Head of People, Engagement and Culture Innovecs
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Why HR Metrics are Important

30th Jun 2020
Head of People, Engagement and Culture Innovecs
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HR metrics are key insights that help businesses keep an eye on their human capital and measure how effective their HR initiatives are. 

Although the measurement of these metrics is a time-consuming process. A successful evaluation of HR metrics enables organizations to:

  • Set clear expectations for the HR role. For example, the staff turnover is 30%, with the market benchmark hitting the same figure. CEO naturally wants to lower the rate to 5%, which is an unrealistic request. To change CEO's mind, you need to provide high-quality analytics using these metrics.
  • Get HR expenses justified. Supposing, CEO believes that the HR programs are  too cost-intensive. What you need is to analyze the effectiveness of HR initiatives to prove that there is a return on investment (ROI). 
  • Reduce employee turnover. The in-depth analysis of the real reasons why people leave the company will help to understand what exactly the company needs to get improved to reduce these terminations.

Total Rewards Metrics

The Total Rewards program includes six main components: compensation, benefits, work-life balance, performance management, career development, rewards, and recognition. Each unit has an approximate set of metrics showing the level of its proper functionality:

  • Compensation – attrition level for the reason of non-compatible level of compensation
  • Benefits – satisfaction with offered benefits and internal employee programs
  • Work-life balance – turnover due to stress at work or overtimes 
  • Performance management – achieving KPIs, identifying whether employee’s productivity has changed
  • Career development – vertical and horizontal career growth ratio: horizontal (administrator → assistant) and vertical (manager → head of department)
  • Rewards and recognition programs – individual engagement and loyalty to the company.

It is crucial to understand that these blocks and metrics work in a tight connection with each other. One metric can be applied to several Total Rewards blocks, at the same, additionally, into metrics. Therefore, it is better when all parameters work in conjunction.

How Effective Total Rewards Are

The period for which you can evaluate the Total Rewards' effectiveness depends on the HR initiative. The effect can be seen immediately in case:

  • People quit due to low salaries, and the salaries were reviewed
  • Benefits package was changed (extended, improved, canceled), and employees were interviewed on a satisfaction level

If we launch career development initiatives, it may take a few months or years to see the desired results. Here you need to measure:

  • The share of workers who get promoted
  • The percentage of vacancies filled with candidates from the talent pool
  • Vertical/horizontal career growth ratio

If a company is based in a country with a stable labor market or in a non-competitive industry, it makes no sense to track the effectiveness of Total Rewards frequently. In a competitive market, regular monitoring of HR metrics is a necessity. HR needs to monitor market trends and how it affects turnover.

Keep in mind that the attrition rate depends on the industry. For example, in retail or HoReCa, a high turnover rate is industry-standard. In manufacturing, it’s usually much lower and can grow either due to seasonality or in case competitors raised salaries and our compensation package has become non-compatible.

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