Quick look: Small- and medium-sized businesses (SMBs) can’t afford to guess their way to success. To grow, they must have a data-driven decision-making culture. But with so many HR metrics available to measure, which are the most important? From turnover rate to revenue per employee, let’s explore the 14 most critical HR metrics for today’s SMBs.
Over the past several years, data-driven human resources (HR) has become essential to maximizing a company’s HR function and uncovering valuable information about an organization and its workforce.
This growing trend has led to a greater focus on and awareness of HR analytics, and the benefits a data-driven approach can have on companies, including SMBs. In fact, according to Grand View Research, the global HR analytics market was valued at $2.25 billion in 2019, and is expected to balloon at a compound annual growth rate of 14.2% through 2027.
Detailed analytics aren’t a new trend – they’re a tried-and-true approach to HR success. But of all the data that can be tracked, what’s worth investing time, effort, and money in? Here are 14 HR metrics that may prove to be valuable for smaller companies to track and analyze, and how to calculate them.
1. Employee Net Promoter Score (eNPS)
Net Promoter Score (NPS) is a popular metric used to determine customer satisfaction. But it can also be used to determine employee engagement and happiness.
To calculate an eNPS score, employers must first survey their employees on a regular basis (i.e. twice per year or once each quarter). The survey should ask employees to rate their willingness to refer the company to a friend or colleague on a scale of 1-10 (or something similar).
The results break down like this:
-
- Ratings from 0-6 are called
detractors
-
- Ratings from 7-8 are called
passives
-
- Ratings from 9-10 are called
promoters
To calculate this metric:
eNPS = % Promoters – % Detractors
eNPS is an important metric for business leaders to measure frequently, and leadership should tweak and improve the survey each time it is conducted. An eNPS score between 10 and 30 is considered good, while anything close to 50 is excellent.
2. Turnover rate
Perhaps one of the most commonly used HR metrics, employee turnover rate shows the number or percentage of employees who leave a company during a given timeframe, and whose roles the company intends to refill.
Turnover metrics can be beneficial in gauging a company’s culture, recruiting strategy, and more. High turnover rates could signal that internal issues exist in which leadership should address.
To calculate this metric:
Turnover Rate = (Number of Separations / Average Headcount) x 100
Generally, retention rates of 90% or higher are considered good and SMBs should aim for a turnover rate of 10% or less.
3. New hire or early turnover
An important sub-metric of employee turnover rate is new hire/early turnover rate. This HR metric looks at the number or percentage of employees who leave within their first year.
To some HR experts, this metric is even more important to track than overall turnover numbers. An employee leaving early could mean that the job isn’t what they signed up for, they have a poor relationship with their manager, or they haven’t had sufficient training. Keeping a pulse on new hire turnover rate can help SMB leaders and managers identify and solve any issues that may be causing employees to depart quickly.
To calculate this metric:
New Hire Turnover Rate = (Number of Employees Who Leave After Less than 1 Year / Total Number of Separations During the Same Period) x 100
4. Average time to fill
Recruiting metrics are some of the most important HR data an organization can measure. Tracking and analyzing these metrics over time can help identify areas in need of improvement and can strengthen talent acquisition strategies.
One of the most commonly used recruiting metrics is average time to fill. This metric looks at the number of days it takes from a job being posted to when an offer is accepted. Knowing how many days on average your positions remain open can help improve recruiting efforts.
To calculate this metric:
Average Time to Fill = Total Number of Days of Open Jobs / Total Number of Open Jobs
The average time to fill varies by job function, and the rate can be lowered by automating job postings, resume screenings, and initial outreach, referring to previous candidates for current requisitions, or outsourcing recruiting efforts to a professional employer organization (PEO).
5. Offer acceptance rate
Offer acceptance rate is another popular recruiting metric, which measures the percentage of candidates who accept job offers.
If a company has a low offer acceptance rate, this could mean there are issues with compensation, job title, employee benefits, or other factors that would cause a candidate to decline an offer. In this case, employers can consider working with a PEO to update their benefits packages, revamp their employer branding strategy, and more.
To calculate this metric:
Offer Acceptance Rate = (Number of Offers Accepted / Number of Offers) x 100
6. Absence rate
Absenteeism can be a problem for companies of all sizes. A high absence rate could mean there are issues with company culture, compensation, and employee satisfaction.
It’s important to note that absence rate measures how often employees call in sick or don’t show up for work. This metric doesn’t include things like paid time off (PTO), jury duty, or other planned absences.
Routinely tracking this metric can help identify workplace trends, such as certain times of the year that have higher absentee numbers.
To calculate this metric:
Absence Rate = (Total Number of Days Missed / Number of Workdays) x 100
7. Absence rate per manager or department
Businesses can drill down further into absence rates by looking at absence rates per manager or department. Doing so can help to pinpoint specific areas of a company where absenteeism is a problem.
Identifying which departments or managers are experiencing higher absenteeism can allow leadership to address the issues that are leading to increased absences.
To calculate this metric:
Absent Rate Per Manager/Department = (Total Number of Days Missed by a Team or Department / Total Number of Workdays in a Team or Department) x 100
8. Employee satisfaction
Many studies have shown that happy, engaged, and satisfied employees are also the most productive. These employees are also much less likely to leave the organization – which lowers turnover rates and helps the company save the time and money spent on hiring a replacement (on average, hiring a new employee costs roughly $4,000!).
These reasons (and more) are why measuring employee satisfaction is commonly viewed as one of the most important HR metrics. Employers can measure employee satisfaction by using eNPS or other surveys and questionnaires, as well as reviewing employee reviews on sites like Glassdoor and Indeed. All of these methods can help identify what is working or how to improve staff happiness.
9. Training cost per employee
Learning and development (L&D) is more important than ever for both employers and employees. 94% of workers say they’d stay at their company longer if it invested in their careers, and many businesses are spending a lot of resources to help train their workforce.
It shouldn’t be too much of a surprise that, given the amount of money spent on L&D, business leaders want metrics to justify the costs. One popular metric is training cost per employee, which breaks down how much money on average the company is spending on L&D per worker.
To calculate this metric:
Training Cost Per Employee = Total Money Spent on Training / Number of Employees Who Participated in Training
Employers should also note that there is also a cost associated with not training employees. Staff that aren’t adequately trained can cause customer dissatisfaction, as well as increase an employer’s turnover rate (94% of employees said they’d stay at a company longer if it invested in their careers).
10. Training time per employee
Another useful L&D metric is training time per employee. This number breaks down the average number of training time (generally measured in hours) per each employee in the organization.
This can help a business determine how many training hours each employee needs to take in order to meet a larger organizational goal. This can help leadership ensure they are dedicating enough time to train specific employees and can help with forecasting future projects and initiatives.
To calculate this metric:
Training Time Per Employee = Total Number of Training Hours / Total Number of Employees
11. Cost per hire
Often viewed as one of the most important recruiting metrics, cost per hire helps companies and talent acquisition departments determine how much money is spent on each new hire.
This metric requires some time to accurately calculate, as there is both internal and external expense data that needs to be determined first – but accurately measuring cost per hire can help determine just how healthy a recruiting strategy truly is.
To calculate this metric:
Cost Per Hire = ([Total External Costs] + [Total Internal Costs]) / Total Number of Hires
12. Revenue per employee
Another organizational metric, revenue per employee can help determine if a company’s staff is at a healthy total number. It can be especially useful when measured and compared over time.
This metric has also been proven to be very beneficial to smaller employers. Salaries and benefits are the largest expenses for many organizations, and a high revenue per employee rate can confirm these costs are being offset.
To calculate monthly revenue per employee:
Revenue Per Employee = Monthly Revenue / Number of Employees
To calculate yearly revenue per employee:
Revenue Per Employee = Yearly Revenue / Number of Employees
13. Employee performance
Measuring employee performance is critical for every company, and there are many ways these metrics can be measured and analyzed.
Individual employee performance goals can be set up on a monthly, quarterly, and/or yearly basis. The same goes for team or departmental goals.
While there may not be one “right” way to measure employee performance, tracking performance numbers can assist with promotions, salary increases, business growth, and much more.
14. Promotion rate
It’s important for employers to have data around promotion and advancement within the organization. These numbers could help explain why turnover rates are high, or why employee satisfaction drops the longer an employee is with the company.
Tracking promotion numbers can help provide insights into your employee development efforts, and can be a great tool for recruiting and retention. Additionally, this data can shed light on the state of your organization’s diversity, equity, and inclusion (DEI).
To calculate this metric:
Promotion Rate = (Total Number of Promotions / Total Headcount) x 100
ExtensisHR’s DEI Dashboard simplifies the analysis process by providing actionable data on pay equity, salary trends, employee turnover, promotions, and previous hires.
HR metrics: a must-have ingredient for business success
It’s important to note that there are many more HR metrics that organizations and departments can track beyond the ones listed above.
HR data can provide valuable insights into an organization and its workforce that can be used to make significant improvements. Additionally, tracking and analyzing various HR metrics can help business leaders identify where resources should be spent in an organization.
