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What is the role of human resource metrics? They are the best indicators that are used to provide measurements of the efficiency and value of human resource strategies in the company. Large organizations try to get the most out of these metrics in order to define the amount of financial investments that should be made into the improvement of HR functions, personnel compensation and other related benefits. In this article we will talk about such human resource metrics as cost per hire, employee management, diversity and workforce productivity.

Experts underline that cost per hire is one of the most typical human resource metrics, which is important for any company. Employers use this indicator to determine the cost of recruiting, retention and training their personnel. There are a number of factors, which are involved in these metrics, such as the amount of time both employers and human resource specialists spend interviewing and sourcing the applicants for this or that vacant position. Other factors that belong to cost per hire HR metrics are pre-employment evaluation costs, processing information about them, expenses related to providing professional orientation for newcomers etc.

Employee engagement is another human resource metric worth consideration. It is associated with the level of enthusiasm and encouragement employees show when it comes to their job positions and tasks they have to perform daily. The best way to get reliable information here is to ask personnel to answer the same sets of questions twice a year. These results may help measure the approximate percentage of employees who are satisfied with their positions and people they work with and draw corresponding conclusions that may improve the situation.

Such HR metric as diversity among the company’s employees and upper managements is generally measured by socially responsible companies. To define this indicator, HR departments generate personnel survey reports and then sort out the obtained information with regard to gender, race, veteran status, age of their employees etc.

Finally, we should proceed to workforce productivity, which is one of the most valuable HR metrics. This indicator does not only measure current personnel efficiency, but also helps predict workforce capabilities and needs in case of attrition and turnover. This is mainly done by means of using data from the previous years, which state the number of employees who have resigned voluntary or not. These HR metrics help develop a good staffing strategy for the upcoming period of time.

How important is it to reveal the impact of the HR department upon the company’s performance? This question is a major concern of lots of business owners nowadays. Meanwhile, recent research has proven that it is possible to increase the company’s productivity up to thirty percent by means of putting HR metrics in place. That is why it proves to be vital to link the human resource strategy to the company’s objectives and business goals. Some experts even underline that human resource department should be ideally run as an individual business to present better performance results.

Generally, all human resource metrics are subdivided into three major categories for the upcoming comparison, analysis and forecasting. These categories involve past expectations, current condition and future prospects. In case it is impossible to get past information, the company should make use of data that belong to a similar organization.

All categories of metrics mentioned above should be linked directly to the company’s business objective, which is individual for each organization. Nonetheless, the most typical human resource metrics that may help measure the ability of the HR department to maintain proper personnel functions, which correspond to the general business strategy, involve employee productivity, attendance and engagement, turnover rates and costs, recruiting effectiveness, communications, personnel retention and the system of rewards that exists in the company.

So, what needs to be thoroughly measured in each organization? When it comes to employee productivity, it is important to measure personnel attitudes, skillfulness and the amount of reached objectives. Thus, it is easy to measure productivity if you manage to compare current results and financial outcomes with those observed during a specified time interval in the past. If your company is new, though, you should measure its productivity against conventional guidelines typical for your industry.

Personnel attendance involves absenteeism and tardiness, while its engagement defines whether the company’s employees are satisfied with their co-workers, supervisors, schedules, attitudes and tasks or not. Thus, there is an efficient HR metric, which is frequently used to identify personnel productivity. It involves the percentage enhancement in employee productivity observed during prior years as well as its currency value.

Other human resource metrics should always be compared to the results obtained from those personnel KPIs mentioned above. For instance, communications generally refers to how correctly and precisely information is passed on to employees, while recruiting efficacy reveals the number of new positions that were created with regard to total turnover rate. This interrelation makes it possible to detect all current problems associated with the performance of the HR department and solve them on time.

Human resource metrics are widely implemented in small and large organizations these days. This is because the growing number of business owners realize their importance for the development of their companies. The main purpose of HR measurement is to point out problems that prevent the company from maximizing their profits. These metrics also help develop business objectives and the most effective methods of achieving them. Apart from this, human resource metrics make it possible to learn how to develop a reliable monitoring and evaluating system in order to measure the HR performance of the company. Therefore, it makes sense to state that human resource metrics are interrelated with the business strategic planning.

HR metrics are mainly used to measure the following aspects: the productivity of activities performed by the HR department, turnover and retention rates, recruiting efficiency, employee skillfulness and training, customer satisfaction etc.  If these metrics are compiled properly, they make it easier to obtain the following statistics: revenue factor, human capital added value, return on investment, overall compensation revenue ratio, personnel training ratio, voluntary separation rate, health care expenses, labor cost revenue ratio, turnover costs etc. Let us have a closer look at some of these metrics and the way they are calculated.

The first human resource metric we are going to discuss here is revenue factor. It is calculated by means of dividing the company’s overall revenue by the amount of employees who work full time. If you wish to identify the human capital added value, you will have to consider the total revenue of the organization minus operating and compensation expenses divided by the overall number of employees who work full time. Total compensation revenue ratio, in its turn, is defined by means of dividing the overall compensation cost by the company’s revenue.

It is no secret that proper personnel training contributes to their productivity. With regard to this, it becomes clear why training investment should be obligatory considered by the company’s managers. This HR metric is calculated by dividing the overall cost of training by the total amount of employees who need this training.

If all the above mentioned human resource metrics are implemented and measured properly, it will contribute to the improvement in the company’s competitiveness, increase in its productivity and employee satisfaction as well as enhanced return on investment. As a result, these changes will be reflected in the improved business performance as well.

Human resource (HR) metrics or KPIs are implemented with the only purpose, namely to provide data related to the efficiency of your HR department that may contribute to enhanced financial outcomes. These metrics are introduced within the Balanced Scorecard System and are considered a significant part of performance measurement and management. They help define how well the personnel department of your company accomplish the major HR goals, which, in their turn, are linked to more serious business objectives.  Managers of the company may use measurement results to review their HR strategic plans.

The most effective way to present HR metrics is to use a human resource Balanced Scorecard system mentioned above. The Scorecard was introduced in 1992 by David Norton and Robert Kaplan and is used to specify the company’s strategies with regard to four basic perspectives, including financial (helps identify what HR strategies have to be implemented in order to satisfy the needs of customers), internal (deals with the company’s endeavors to make HR activities and functions consistent enough to satisfy customers’ demands), customer (helps find out what exactly customers expect from the company and how HR metrics should be presented favorably) and organization learning (helps learn how to improve the productivity of HR personnel).

What you should realize is that it is impossible to measure all HR activities at the same time. Otherwise, you will have to implement dozens of HR metrics simultaneously, which will complicate the whole measurement process. Actually, it is not necessary to do that. Instead, you should measure only those metrics that are important (if not crucial) for your business. Thus, you can easily measure the efficiency of the recruitment process, performance management, training and productivity improvement, benefits and compensation etc.  Profound analysis of these aspects will help you draw appropriate conclusions in order to identify those factors that have to be enhanced for the benefit of your organization.

Each HR metric has two sides. They provide a strong link between human resource activities and your business goals. It means that if you manage to adopt proper HR strategies, your chances to reach your business objectives will increase as well. Likewise, if you fail to reach your business goals with the lapse of time, there will be a need to review those HR metrics you have implemented and set up new KPIs if possible. In other words, you should understand that the main goal of HR measurement is the productivity of your organization.

There is no doubt about the fact that human resource department is one of the most influential sectors in any company. This is because HR specialists are responsible for hiring professional employees that will contribute to the advancement and success of the organization. This task, however, is quite tricky and painstaking, which explains the need for quality and reasonable HR metrics, the number of which should not be too high, though, to prevent the specialists from their proper investigation and analysis.

Managers of some companies believe that the greater number of metrics they implement, the better results they will obtain. This is definitely a misconception, since the excessive amount of HR metrics will make the whole performance measurement system weak and ineffective in the long run. As far as the introduction of this system is quite expensive, it becomes understandable   that overdoing will lead to the waste of money, effort and time. On the other hand, properly selected HR metrics kept at the required level by means of eliminating those aspects which will not solidify the capabilities of your human resource department, will eventually result in the formation of a more qualified and productive human resource team.

As soon as you get involved into the process of HR metrics implementation, you should keep in mind to focus on those factors that directly affect the performance of your personnel. This is because profitable and successful company that aims at reaching their strategic objectives is one of the basic measurements of an efficient and productive human resource team. Therefore, HR metrics that focus on these aspects should always remain a priority to you.

HR department is responsible not only for the process of recruitment people, but also for the retention of qualified staff. This is actually not an easy task, since only the most skillful and experienced human resource masters have the ability to maintain a low personnel turnover rate.  Of course, your business will not experience troubles associated with the fact that an incompetent employee will be replaced by a more qualified worker.  The most problematic point here is that extra financing will be required to train a newbie, which is always needed irrespective of the professionalism of this person. In case these situations occur regularly, it may become an unreasonable waste of your financial assets. So, it makes sense to use HR metrics in order to increase the level of personnel retention as well.

Why have HR metrics become so important? The reason for that is the increased need for quality, accurate and efficient personnel management. It is not a secret that profitability of the company initially depends upon the productivity of its workforce. Human resource metrics applied within the Balanced Scorecard System make it possible to analyze the most vital factors that affect the efficiency of employees. In other words, they are perfect tools for the assessment of their experience and qualifications as well as utilization of the obtained data for the development of business improvement strategies.

Despite of the fact that not all senior managers consider this performance measurement system useful and important, the increased number of them understand the exceptional value of qualified human resources for their companies. They strive for proper implementation and interpretation of those HR metrics that are currently important for their businesses. What are they? Experts point out the following ten measurements that matter for the effective management of human capital in any organization: revenue factor, human capital return on investment, human capital added value, cost per one hire, labor cost revenue ration, health care expenses per one employee, training investments, overall compensation revenue ratio, voluntary separation rate and, of course, turnover costs. No matter what HR metrics you are going to develop in your company, they should obligatory be related to your business strategies and objectives. This will signify that your HR specialists understand the essence of this system and its importance for the organization they work in.

HR Balanced Scorecard analyzes the performance of any company with regard to the following perspectives: financial, strategic, customer and operational. Each of them involves a number of aspects to be evaluated. Thus, the financial perspective determines how well business owners manage the total turnover cost and whether the return on human resource investment is viable or not.  The strategic perspective defines if the company’s management invests into the advancement of human resource capabilities and how well their business strategies are interrelated with the goals they have set.  Customer perspective is considered when there is a need to analyze factors that affect the level of customer satisfaction, while operational perspective underlines the accurateness and efficiency of technologies applied for proper human resource performance improvement. It is assumed that effective and correct HR management will be obligatory reflected in the substantial increase of the company’s shareholder value, which is typically one of the most essential and important missions of any business.

No matter what business you own, you want to be sure that you have return on your financial investment. Consequently, you have to pay special attention to the analysis and improvement of the performance of all departments of your company. This initially concerns the efficiency of HR department, which is primarily responsible for personnel employment. This process, by the way, is much more complicated and time-taking than it may seem at first sight. This is because the human assets of your business may affect its performance in different ways. If you employ only qualified people, who are experienced in your particular industry, then you have more chances to promote your business and bring it to the new level. However, if the prevailing number of employees are not that qualified, it may prevent you from reaching the most urgent objectives you target at. This is actually one of the most frustrating, but common problems a lot of businesses face nowadays.

As far as it is not easy to differentiate between the proficiency of applicants, it makes sense to implement a reliable and accurate system, which will help HR specialists get the most out of the recruitment process. If you realize the necessity of this step, then HR metrics are what you really need. Though their development and measurement is quite expensive, they are still worth your investments. If you do everything properly, you will benefit from this system in the long run.

How exactly is it possible to define the return on your financial investments with the help of HR metrics? The fact is that there are lots of significant aspects that have to be considered here. These primarily involve the overall amount of employees hired during a specified period of time, the percentage of workers who undergo the probation period as well as the percentage of those who will be able to get a regular status in your company. No doubt, it is not easy to analyze all these factors, but if the human resource department employees cope with this task successfully, it will not take long to draw corresponding conclusions and improve the situation on time. That is why the above mentioned aspects should be obligatory included into the company’s HR metrics.

Experts point out that the number of metrics you are going to implement should not be high. Otherwise, HR specialists will be puzzled with them and may even overlook those that are of key importance for your business. Try to stick to ten basic HR metrics, which will facilitate the application of this system in your company.

If you are a human resource department worker, then you have firsthand knowledge of how challenging and complicated the process of personnel recruitment actually is. You will definitely agree that it is not easy to find qualified people, who wish to work for the benefit of the company. There are no 100% reliable means of defining whether the applicant for this or that position will meet your expectations or not. Meanwhile, this aspect is highly important, because the productivity of the company’s workforce affects its overall performance and profits. That is exactly why HR departments of both small and large companies all over the world recognize the necessity to implement human resource metrics.

What makes HR metrics so valuable? The thing is that they are really helpful in analyzing the company’s current performance and drawbacks that prevent these businesses from reaching all the objectives their managers have initially set.  They are often compared to specific guidelines that make it possible for different organizations to find cost-effective solutions to the most obvious human resource problems they currently face. If measured properly, HR metrics help enhance the overall efficiency and productivity of the company’s workforce. That is why we may state that the basic objective of their implementation is accurate and quality personnel assessment.

How is it possible then to work out a reliable human resource metrics system? This generally depends upon the experience and qualifications of HR department workers. Those of them, who have never heard about the concept of HR metrics before, are more likely to make serious mistakes in their development and measurement, which can make the whole approach ineffective. In this respect, proper training matters greatly and managers of such companies should make everything possible to provide their human resource department employees with the required knowledge. As soon as they realize the basics of this system and measurement principles, they will not face problems when implementing HR metrics. As a result, they will be able to define those applicants who are more suitable for vacant positions the company has.

Gathering information about the personnel proves to be one of the main steps in the evaluation of their performance.  Still, not all facts will be helpful here and HR specialists should be able to sort out those of them that are of paramount importance in this process. As a rule, ten metrics are more than enough to make this system effective. Such aspects as personnel engagement, recruiting and retention, workforce productivity and manager satisfaction should obligatory be included into this list, since they are those factors that affect the company’s performance most of all.

The role of the human resources in any company should not be underestimated, because this is exactly what business performance rests on. It does not really matter how unique, effective and advanced the company’s technologies are, since it is people who bear responsibility for its productivity.  That is why it seems highly important to provide them with improved learning and training opportunities. However, how can you know what exactly needs to be enhanced? The answer to the suggested question is the following: the Balanced Scorecard system is what you really require to make a quality evaluation of HR performance and draw corresponding conclusions. This tool can effectively help achieve all your business goals in a consistent and systematic way due to the metrics and indicators it utilizes.

So, what is the best way to apply the Balanced Scorecard system to human resources? To start with, you should define what HR metrics exactly you plan to implement and what measures you are going to undertake if you realize that something needs to be improved here. For example, if you focus on the reduction of turnover costs, you should think over the development of efficient recruiting techniques and new- hire orientation ways that will enable you to optimize the level of workforce retention.  What measures will you have to undertake to cope with these tasks then? You will definitely need to identify the basic features of productive employees who work in your company for over two years and apply different methods of screening new applications more precisely. In addition, you will have to integrate the so-called “”branding effort” into the process of recruitment and improve the orientation program for better retention of new employees.  The next step will be to decide how many HR metrics you are going to establish. When it comes to the reduction of turnover costs, the following measures will be the most effective: cost-per-hire, time-to-fill, turnover rates and costs, customer satisfaction with new-hire process, supervisor satisfaction with orientation etc. As you see, there is much work to be done before you decide what human resource metrics you will establish. So, you need to have enough patience and dedication to make it a success.

Apart from this, the HR BSC should obligatory involve the following efficient elements: accountability, measurable results and validity.  In other words, any HR metric should be understandable and have a connection with business objectives. Only in this case, the HR BSC system will prove to be really meaningful.

HR metrics have undoubtedly become highly important for different performance evaluation systems. The Balanced Scorecard system is not an exception.  The fact is that nearly all large companies face the necessity to identify how well their business is running sooner or later. The analysis of performance and productivity of the HR department is what they should start with. Unfortunately, a lot of business owners do not realize the value of this factor and frequently fail to undertake the required measures to manage the HR functioning effectively. Those, who do understand the importance of this procedure, tend to use the benefits offered by the Balanced Scorecard system to their advantage.

Human resource metrics, just like other essential measurements within the BSC system, should feature powerful connections with the company’s strategies. This may guarantee that proper HR evaluation means much for the management of the organization and they are striving for its improvement.  There are four basic perspectives utilized within the system of Balanced Scorecard. They are strategic, customer, operational and financial perspectives. The first one is used to identify whether the company’s owners properly invest in the growth of their HR capabilities. The second perspective is applied to define if the work of the HR department is appreciated by people and encourages them to work there. Operational factor, in its turn, is helpful when there is a need to decide how effective the HR management transactions and processes really are and what is done to enhance them. Lastly, the financial perspective is highly important as well, since it makes it possible to see whether the return on HR investment is competitive or not.

Each of the above mentioned perspectives uses a number of metrics in the process of HR performance measurement. Actually, the list of these metrics is quite long and involves the following indicators to be analyzed: revenue factor, human capital return on HR investment, general compensation revenue ratio, turnover costs, training investment aspect, cost per hire, health care expenses per employee etc. Still, no matter how long this list is, it does not necessarily mean that you should tend to establish all these HR metrics at a time. Instead, you should decide in favor of those that affect your business most of all.

The conclusion is as follows: effective measurement and management of the company’s human capital is one of the most essential parts of creating business value, which means that it should become a major component of the Balanced Scorecard system in general.