HR metrics worth watching

Although machines supported by artificial intelligence can handle more and more tasks, people remain indispensable for creative and innovative solutions. At the same time, people have feelings, individual goals and sometimes problems too, which have to be taken into account during employment. That's why managing human resources is a huge challenge. HR metrics are there to support this — at least some of them are.

HR metrics are not optional

In the words of Peter Drucker, what we measure we can optimise. That's exactly why both senior management and HR now see how important it is to measure the results of human resources activity. Monitoring HR metrics can contribute to retaining the workforce, boosting the company's performance, building a better employer brand, and I could go on. Of course, it matters which metrics we track and what we do based on them.

Defining HR metrics (KPIs)

Involve senior management in defining HR KPIs (key performance indicators). The metrics have to align with the company's strategy. In fact, I'll go further. 87% of respondents in one survey believe that HR reporting influences the company's strategy. After all, based on HR metrics there may be a need for recruitment, redeployment of human resources, and so on, which affects the company's short-term and even long-term plans. That's exactly why it's worth considering what figures managers want to see beyond the standard HR metrics, such as the turnover rate. Based on these, they can make better decisions.

Important HR metrics grouped by theme

For an easier overview, I'll present a few of the more important HR KPIs worth monitoring, divided into 2 groups. Alongside presenting them, you'll also learn why you need to keep an eye on these HR metrics.

1. Metrics related to HR tools and services

1.1. HR cost per employee

- the amount the company spends on supporting HR tasks divided by the number of employees

On its own this doesn't mean much. A benchmark is essential to interpret it. You can compare the result you get with the results of similar-sized companies, with industry data and, of course, if you have several years' data, with your own earlier figures. This lets you see trends emerge too — e.g. whether the HR budget grows proportionally with the number of employees, or not.

1.2. The HR-to-employee ratio

-  the number of colleagues working in HR divided by the number of employees (including HR) multiplied by 100, so we see the ratio as a percentage.

Based on this metric you can weigh up whether the HR department needs restructuring or not. Of course, it can be hard to decide, based only on your own metric, whether you might need to expand the HR team. That's exactly why I'm also giving you a point of reference.

Mostly this metric is inversely proportional to company size, and although there can be differences based on companies' needs, this is generally the normal ratio:

• Under 100 employees: 2.70
• Between 100 and 249 employees: 1.26
• Between 250 and 499 employees: 1.07
• Between 500 and 999 employees: 0.82
• Between 1,000 and 2,499 employees: 0.79
• Between 2,500 and 7,499 employees: 0.53

1.3. Use of HR software/tools by employees

- the number of employees who actively use the HR software and tools provided by the company divided by the total number of employees multiplied by 100

This is one of the most important HR metrics that senior management — or at least the CFO — is interested in. After all, if only a negligible percentage of employees use an HR tool, then maintaining it is very likely a waste of money that the CFO will want to put a stop to. Of course, a low usage rate on its own doesn't necessarily lead to terminating/abandoning the HR software service. That's also influenced by the ROI the tool produces.

1.4. The return on investment (ROI) of HR tools

- several factors contribute to the return on a given HR tool, but when calculating it you have to examine how much money it saves or generates for the company compared with the implementation and maintenance costs.

This metric helps you decide how worthwhile it is to run a given software/tool. It's advisable to examine it together with the number of active users. The two metrics go hand in hand. Often, even a smaller onboarding campaign is enough to reach the minimum number of active HR-tool users at which the investment in the HR application not only pays off but can even improve company performance. Experience it for yourself with the CHEQ HR app.

2. HR metrics related to recruitment

2.1. How much the company spends to hire a candidate (cost per hire)

- the costs preceding and accompanying a candidate's hire divided by the number of employees
Here you have to take both internal and external costs into account: the cost of the job advert, the recruitment agency's success fee, the costs arising during the selection process, the onboarding costs, and so on. With this metric you can identify the areas where you might be able to optimise recruitment costs while the company can still choose from qualified applicants.

2.2. How much time passes from recruitment to employment (time to hire)

- the total number of days taken to fill each advertised position divided by the number of advertised positions

It's important to measure this metric for two reasons. On the one hand, if the selection process is too long, there's a risk of losing talented and suitable candidates who take a job with the competition in the meantime. You also have to reckon with the fact that until the new worker arrives, the existing ones are overloaded. If this state of affairs persists for a long time, the chance also rises that these colleagues, too, resign under the burden of an unbearable amount of work. On the other hand, if we fill vacant positions within too short a time, we face the danger of not having chosen the right person. The quality of the work may be poor, which can affect the company's overall performance.

2.3 How many days it takes for a new employee to become productive

- assign a KPI to each new worker and add up the number of days needed to meet the KPI, then divide this by the number of new workers; this gives you how many days on average are needed for a new employee to pick up the rhythm of the company's performance. E.g.: If 5 new employees reach their assigned KPI in 450 days, then on average they become productive workers in 90 days.

This is another HR metric worth keeping an eye on, since it also reflects the effectiveness of onboarding. It can be interesting to work out how to speed up becoming productive. It may be that colleagues need to be given more information, training and support than the company currently provides. This can reshape the training process, which can favourably influence the company's performance.

2.4. New-hire turnover rate

- how many new employees resign in the first year, during the probation period, or within a time frame defined by the company

This can be calculated in two different ways:

New-hire turnover rate relative to the total turnover rate -  the number of new workers leaving in the period examined divided by the total number of employment relationships ended in the period examined multiplied by 100 (e.g.: 3 new workers left within 1 year : 9 workers left in total within 1 year x 100 = 33.33%)

New-hire turnover rate relative to the total number of new employees - the number of new workers whose employment ended in the period examined divided by the number of new workers hired in the period examined multiplied by 100 (e.g.: 3 new workers left within 1 year : 9 new workers were employed in the 1 year examined x 100 = 33.33%)

This metric, too, sheds light on how effective or ineffective the company's selection strategy and onboarding process are. It's worth making sure this rate is as low as possible, since besides the fact that hiring the wrong candidate comes with high costs, it also negatively affects the employer brand and damages the team's morale.

CHEQ helps optimise recruitment-related HR metrics

1. It supports fast position filling and reduces recruitment costs

CHEQ clients use the tool in two ways to find the right person to fill an open position as soon as possible, and so reduce recruitment costs.

• Employee referral - this is a fairly well-known technique and most companies use it. It essentially means that employees recommend someone from among their acquaintances who might be suitable for the role. If the company hires the recommended worker and they work out, the referring colleague usually receives a smaller or larger cash reward. It's entirely worth the company paying this, since through the referral it saves a significant amount on recruitment. Employee referral through CHEQ differs from the traditional version in that here the referral can be made anywhere and any time with a tap. Your smartphone is always to hand, so an employee referral can even happen during a friendly barbecue party, in the middle of chatting with friends.

• Keeping in touch with former colleagues - if it's a friendly parting, there's nothing to stop the company staying in touch with its former employees. They're placed in a separate user group and receive only certain messages, or have only limited access to company information, such as open positions. This makes it possible for them to return to the company in a different position themselves, or to recommend a suitable colleague.

2. It can reduce the training time and the new-hire turnover rate

CHEQ offers a way to create a better onboarding experience and supports the training and integration process. It can provide access to plenty of information important to a new worker:

• Through the CHEQ interface, with a few taps you can make available, for example, a map of the site or office, on which you precisely mark the work areas. This way they can easily find the colleagues working in the various areas.
• You can share the organisational chart.
• You can create a contact list showing who to notify about which matters and through which contact details.
• You can give them tips on where to find a post office, bank or government office near the workplace for handling their affairs.
• You can also point out the fast-food places nearby, so they don't go hungry even if they didn't bring lunch and the company doesn't have its own canteen.

In addition, the CHEQ interface is also suitable for microlearning, which is worth taking advantage of. After all, a new employee can access the training materials shared here anywhere and any time. This reduces frustration and anxiety too. Because no one will see them as stupid or unfit for the task just because they've gone through the training material, say, 3 times. By contrast, if they ask a colleague the same thing 3 times in person, that can already be uncomfortable.

Find out more about using CHEQ — request our no-obligation free demo!