20 HR METRICS WITH

A DIRECT AND
POWERFUL IMPACT
ON BUSINESS AND
GOALS
 METRICS
Employee Turnover Rate
Cost per Hire
Time to Hire
Employee Engagement Score
Training Cost per Employee
Absence Rate
Employee Net Promoter Score (eNPS)
Performance Rating Distribution
Diversity Rate
Retention Rate
Revenue Per Employee
Employee Satisfaction Index
Leadership Ratio
Skills Gap
Overtime Hours
Salary Competitiveness Ratio (SCR)
Benefits Utilization Rate
Career Path Ratio
Human Capital ROI
Workforce Capacity
 EMPLOYEE TURNOVER RATE
This is the rate at which employees leave the organization, calculated by dividing
the number of employees who left during a certain period by the average number
of employees during that same period, multiplied by 100.

It's a key indicator of employee dissatisfaction, inadequate job fit, or unsuitable

working conditions. A high turnover rate can lead to higher recruitment and
training costs, lower organizational knowledge and customer satisfaction, and
can affect overall productivity and revenue.

Furthermore, a high turnover rate can seriously disrupt operations, lead to

institutional knowledge loss, and damage company culture. Companies with
high turnover may struggle to achieve long-term goals due to constant hiring
and training efforts. They may also face reputation issues that discourage
potential customers and high-quality job applicants, hindering business
growth and profitability. Implementing strong retention strategies such as
career development programs, mentorship opportunities, and regular
feedback loops can lower turnover.

Creating a positive, inclusive company culture and offering competitive benefits

can also contribute to retention. This is linked to Employee Engagement Score,
Employee Satisfaction Index, and Retention Rate. High engagement and
satisfaction often correlate with low turnover and high retention. It can also be
related to Training Cost per Employee if high turnover necessitates frequent
training of new hires. A common mistake is comparing turnover rates across
industries without taking into account industry-specific factors. High turnover
in one industry may be normal, whereas in another it might signal problems.

Also, it's important to differentiate between voluntary and involuntary

turnover, as they may reflect different issues.
 COST PER HIRE
This is the average amount of direct and indirect costs associated with
recruiting a new employee. Direct costs may include advertising expenses,
job fair fees, online job board charges, and agency fees.

Indirect costs can include interview time, background checks, and

administrative expenses. By managing this cost, businesses can maximize
their recruitment budget, allowing resources to be invested elsewhere,
thereby improving overall efficiency and profitability.

Additionally, high costs per hire can reduce a company's profitability and
limit its ability to invest in other crucial areas such as product development,
marketing, or customer service. It may also force the company to hire fewer
employees than needed, leading to understaffing and overwork, both of
which can harm productivity, quality, and customer satisfaction.
Streamlining the recruitment process through efficient applicant tracking
systems and focusing on quality over quantity in sourcing strategies can
lower recruitment costs. Building a strong employer brand can also reduce
advertising costs by attracting more organic applicants.

This metric can be linked to Time to Hire as longer hiring processes can lead
to higher costs. It may also impact the Quality of Hire, as rushing the
process to save costs might compromise the quality of candidates hired. This
metric can be misunderstood if all relevant costs are not included. For
instance, many companies fail to account for indirect costs such as time
spent by employees on hiring activities.

The cost per hire metric is also sometimes used to justify cost-cutting in the
recruitment process, which can lead to lower quality hires.
 TIME TO HIRE

This is the duration from the day a job requisition is opened until the
offer is accepted by the candidate. It's influenced by various factors
including sourcing methods, efficiency of the recruitment process, and
the complexity of the role.

Reducing the time to hire can lead to cost savings, faster time to
productivity, improved candidate experience, and a better competitive
edge in securing top talent.

On the flip side, prolonged hiring processes can leave critical positions
vacant, hampering the company's ability to execute strategies and meet
objectives. It can also lead to lost opportunities as top candidates may
accept other offers, weakening the company's competitive position in the
marketplace. Speeding up the recruitment process might involve
investing in training for recruiters, implementing better screening
methods, or using AI-powered recruitment tools.

Keeping communication with candidates efficient and timely can also

shorten the hiring timeframe. Linked to Cost per Hire as mentioned
above, but can also impact Employee Engagement Score and Employee
Satisfaction Index as a prolonged hiring process might affect new hire's
initial engagement and satisfaction. A common mistake is prioritizing
speed over quality. While a short time to hire can save costs, if rushed,
it can lead to poor hiring decisions.
 EMPLOYEE ENGAGEMENT SCORE

This score is generally determined through an employee survey that

assesses factors such as job satisfaction, commitment, and motivation.

Engaged employees are typically more productive, better at problem-

solving, less likely to leave, and more likely to be advocates for the
company, all of which can lead to improved business performance and
customer satisfaction. Besides, low employee engagement can result in
higher turnover rates, decreased productivity, and poor customer
service, all of which can harm the company's performance and
reputation.

By maintaining high engagement levels, companies can foster a positive

culture, which can help in attracting talent, retaining top performers, and
achieving business objectives. Regular engagement surveys and action on
feedback, as well as initiatives focused on work-life balance, rewards
and recognition, and career progression opportunities can improve
employee engagement.

Correlated with Employee Turnover Rate, Retention Rate, and Employee

Satisfaction Index. High engagement often leads to high satisfaction and
retention and low turnover. Misinterpreting this score is common as high
engagement does not necessarily equate to high productivity or
performance.

Also, acting on this metric without understanding the root causes of low
engagement can lead to ineffective solutions.
 TRAINING COST PER EMPLOYEE

this is the total cost of employee training divided by the number of

employees.

It includes expenses such as training materials, external courses or

seminars, and the time spent on training. Investments in employee
training can improve skills, increase productivity, decrease error rates,
and improve employee satisfaction and retention, leading to a stronger
competitive position.

However, if these costs become exorbitant without corresponding

improvements in productivity or quality, it can impact profitability.
Therefore, it's important for HR leaders to ensure that training
programs provide a good return on investment, contributing to the
company's strategic goals. Cost-efficient training strategies may include
leveraging online learning platforms, developing in-house training
programs, and optimizing the use of existing resources. Regular
evaluation of training effectiveness can also help ensure good ROI.

This can be linked to Employee Performance, as more investment in

training should theoretically lead to better performance. It's also related
to Employee Turnover Rate if frequent training of new hires is needed. A
pitfall here is viewing training as an expense rather than an investment.
Cutting training costs might save money in the short term, but it can
hamper long-term growth and productivity.
 ABSENCE RATE

This is calculated by dividing the number of workdays missed due to

unplanned absences by the total number of contracted workdays,
multiplied by 100. High absence rates can lead to decreased productivity,
overworked remaining staff, poor morale, and lower customer
satisfaction. A strategic focus on reducing absence rates can lead to
increased efficiency, improved employee wellbeing, and better customer
service.

Excessive absences can also disrupt workflow, increase the workload

for other employees, and lead to missed deadlines, all of which can
negatively impact business performance and customer satisfaction.
Effective absence management strategies can include promoting a
healthy work environment, implementing flexible work policies, and
offering wellness programs.

This metric can be linked to Employee Satisfaction Index and Employee

Engagement Score, as high satisfaction and engagement often lead to
lower absence rates.

This metric can be misused if companies penalize employees for absences

without understanding the reasons. For instance, if the absence rate is
high due to poor working conditions, penalizing employees could
exacerbate the issue.
EMPLOYEE NET PROMOTER SCORE
(ENPS)
This is calculated based on responses to the question: "On a scale from
0-10, how likely are you to recommend this company as a place to
work?" It provides an indication of overall employee satisfaction and
loyalty, which can affect recruitment, retention, productivity, and
customer satisfaction.

Focusing on improving eNPS can enhance the employer brand and

contribute to business growth.

A low eNPS score may signal a poor work environment, potentially

affecting the company's ability to attract and retain high-quality
employees, impacting overall business performance.

Increasing eNPS might involve regular pulse surveys to understand

employee sentiment and areas for improvement, initiatives to improve
the employee experience, and a clear feedback loop to demonstrate that
employee opinions are valued. Correlated with Employee Satisfaction
Index and Employee Engagement Score.

A high eNPS often indicates high satisfaction and engagement. A pitfall

here is focusing too much on the score and not enough on the feedback
received.

The score is a metric, but the feedback can provide valuable insights for
improvement.
 PERFORMANCE RATING
DISTRIBUTION
This is the distribution of employee performance ratings, typically on a
scale from poor to excellent. It can help identify performance trends,
skills gaps, and training needs. Fostering high performance across the
company can lead to increased productivity, higher-quality products or
services, and better customer satisfaction.

Furthermore, an understanding of performance distribution can help the

company align its workforce with its strategic goals, identify areas
where additional training or resources are needed, and ensure that it is
well-positioned to meet future challenges. Regular performance reviews,
clear goal-setting, performance improvement plans for underperformers,
and career development programs for high performers can help manage
performance levels across the organization.

This is related to Training Cost per Employee, as better training should

ideally lead to better performance. It's also linked to Revenue Per
Employee, as higher-performing employees typically contribute to higher
revenue. Misunderstandings can occur if this metric is used in isolation.
For instance, a company with a high performance rating might have a
lenient assessment process, not necessarily high performing employees.
 DIVERSITY RATE

This refers to the variety of differences between people in an

organization. Diversity can include race, gender, ethnic group, age,
personality, cognitive style, tenure, organizational function, education,
background and more. A diverse workforce can lead to a broader range
of ideas, promoting creativity and innovation, enhancing problem-solving,
and leading to better decision-making and business outcomes.

Diversity can improve the company's image and attractiveness to

potential employees and customers, supporting business growth in
diverse markets. A diverse workforce can be fostered by unbiased
recruitment processes, inclusive policies and practices, and diversity
and inclusion training programs.

This can impact Employee Engagement Score and Employee Satisfaction

Index, as diverse workforces often lead to higher engagement and
satisfaction. It's also linked to the Company's Reputation and Employer
Branding, as organizations that value diversity are often seen as more
attractive to potential employees. A common mistake is to focus solely on
representation and not on inclusion and equity.

Diversity without inclusion can lead to underutilized talent and reduced

employee satisfaction.
 RETENTION RATE

This is the percentage of employees who remain with the company over a
given period, usually a year. Retaining employees can save the company
recruitment and training costs, maintain productivity and morale, and
preserve organizational knowledge and skills. Companies with high
retention rates are often more stable, enabling them to pursue long-term
goals effectively.

Strong employee retention can be a sign of a positive work environment

and effective management, both of which can enhance the company's
reputation and attractiveness to potential employees and customers.
Strategies to improve retention may include competitive compensation
packages, clear career progression paths, recognition and reward
systems, and regular employee feedback.

This metric is linked to Employee Turnover Rate, Employee Engagement

Score, and Employee Satisfaction Index. High retention usually means low
turnover and high engagement and satisfaction.

A pitfall is assuming that a high retention rate is always a positive sign.

In some cases, it might reflect a lack of career mobility, leading to
stagnation and reduced motivation.
 REVENUE PER EMPLOYEE

This is calculated by dividing total revenue by the total number of

employees. It provides an indication of employee productivity and the
efficiency of labor utilization. Higher revenue per employee indicates a
more efficient and profitable organization.

By focusing on maximizing this metric, HR can contribute to improved

financial performance and growth. This metric is also a key indicator of
organizational efficiency, so if it's low, it may signal the need for
productivity enhancements or workforce adjustments. Ways to boost
this metric could involve improving productivity through training and
development, optimizing work processes, and investing in tools and
technologies that enhance efficiency.

This is linked to Performance Rating Distribution and Training Cost per

Employee, as better performance and training often lead to higher
revenue per employee.

It's also linked to Workforce Capacity, as optimal capacity can improve

revenue generation.

A potential misuse of this metric is to drive employees to work longer

hours to increase productivity, which can lead to burnout and decreased
productivity in the long run.
 EMPLOYEE SATISFACTION INDEX

This is a measure of how satisfied employees are with their jobs, often
assessed through surveys.

Satisfied employees tend to be more productive, committed, and loyal,

leading to benefits like lower turnover, higher customer satisfaction, and
better business performance. Additionally, a strong Employee
Satisfaction Index can make the company more attractive to potential
hires, supporting recruitment efforts. Regular employee satisfaction
surveys, initiatives to improve work-life balance, and clear
communication around company policies and changes can enhance
employee satisfaction.

Correlated with Employee Engagement Score, Retention Rate, and

Employee Turnover Rate. High satisfaction typically means high
engagement and retention and low turnover. It's important not to view
satisfaction as an end in itself. Satisfied employees are not always
productive or engaged.

Actions should be taken to ensure satisfaction leads to increased

productivity and performance.
 LEADERSHIP RATIO

This is the ratio of management to non-management employees. A

suitable ratio helps ensure effective management without unnecessary
costs or bureaucracy.

An appropriate leadership ratio can also contribute to employee

satisfaction and productivity by ensuring adequate support and direction
without excessive micromanagement. It also helps maintain
communication and decision-making efficiency, which can support the
effective execution of business strategies. A suitable leadership ratio
can be maintained by having clear succession planning in place, investing
in leadership development programs, and ensuring an adequate support
system for all employees.

This can impact Employee Satisfaction Index and Employee Engagement

Score, as appropriate leadership ratios can enhance satisfaction and
engagement. It's also related to the Performance Rating Distribution, as
effective leadership often leads to better performance.

A common misunderstanding is that a lower ratio (more leaders) always

leads to better results. Too many leaders can lead to confusion and
inefficiency, while too few can lead to inadequate supervision and
support.
 SKILLS GAP

This is the difference between the skills that employers need to achieve
their business goals and the skills that their employees possess.
Identifying and addressing skills gaps can enhance productivity and
innovation, foster employee growth and development, and maintain the
company's competitive position in the market. Besides, if a skills gap is
left unaddressed, it can lead to missed opportunities, inefficiencies, and
decreased competitiveness, hampering business growth and
development.

Regular skills assessments, training and development programs, and

partnering with educational institutions can help close skills gaps.

Linked to Training Cost per Employee, as addressing skills gaps often

involves training investments. It can also impact Performance Rating
Distribution, as a workforce with a smaller skills gap typically performs
better. A common pitfall is focusing on existing skills gaps without
considering future needs. The skills gap analysis should align with the
strategic direction of the company to ensure future competitiveness.
 OVERTIME HOURS

This is the number of hours employees work beyond their regular work
hours. It's important for managing labor costs and employee wellbeing.
High overtime can increase costs and risk burnout, while low overtime
could suggest underutilization.

Balancing overtime can help manage costs, maintain employee

satisfaction, and ensure productivity. Consistently high overtime may
indicate understaffing or inefficient work processes, both of which can
negatively impact productivity, employee morale, and ultimately,
customer satisfaction. It could also lead to higher operational costs and
potential legal issues, affecting the company's bottom line and
reputation. Balancing workloads, optimizing work processes, and hiring
additional staff or adjusting shift schedules where necessary can help
manage overtime.

This can be linked to Employee Satisfaction Index and Employee

Engagement Score, as excessive overtime can lead to decreased
satisfaction and engagement. It's also related to Workforce Capacity, as
optimal capacity management can reduce the need for overtime.

A common mistake is considering high overtime as a sign of dedication or

productivity. Prolonged periods of high overtime can lead to burnout,
increased errors, and lower productivity in the long run.
 SALARY COMPETITIVENESS RATIO
(SCR)
This compares the average salary at your company to the average in the
market for similar roles.

A competitive SCR can help attract and retain top talent, ultimately
supporting business goals by ensuring the company has the necessary
skills and experience to succeed. If the company's salaries are not
competitive, it may struggle to attract and retain top performers, which
could hinder its ability to compete effectively, achieve its goals, and
maintain customer satisfaction.

Regular benchmarking against industry standards, clear pay structure

and transparency, and performance-based rewards can help maintain a
competitive SCR. This metric is linked to Employee Turnover Rate and
Retention Rate, as competitive salaries can contribute to low turnover
and high retention. It's also related to the Quality of Hire, as competitive
salaries often attract higher-quality candidates.

A potential pitfall is assuming that higher salaries alone will attract and
retain talent. While important, other factors like career development
opportunities, benefits, and work culture also play significant roles.
 BENEFITS UTILIZATION RATE

This is the percentage of eligible employees who are utilizing each

benefit. High utilization rates can indicate that the benefits offered are
valued by employees, which can aid in recruitment and retention efforts,
improve job satisfaction, and enhance productivity.

Conversely, low utilization might suggest that the benefits package

needs to be reevaluated and potentially redesigned, which could lead to
cost savings for the company and increased satisfaction for employees.
Regular surveys to understand employee preferences, communication
around available benefits, and regular reviews of benefits offerings can
improve benefits utilization.

This can impact Employee Satisfaction Index and Employee Engagement

Score, as employees who utilize and appreciate their benefits tend to be
more satisfied and engaged.

A common mistake is thinking that low utilization is always bad. Some

benefits, like employee assistance programs, might have lower utilization
but provide significant value to those who use them.
 CAREER PATH RATIO

This ratio compares the number of internal promotions to external hires.

A high ratio can indicate that there are clear advancement opportunities
within the company, improving employee morale and retention, and
contributing to business continuity and institutional knowledge.

Promoting from within can also be more cost-effective and less risky
than hiring externally, as the company already knows the employees'
abilities and fit with the company culture.

Clear internal mobility policies, internal job boards, and career

development support can help improve this ratio. Linked to Employee
Engagement Score and Retention Rate, as clear career paths often lead
to high engagement and retention. It can also impact the Leadership
Ratio, as internal promotions often fill leadership roles.

Misinterpreting this ratio is common. A high ratio (more internal

promotions) isn't always positive if it leads to a lack of new ideas.

A balance between internal promotions and external hires is often

beneficial.
 HUMAN CAPITAL ROI

This is the return on investment in human capital, calculated by dividing

total workforce costs into the company's revenue.

A higher ratio indicates that the company is using its human capital
effectively, which can enhance profitability and provide a competitive
advantage. If this ratio is low, it could signal inefficiencies in labor
utilization or issues with workforce productivity, which might require
strategic interventions from HR to address. Investment in employee
development, strategic workforce planning, and effective talent
management can enhance Human Capital ROI.

This is linked to many of the other metrics, such as Training Cost per
Employee, Revenue Per Employee, and Workforce Capacity, as all these
factors can impact the return on investment in human capital. A potential
misuse is viewing human capital solely in monetary terms.

This can lead to decisions that improve the ROI in the short term but
negatively affect employee morale and retention in the long term.
 WORKFORCE CAPACITY

This measures the volume of work the workforce can produce, often
assessed in terms of full-time equivalents (FTEs).

Adequate capacity is crucial for meeting business demands and achieving

strategic goals. Managing capacity effectively can ensure operational
efficiency, customer satisfaction, and business growth. If capacity is not
aligned with demand, it could lead to overwork, stress, burnout, and
turnover, or alternatively, underutilization and unnecessary labor costs.
HR plays a crucial role in monitoring and managing workforce capacity to
align it with the company's strategic goals.

Regular forecasting of labor needs, cross-training employees to enhance

flexibility, and hiring temporary staff during peak periods can help
manage workforce capacity. This metric is linked to Revenue Per
Employee, as optimal capacity management can maximize revenue.

It's also related to Overtime Hours, as under or overcapacity can lead to

excessive overtime.

A pitfall is to push for maximum capacity utilization without considering

employee wellbeing. This can lead to burnout and decreased productivity
over time.