HR metrics don’t have to be complicated, even for a large organization with hundreds or thousands of employees to take into consideration. The right HR metrics will illuminate strengths and weaknesses in the effectiveness of HR departments and in recruiting strategies. Big companies don’t have to invest in lots of HR metrics to see patterns and address them. A few essentials may prove to be a big help.
Figuring out employee satisfaction in a quantifiable way isn’t as easy as measuring costs or days. To understand whether or not your employees are happy, implement surveys. Any time someone takes a survey, the responses will be somewhat subjective, but survey responses are still a valuable HR metrics tool for a number of reasons.
You can use survey responses to determine how employees rate their managers and vice versa. You can find trends in employee satisfaction and dissatisfaction in many categories, like looking forward to coming to work or feeling like the benefits packages aren’t comprehensive enough. Employee survey responses can help you figure out any trends in losing good employees. Another way to unlock employee satisfaction is to take a look at absence rates. Sometimes absences can indicate low job satisfaction.
The Cost of Losing an Employee
Some HR departments choose to focus on yearly turnover rates. While turnover rates can help the company set goals, the rates themselves don’t answer many other questions. Losing an employee doesn’t just mean you have an empty spot to fill. In larger companies with salaried employees, it often means a severance package and a possible payout for unused vacation days.
Another component of this cost is how long it takes to fill a vacant position. This cost includes the work that’s going undone or being picked up by other employees. It also includes the time and effort the HR department expends recruiting someone new. That means candidate searches, interviews, background checks, and more.
The Cost of a New Hire
Sometimes employee turnover doesn’t look too bad until you truly understand how much it costs to hire a new person. Large companies aren’t just looking at the salary of the individual. Training hours cost money, benefits cost money, and the productivity of a new employee isn’t going to match up with experienced employees at first, either. For example, at a billion-dollar household giant like Amway, the cost of a new hire can be tens of thousands of dollars more than the new person’s salary alone. After understanding how much new hires truly cost the business, employee turnover becomes a more pressing issue.
New Hire Effectiveness
Once those vacant positions are filled, the next way to measure the effectiveness of recruiting practices is to take a look at the new hires and how they are performing. It might not be helpful to compare them against a former employee if that person was a tenured, experienced individual, but getting management feedback and satisfaction is a good starting point. Understanding the revenue the new employees are generating and comparing it to the cost of employing them is another good way to determine if they were a good choice. This is especially relevant once you’ve figured out how much it costs to hire a new person.
Focusing on Key Positions
When determining turnover costs and the cost per new hire, some HR departments find it more effective to focus on certain positions, such as management, versus treating every job with the same relevancy. However, the bigger an employee’s salary and role in the company, the more it costs the company to fill that vacant position. When you have thousands of employees, it might not be smart to evaluate every position. Instead, you might want to target your metrics on jobs that have the biggest impact.
The most effective HR metrics are the ones that point out employment weaknesses. Whether recruiting practices aren’t effective or employees are leaving because they aren’t satisfied, understanding the costs associated with employee turnover, retention, and satisfaction is invaluable to a large organization.