Workforce Metrics
From OrgChart.net
With more ways than ever to capture information, organizations today have numerous metrics at their disposal, often more than they can use. When used properly, however, metrics can suggest trends and can tell us what strategy to employ. One number alone may not drive strategy, but a set of numbers will, especially if it paints a clear picture and clarifies a strategy for the future.
If impending retirements are at 20%, and the industry average is 10%, your organization will need to develop a strategy to fill those spots. If employee turnover is at 10% but the industry average is 5%, you will need to develop an employee retention strategy. More than anything, metrics allow HR management to make business decisions based on facts, not just opinions.
Sample workforce metrics include:
- Simple headcounts such as permanent employees, vacancies and contractors – used to analyze workforce dynamics and centers of responsibility
- Spans and levels metrics including counts, totals, averages, minimums and maximum – help to analyze the organization and structure it efficiently
- Turnover rates including voluntary and involuntary turnover – help to evaluate recruiting and management effectiveness
- Budget metrics such as salary roll-ups, average salaries and budget differentials – assist in workforce reporting and planning
- EEOC ratios including counts, percentages, totals and averages – offer insight into managing compliance and regulatory issues
- Performance ratings and comparison to averages – provide a snapshot of employee potential
Top Workforce Metrics to Track
- Revenue per Employee
This is usually at the top of everyone’s list (although some organizations prefer to look at profit instead of revenue). Revenue per employee helps the business determine the value of each individual, and it helps management measure changes in spending on training and development, benefits, etc.
- Human Resource Expense Factor
Even though overall HR costs are relatively small compared to production, marketing and administrative expenditures, it is helpful to have a metric to ensure that the dollars spent in HR are resulting in a continuous improvement of workforce productivity.
- Total Compensation as a Percentage of Revenue:
This is a key HR metric since it measures workforce productivity. The key is to continually improve the ratio between the dollars spent on employee costs (wages, benefits and overall HR expenses) and overall company revenue. Some organizations also track employee satisfaction with the overall compensation via surveys.
- Absence Rate
Absence rate (including sick leave) is an indicator of employee engagement. If you also have employee satisfaction data from surveys, these two can be combined to create a snapshot of employee engagement. The best indicator in surveys is the percentage of employees who look forward to coming to work.
- Turnover Rate
Turnover rate is another key indicator of employee engagement. It is most helpful to look at the turnover rate of new employees (since employees who have been there a while may leave for other reasons).
- Cost per Hire
Cost per hire is calculated by adding up the expenses associated with recruiting and dividing that amount by the number of new hires during the period. This metric measures the effectiveness and efficiency of the recruiting function, many employers calculate the cost per hire.
- Turnover/Replacement Cost
Tracking turnover indicates trends in areas of problems in compensation, management, workload, etc. HR can use this information to address issues before key employees are gone. Often it is better to weight turnover in key positions more heavily than in positions overall.
- Benefit Cost as a Percentage of Total Compensation
In the United States, benefits account for about a third of total compensation costs for most organizations. Measuring your organization’s benefits cost allows you to benchmark against other companies and also control costs.
- Benefit Cost a as Percentage of Revenue
Similar to tracking against percentage of compensation, the metric of benefit cost as percentage of revenue helps you see track against competitors and see whether your employment expenditures support your revenue goals.
- Time to Fill Jobs
Measuring the time it takes to fill jobs will help evaluate the success of HR in its recruiting efforts. If this metric changes over time, it can indicate the effectiveness of various methodologies and strategies.
