
Let’s look closely at thirteen of the most popular measures that I’ve seen quoted in the past year or two:
– Cost of HR per Employee: The total cost of running the HR function divided by the total number of employees.
– Ratio of Employees per HR staff member: Total number of employees divided by number of staff in HR department.
Both statistics of interest maybe, but really nothing more than that, as they do not relate to performance or achievement. Are we going to start (heaven forbid!) benchmarking against other organisations in the same sector? Is there some magic number that HR should be striving for?
– Cost per Hire: The average cost of hiring a new employee. This is the total costs of all recruitment over a period divided by the total number of employees hired in that time.
– Time to Hire: The average number of days that elapse between job postings and offer acceptances.
If HR are directly involved in recruitment sourcing, then maybe there’s something to respond to, but hiring managers have a major bearing on this, and higher-value post recruitment in some financial periods will skew the results. A raw average of these won’t tell any real story.
It will tell you, at least, that the organisation is not viewed as an employer of choice for whatever reason, sufficient to trigger investigation.
– Headcount: The total of employees in an organisation, usually segmented by division or activity, and expressed as full-time equivalents (FTE) as well as actual heads.
Headcount budgets are very much within the sphere of C-suite, Financial and Operational parts of the business. Sure, headcount for HR is an HR affair, but I am not convinced that HR is in a position to have major input to the framing of those budgets. Of course, data held in the HR system would play its part, but then that data belongs to all.
– Employee Satisfaction: Usually expressed by taking number of employees who would positively recommend your company as a good place to work against those who wouldn’t, giving an index of satisfaction or dissatisfaction.
This is a workforce metric of value providing one is confident that survey anonymity gives candour in response. Reasons why are the key here. Again, how much direct influence does HR have over wages, working conditions and toxic management? This is the big Culture question, and HR is most definitely responsible for culture, but its style is indicative of the prevailing culture.
– Tenure or Retention Rate: Divide the number of employees who stay with you for e.g., three years by the total number of employees.
From a statistical standpoint this figure is interesting, but unless it is specifically targeted at a key category of employee, it tells us little, apart from the fact that people do or do not last at the company.
– Key Turnover: The turnover rate of turnover among your high-performing and/or high-potential employees.
This is much more relevant, as it goes to the very heart of what every organisation needs. The numbers themselves need to be backed by evidence from exit interviews to go to the root causes of departure (and a mechanism to find out why they stay, as well!) Again, not an HR metric, however.
– Absence Rate: The average number of days that employees are absent ill or for other unscheduled occasions, usually annually.
This figure is important, as it can highlight problems within locations, departments and with managers. Relevant year-on-year comparisons can give a useful picture. However, HR does not have a direct line of influence over this; the draconian ‘return interviews’ that some in HR like to instigate may drive down absence temporarily, but it isn’t leading towards a better culture. Another workforce statistic.
– Employee productivity rate – a measure to assess levels of productivity of the workforce over a given period.
A workforce statistic, more properly segmented through organisational activities, although administrative functions may hit their targets without trouble the bottom line.
– Revenue per Employee: Total revenue divided by the total number of employees or FTE.
The last time I looked, HR was not responsible for either company revenue or the total number of employees. It’s a workforce statistic, although a crude one, as it implies that somehow the number of employees affects the revenue. Cost per Employee /FTE fits into the same category
– Training Completion Rate: The number of employees who completed a given training divided by the total number of employees, then multiplied by 100 to get a percentage.
Among various iterations of these figures I have seen ‘Total number of Training Days per annum’ which of course is meaningless.
This should reflect procedures put in place by HR, executed by line management and monitored automatically by the HR system. The ongoing development of the workforce where necessary is a business priority for any organisation. The figure should be 100% or very close.
– Diversity percentages
It is important to get this right, not just for compliance in some cases, but also to match the stated aspirations of the organisation in this area.
Responsibility for Diversity is all too often thrust on HR, whereas awareness should be enterprise-wide and ingrained within every employee in the same way as Quality Control should be.
Diversity goes deeper than physical attributes; merely reporting on these leads to corporate tokenism, which does the cause no good at all. There is a much wider array of diverse factors here, so be sure to include them all.
This is a measure which reverberates all the way up to C-suite, who are ultimately responsible.
In conclusion, there are very few real metrics of value in this list. Most of them are workforce statistics at best and in some cases act as a trigger for further research.
One thing for sure, HR has very little direct influence over these figures and their implications. There therefore needs to be a clear distinction between what we should call Workforce Metrics and Statistics, and HR metrics which relate to HR performance.
In my recent book, I have suggested some metrics, just one of which I’ll mention here
– Suggested metric: Effectiveness of HR software
My Three Laws of HR Tech require that:
“HR will take responsibility to ensure that their organisation has an HR system configurable to meet its process and information needs.”
“HR will be responsible for the accuracy and timeliness of information held in the system, providing a single source of truth and real-time reporting.”
“HR system information will be freely available and in required formats to all in the organisation authorised to have access to this information.”
Add to these the ongoing return on investment on the current HR software application; you’ll find that on your original application for funds to acquire the system. Check if it’s still ‘the gift that keeps on giving’ – or if it ever gave in the first place.
If you are meeting these all of these to the satisfaction of your internal clients all the way up to the Board, then you are winning!
Denis W Barnard
