You know that analytics is changing the world of human resources. Powerful numerical analysis is providing deep insights into ways businesses can transform company culture, empower employees, and make themselves more profitable.
But just because you recognize the importance of HR analytics doesn’t mean you actually know what data you should be tracking or how to use it. Below are 5 key areas where you should be tracking HR metrics.
- Revenue Per Employee
Calculated by dividing your company’s revenue by its total number of workers, this metric indicates how much income you earn per employee. In other words, it’s a metric of how well a company uses its labor force. Revenue per employee can be affected by many factors. For instance, some industries are more labor-intensive, meaning their revenue per employee will always be lower. Another factor is the age of a company. Younger companies with newer workforces often have a lower revenue per employee until they are more established and employees have a stronger grasp on their jobs.
- Employee Productivity
The number of people who work from home has increased by 44% in the last 5 years. This shift means it’s hard to measure productivity the traditional way (by hours spent in the office). As Robert Pozen of the New York Times explains, “Instead of counting the hours you work, judge your success by the results you produce… Clearly, these accomplishments — not the hours that you log — are what ultimately drive your organization’s success.”
Productivity can be difficult to measure, especially in some industries, but knowing the productivity of your employees is important. Low productivity may mean employees lack the skills or understanding necessary for doing their jobs, or that some functions of their jobs need to be streamlined.
- Talent Management
Employees are your most crucial resource. They’re often also your most expensive resource. When your business experiences quicker-than-normal turnover, the costs of hiring and training employees increase. For this reason, tracking talent management metrics is critical.
Tracking your cost per hire, turnover rate, and training efficiency can help you identify areas where your company needs improvement. A high turnover rate may mean it’s time to evaluate employee pay, benefits, and engagement. Low training efficiency might indicate you need a more effective or economical training method. Talent management is an area where tracking analytics can pay off big time not only monetarily but in company culture and employee performance as well.
- Total Compensation
Related to talent management, total compensation looks at the cost of all compensation employees receive, including salary, overtime pay, bonuses, profit sharing, health insurance, retirement contributions, and stock options. On the one hand, better compensation helps recruit and retain better talent, but on the other hand, these benefits can be expensive for the company.
While compensation is a necessary expense, it’s one that must be managed. Over-compensation limits a company’s ability to acquire new talent, while under-compensation will lead to higher employee turnover and lower employee engagement. By pairing total compensation metrics with your revenue per employee and employee productivity metrics, you can better evaluate what kind of compensation your company can actually afford to offer.
The benefit participation rate, which tells you the percentage of employees who take advantage of certain forms of compensation you provide, is an important but oft-overlooked metric in this area. You can calculate this number by dividing the number of employees enrolled in a plan or benefit by the number of employees eligible, and then multiplying by 100. Inc.com explains that “If employees aren’t using some [benefits], then cut ties and move on. Reinvest the money into plans that are more widely used.”
- Diversity Hires in Customer-Impact Positions
This metric looks at the diversity of employees who deal directly with customers. Stan Kimer explains it this way: “People want to see themselves represented at companies they buy from, and a diverse sales force can more directly relate to the needs and wants of the people they are selling to.” The demographics of our society are changing; in fact, according to recent census data, babies of color now make up the majority of the U.S. population. When customers see your company employ people like them, it makes them feel more confident doing business with your company. This is an important metric for appealing to your target market.
As you look to become a more data-driven HR leader, it should become easier to find the metrics essential to track your business success. To help with this, we recently launched our HR analytics dashboard to bring all your people metrics into one place. Click to schedule a demo and learn more.