The C suite might not care about application completion rates, time to hire, and other metrics that make the human resources world go round. You use them. They belong in HR. But company executives might have a different idea about what matters most of all.
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With technology advancing at a stunning rate, big data to mine and so many different ways to examine it, there’s no shortage of information to convey. The trick is measuring the right metrics and pulling the right reports to illustrate what they need to know.
The short version: what was the return on investment for the last budget spend and how will you improve on that next cycle?
The long version: which metrics illustrate the biggest impacts, whether they’re negative or positive?
Reward Gateway says the better informed you are and the more clearly you articulate that information the better chance you’ll stand of getting more in the next budget cycle.
You don’t have to flood them with information. You just need to tell the whole story as succinctly as possible. These metrics show the direct relationship between what you do and how the results affect the company.
How Much Revenue is Generated by the Average Employee?
Any metric that takes you straight down to the bottom line is a good one. Also one of the most revealing metrics, revenue-per-employee gives a high-level view of the relationship between people and what they bring to the company. Human Resources Today calls it ”the standard workforce productivity metric.”
Here’s how you get it: total yearly revenue divided by the average number of employees.
To take this metric a bit further, do a little research into the employee productivity of industry peers, suggests Human Resources Today. Revenue and the number of employees should be public for larger companies. How does yours compare to competitors in your area, around the country and even around the world?
Employee productivity won’t give insight into departments or teams. But it’s still useful as a marker or baseline that can help you illustrate the value or effectiveness of changes implemented in the future. Perhaps more important, it’s got zero fluff.
How Has a New Hire Improved Over the Previous Employee’s Performance?
The loss of an employee pinches the company in several different ways. Not only does it have a straightforward financial effect because you’ll need to source and hire someone new, it can also affect these elements of day-to-day operation:
- Higher stress and lower employee morale
- Lower department/team productivity
- Increased workload for other employees
- Risks of additional attrition
- Customer service issues
Once a new person is hired, the Quality of Hire Improvement metric reveals how they’re working out. HRT explains that this metric is probably too complicated to quantify for employees whose performance isn’t measured in dollars and cents. But for people in sales and collections, it’s easy.
In its most basic form, this metric shows as a percentage how much better (hopefully, not worse) a new hire is performing compared to the last person who held the job. How have sales or collections increased?
This metric doesn’t just show an employee’s performance. It speaks to the effectiveness of your sourcing and hiring, particularly if the new hire was sourced and hired using any new strategies from the time when the previous employee was hired. You could use it to support the effectiveness of these and many other HR practices:
- Relationships with recruiters
- Sourcing/talent matching
- Technology used
- Candidate screening
- Candidate experience
- Candidate engagement
- Employee engagement
What is the Weighted Performance Change for Turnover in Key Jobs?
Ready to dig in a little deeper? Let’s talk about how costly it is when the company loses its best performers. The weighted performance change for turnover in key jobs illustrates how important it is to keep top employees engaged. It’s especially useful when compared to the cost-per-hire of starting over from scratch with someone who may or may not match the performance of their predecessor.
HRT says you should ”measure the percentage of employees in key jobs who voluntarily quit each month and over the whole year.” This turnover rate should be weighted by their performance so that you can see at a glance how costly it is to lose the best people in top roles.
The weight, they explain, is typically the percentage-how much better-that the employee who quit performed than others in similar roles. Weighting the metric in this way puts more value on losing a high-performing employee than those who perform at average or below. If the employee’s productivity isn’t easy to determine like it would be for a person in sales, you’ll probably need to work with the CFO to determine the employee’s ”total dollar impact” on the company.
How Many Goals Were Met During the Last Budget Cycle?
This metric shines a light on the human resources department. If you want a better budget next year, Percentage of HR Goals Met is where you’ll find ample data to support it. It might be uncomfortable to scrutinize your effectiveness so thoroughly. But avoid the temptation to gloss over or artificially weight anything that’s not exactly positive. Negative results are areas to improve.
Your goals would have been outlined with company executives long in advance. These are just a few of the numerous possibilities:
- Recruiting
- Retention
- Talent development
- Culture
- Employee engagement
- Implementation of new technology
- Training
Another metric that’s difficult to quantify, this one relies partly on the opinion of others within the company. You probably can’t put a dollar amount or even a percentage on how well human resources performs because it deals with how your work affects them in theirs. And according to Qualtrics, American workers aren’t exactly the best gauges of their own performance. Americans routinely rate personal performance about 11 percentage points higher than the performance of their peers.
HRT says a simple way to survey managers and employees is with a 1-to-10 scale on performance.
”For any program getting a rating of eight or lower, ask the surveyed person to estimate the dollar amount of their reduced productivity.”
Going forward, surveying and reporting twice a year on goals met shows how effective you’ve been and gives you the opportunity to course-correct.
Revenue Lost From Job Vacancies
The revenue that’s lost when an employee leaves isn’t the reverse of revenue gained while they’re on board. There’s much more to calculating the true impact of losing an employee than erasing what they brought to the company. But you still should begin with the direct costs.
Like this: annual salary / 220 working days X the company average days to hire
But that’s just the baseline. To make this a much more useful and revealing metric, you’ll need to investigate much further.
There’s cost-to-hire or the total cost of hiring someone new. It involves sourcing and recruiting costs including recruitment advertising, revenue lost while the job is vacant, and a host of factors.
The business impact can spread far and wide throughout the company. Dice says it might include delayed product release, customer satisfaction issues, direct lost revenue and more.
Within each of those data points, there’s more to explore. How deep you go depends on how much of an impact you believe they have.
For example, if a key employee quits and that employee has a strong relationship with a valuable customer, there’s more at risk. If another employee steps in to pick up the slack until the position is filled again, the customer might not have the same rapport. Worse, they might not get along with the replacement employee at all, which could equal lower sales or even the loss of a customer.
Drilling down even more, let’s say the customer is known for making referrals. If customer satisfaction dips, you could lose their business as well as the potential business of the people they refer. You can’t quantify with any sort of accuracy the potential effect of losing a customer you never had. But you can get a closer idea by examining past referrals and how fully they developed into customers.
Looking at the employee who steps to handle the workload of a lost employee, they also have an impact on business. If their workload increases, morale might drop and customer service with their own regular clients could suffer.
There’s almost no end to it.
Lost revenue from job vacancies can reaffirm your case for a healthier budget that enables a more dynamic recruitment process as well as progressive employee engagement strategies to keep the talent you’ve got.
Once you’ve compiled the most common and relevant set of metrics, there’s one more thing to do. Chances are there’s another point either unique to the industry or to the company where you work. It might be included as a weight in another metric, but it needs its own separate investigation. It could be a problematic hiring tactic, wonky software or something as small as offensive hold music on the phone. If you can identify it, you can probably measure it in some way and relate it to the employee or customer experience and the overall profitability of the business.
Meeting with the C suite is enough to give anyone a healthy case of nerves. They need answers and rely on you to provide them. Because they can’t be involved elbows-deep with your department, they also count on you to filter out the noise and distill the data into meaningful metrics that they can apply to their own tasks. The more you learn, the more opportunities you’ll have to improve the effectiveness of your department and departments throughout the company.