From HR Metrics to People Analytics: Leveraging Data to Improve Business Outcomes




The HR function is increasingly being asked to demonstrate the value it brings to the organization. One way HR can do this is by using metrics and analytics to measure the impact of HR initiatives and activities on business outcomes. HR metrics and people analytics can provide valuable insights into areas such as workforce productivity, employee engagement, retention, and talent development.

The use of HR metrics and people analytics has become more prevalent in recent years, as organizations seek to gain a competitive advantage through better understanding and management of their human capital. HR leaders can use data to identify trends, predict future outcomes, and make informed decisions that improve workforce performance and drive business success.

However, collecting and analyzing HR data is not without its challenges. HR professionals must ensure that the data they collect is accurate, relevant, and aligned with the organization's strategic goals. They must also be able to communicate the insights gained from data analysis in a way that is meaningful and actionable for key stakeholders.

To leverage data effectively, HR professionals must develop a data-driven mindset and build a culture of data-driven decision-making within their organizations. This requires investing in the right technology and talent to support data collection, analysis, and communication. HR leaders must also be willing to collaborate across departments and work closely with senior leaders to ensure that HR metrics and people analytics are aligned with the overall business strategy (Vulpen, E. V., 2021).


HR metrics  in recruitment

1. Time to hire metric

The 'time to hire' metric is significant in recruitment, which measures the duration between a candidate applying for a job and accepting the job offer. This metric provides insights into recruitment effectiveness and candidate experience. A long time to hire indicates inefficient HR processes, including assessment, interview, and role acceptance, which may negatively impact candidate experience, and they may drop out of the recruitment process. The 'time to fill' metric, which is measured from the approval of a job requisition to candidate acceptance, should not be confused with 'time to hire.' 

2. Cost per hire metric

Another significant recruitment metric is the 'cost per hire,' which indicates the cost of hiring new employees and recruitment efficiency. The formula for calculating the 'cost per hire' includes adding internal and external recruitment costs and dividing them by the total number of hires in a selected measurement period, such as monthly or annually.

3. Early turnover (percentage of recruits leaving in the first year)

The percentage of new hires who leave the company within their first year, commonly known as the early turnover metric, is arguably the most significant indicator of hiring success in a firm. This metric highlights potential mismatches between the employee and the organization or their job role. Early turnover can be very costly for businesses since it often takes between six and twelve months for employees to attain their Optimum Productivity Level. 

4. Time since last promotion (avg time in months since last internal promotion)

Tracking the average time in months since the last internal promotion provides a simple yet effective metric for understanding why high-performing employees may choose to leave the organization.

HR metrics related to revenue

5. Revenue per employee (revenue/total number of employees)

The efficiency of an organization can be assessed through the revenue per employee metric, which is calculated by dividing the total revenue generated by the total number of employees. This metric is a measure of the quality of employees hired and can provide valuable insights into the organization's performance. Business Insider has published an article comparing the scores of the top 12 tech companies in the world on this metric.

6. Performance and potential (the 9-box grid)

The 9-box grid is a model that maps an individual's performance and potential across three levels and is used to differentiate between underperformers, valued specialists, emerging potentials, and top talents. This metric is useful for identifying the reasons for turnover and can provide qualitative and quantitative measures of employee performance. Metrics used to measure employee performance include Net Promoter Score, management by objectives, number of errors, 360-degree feedback, forced ranking, and more.

7. Billable hours per employee

Billable hours per employee is a concrete example of a performance measure, especially relevant in professional service firms like law and consultancy firms. Analyzing this metric in relation to employee engagement or other input metrics can provide valuable insights. Benchmarking this metric between different departments and managers/partners can also be beneficial. This metric is also related to employee utilization rate, which refers to the amount of time an employee spends on billable tasks.

8. Engagement rating

Engagement rating is a crucial metric for HR outcomes as an engaged workforce is more productive. Engaged employees tend to perform better and perceive challenges positively. The engagement rating is a measure of how much employees like their job and are proud of their company. It is an important metric for a team manager's success, and team engagement is also a vital component of this metric.

Other HR metrics

9. The cost of HR per employee 

This metric indicates the cost-effectiveness of the HR department in terms of dollars spent per employee.

10. HR professionals to employee ratio 

This metric measures the efficiency of HR in terms of the number of employees served per HR professional. A company with strong analytical capabilities can achieve higher efficiency with fewer HR professionals.

11. HR business partners to employee ratio 

Similar to the previous metric, this measures the efficiency of HR business partners in serving employees. Strong analytical capabilities can help HR predict the impact of HR policies, resulting in higher efficiency and reduced need for business partners.

12. Turnover (number of employees who leave/total population in the organization)

This metric shows the number of employees who leave the company in a given year. It can help track the difference in attrition between high and low performers and provide information on which departments and functions employees prefer to work in.

13. Effectiveness of HR software

This metric measures the effectiveness of HR software in terms of active users, session length, total time on the platform per user per month, screen flow, and software retention. It helps HR determine what works for employees and what doesn't.

14. Absenteeism (percentage of employees absent)

This metric measures the rate of employee absences, which can indicate dissatisfaction and be a predictor of turnover. It can help identify potential problems and bottlenecks in individual departments and with individual managers (Vulpen, E. V., 2021).

References

1. Vulpen, E. V., (2021). 14 HR Metrics Examples and Why Data-Driven HR is Essential. AIHR Digital. Retrieved from https://www.aihr.com/blog/14-hr-metrics-examples/, Accessed on 20th March, 2023

Comments

  1. M.Kamal PriyashanthaApril 13, 2023 at 9:25 AM


    Hi Suranga,It is better to include the conclusion of the article . I will add these for you.Organizations may better allocate resources, make data-driven choices, and increase employee retention, performance, and compliance by using HR metrics, which offer useful insights into their workforce. These KPIs include data-driven decision making, better resource management, increased compliance, and improved staff retention and performance. Organizations can identify areas where they may need to improve and take steps to solve problems before they become more serious by measuring indicators like turnover rate, employee engagement, and time-to-hire. Organizations can also spot areas where employee performance and productivity can be enhanced by tracking measures related to employee performance. Overall, HR metrics give businesses insightful information about their workforce, empowering them to make data-driven decisions, more efficiently manage resources, and enhance employee retention, performance, and satisfaction. Good luck.

    ReplyDelete
    Replies
    1. Suranga WijayarathnaApril 16, 2023 at 9:05 AM

      Thank you for your feedback! I completely agree that including the conclusion of the article would have been helpful for readers who may have missed it.

      Delete
  2. Tharanga JayasundaraApril 13, 2023 at 7:03 PM

    Good topic, and I can add the following comment based on my review,
    The efficacy and effectiveness of HR policies are assessed using HR metrics. Metrics aid in the comparison of various data points. Turnover, for instance, has gone up by 50% from the previous year, when it was 5%, and is currently 7.5%. The first are data points, and the second are measurements.
    Well Done !

    ReplyDelete
    Replies
    1. Suranga WijayarathnaApril 16, 2023 at 9:07 AM

      Thank you for your comment and for sharing your insights on the importance of HR metrics in assessing the efficacy and effectiveness of HR policies. As you pointed out, HR metrics allow for the comparison of various data points, which can help organizations identify trends and patterns that may require attention. I appreciate your contribution to the discussion.

      Delete
  3. Gamini EdirisingheApril 14, 2023 at 1:20 AM


    Hi Suranga,
    your article detail oriented. well done ..!!
    I would like to add following points how it effect to the globally ?

    Human resources (HR) metrics are measurements used to track and analyze various aspects of an organization's workforce and HR processes. These metrics can have a significant impact on a company's global operations, One way in which HR metrics can affect a company globally is by providing insight into the effectiveness of HR policies and practices. For example, metrics such as employee turnover rate, time-to-hire, and training effectiveness can provide HR leaders with valuable data on how well their strategies are working in different regions of the world. This information can then be used to make improvements and adjustments to better meet the needs of the global workforce.

    Additionally, HR metrics can help organizations identify areas of risk and opportunity in terms of workforce diversity, equity, and inclusion. Metrics such as employee demographics, pay equity, and representation in leadership positions can help companies ensure they are creating a diverse and inclusive workplace culture that supports their global operations.

    ReplyDelete
    Replies
    1. Suranga WijayarathnaApril 16, 2023 at 9:08 AM

      Thank you for your insightful comment! I completely agree with you that HR metrics can have a significant impact on a company's global operations by providing valuable insights into the effectiveness of HR policies and practices. This data can be especially important for multinational companies operating in different regions of the world with diverse workforces.

      Delete
  4. RUSHNI YUSUFApril 15, 2023 at 11:56 AM

    With advance HR software an organisation can improve communication, can do deep analysis, also will help faster recruitment and less paper work or rather paperless. Improved parameters on performance,payroll functions.The HR portal reduces the overall life-cycle for recruitment, onboarding, and appraisals.which will be a great asset to the company as it is less time consuming and more result oriented

    ReplyDelete
    Replies
    1. Suranga WijayarathnaApril 16, 2023 at 9:09 AM

      Thank you for your insightful comment! I completely agree with you that using advanced HR software can be a great asset to an organization, as it can help improve communication, streamline processes, and provide valuable data for analysis.

      Delete
  5. Lalindu WijesingheApril 18, 2023 at 9:59 PM

    HR metric refers to the measurement and analysis of various human resource-related data to evaluate the effectiveness of an organization's HR strategies and practices. It involves collecting, analyzing, and reporting on data related to employee performance, productivity, engagement, turnover, absenteeism, and other HR-related metrics. Well done!!

    ReplyDelete
  6. Tharanga WanigasundaraApril 21, 2023 at 8:02 PM

    Interesting topic.
    The use of HR metrics and people analytics can help organizations improve their understanding of human resources and make more informed decisions about how to manage and develop their employees. By leveraging data to gain insights into key HR functions, organizations can improve their overall business outcomes and achieve greater success in today's highly competitive business environment.
    Well done.

    ReplyDelete

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