Employee metrics measure the human-related costs of running a business. When it comes to making important decisions about company productivity, these Human Resources metrics can reveal essential insights into where the budget is being spent.
Not only do employee metrics enable HR executives to track and measure performance, but they also help you predict future staff costs.
In short, they measure employee costs in relation to the profitability of your business. Since no business owner can afford to operate without this essential data, let’s go straight into the eight employee metrics that will help you maximize your productivity.
It’s important to know how much revenue each employee generates. A higher revenue per employee generally indicates a more productive organization, though it’s difficult to establish a benchmark across different industries and geographical locations.
The revenue per employee metric can be worked out as follows:
Total revenue ÷ total number of employees = revenue per employee.
There is no recommended figure, it could vary from $150 per day to thousands depending on your industry. Generally, successful businesses find that employees bring in more money than it costs to hire them.
The cost per hire (CPH) measures the average figure spent to recruit qualified candidates. This may be used for internal or external hiring costs. In-house recruitment involves talent acquisition and training costs, while external costs per hire include hiring agency fees, job posts, interviewing costs, and so on.
The cost-per-hire formula is as follows:
Internal recruiting costs + external recruiting costs ÷ the total number of hires = CPH.
The CPH should also take account of cost savings such as remote interviewing by online video calling which reduces the need to pay a prospective employee’s travel expenses.
The onboarding of new staff members has changed dramatically since the start of the pandemic with many now undergoing remote onboarding. How new employees are treated in their first days of a new job goes a long way to determining whether they will stick with the company. According to TalentLyft, 69% of employees are more likely to stay with a company for three years if they experienced great onboarding.
There are multiple reasons why staff leave their jobs, but this year has turned out to be a record for resignations. In fact, more workers from the USA are quitting their jobs than at any other time during the past two decades.
The pandemic has led to many people examining their lives and thinking about whether they want to continue in the same job for the next 25 years. Others have found remote working to be a challenge.
Continuous video calls from the home office or kitchen table have given rise to a form of video conferencing fatigue which is leaving employees feeling exhausted and defeated. While video conferencing has become an invaluable tool during lockdown, it has also unfortunately contributed to physical and mental exhaustion amongst employees.
In fact, 40% of remote workers report suffering from a sense of physical and mental exhaustion after prolonged screen time.
Email fatigue is another factor driving staff to hand in their notice. New ways of working can help alleviate the frustration caused by piles of emails, not least, cloud computing which brings a whole host of benefits for employees and organizations.
It goes without saying that high employee turnover is costly. Every time someone leaves, you have to invest time and money recruiting, interviewing, onboarding and training. This can all add up to as much as half the cost of an employee’s annual salary.
To calculate employee turnover, take the number of staff and divide that by the number of employees who have left over the course of a year, or a set amount of time.
The number of employee terminations ÷ average number of employees = turnover rate.
This is all about how to tailor systems so that staff can work most efficiently. It’s less about individual productivity and more about an overall picture of the type of employees required to effectively run the organization.
Measuring employee productivity can help establish whether you have the right skills available to avoid understaffing, or indeed, overstaffing. While manual labor is a little easier to track, there are different factors at play for knowledge work. Embrace the science of analytics to help you evaluate productivity.
In addition, try to focus on the essential tasks that contribute to the success of your organization, rather than tracking the number of hours spent in the office and the number of emails sent.
Evaluate the quality of work, rather than just the speed at which a task is completed. Measuring how many calls a customer service agent made is all very well, but what about their feedback rating?
It’s important to measure call center metrics and KPIs which ultimately help to increase customer satisfaction and/or agent productivity.
Has the team acquired new skills such as mail retargeting?
All of these factors should be taken into account. To establish an employee productivity rate metric you will need to calculate company revenue divided by the number of employees on payroll.
When an employee suddenly takes time off, it could be for any number of valid reasons. Yet there will be an inevitable impact on your business. This impact could be major or minor, depending on the role the absent employee holds. It could mean other staff members have to cover their work, you could miss vital meetings and deadlines, and it could lead to disharmony in the workforce if co-workers are asked to work extra hours.
The employee metrics for tracking absenteeism should start with an attendance and absence management policy. This policy should specify the number of vacation days, who to report an absence and sick leave to (phone, email, etc), and the consequences of an employee failing to follow this guidance.
Instead of just recording someone as absent, you should come up with a list of common reasons why staff take time off, such as sick leave, medical appointments, childcare, and jury duty. This will give you a full picture of absenteeism in the company.
Some organizations avoid training costs because they are concerned they won’t receive a good return on investment. In fact, the reverse is often true. Staff that feel valued are much more likely to stay loyal to an organization or business. Investing in professional skills and staff training won’t just boost morale and reduce turnover, it can also plug competency skill gaps and will help your company to remain competitive.
To assess employee metrics in training, you will need to identify the goals of different training programs. What are you hoping to achieve through this training? Is it part of a succession planning strategy? Is it to help your employees become more adept, for example by learning how to use business phone systems more efficiently?
Ask for feedback from your staff about how they prefer to learn. Would they rather use a mobile device or be in a classroom? Would IT professionals, for example, want to focus on the meaning of no code when it comes to designing software for the self-service movement?
To calculate training spend per employee can be reached by crunching the following numbers:
Training budget ÷ number of trainees = training spend per employee.
HR departments are now much more likely to track key performance indicators (KPIs) that show both overall performance and how different policies are contributing to the business.
KPIs should be part of a wider HR planning strategy. The right HR software and tools can collect data and produce reports which will provide valuable insight and an opportunity to see where improvements should be made.
Human resource metrics enable an organization to measure the effectiveness of its human resources, such as employee turnover, cost per hire, and benefits participation rate.
Having a sense of direction and purpose empowers staff which leads to greater success and wellbeing. Small to medium-sized companies average one full-time member of human resources for every 100 to 150 employees.
The cost of HR per employee can be worked out as follows:
Total HR salary and benefits ÷ number of employees = the cost of HR per employee.
A quality health insurance plan is one of the most desirable benefits you can offer your staff, but it isn’t cheap. Healthcare insurance premiums are rising every year. The average annual premiums for employer-sponsored health insurance in 2019 was $20,576 for family coverage, a 22% increase over five years.
Out of that amount, employees paid an average of $6,013 toward healthcare costs.
Expensive as healthcare insurance is, it’s essential if you want to attract top talent to your team. As far as employee metrics go, this is one of the easiest to work out. You just need to sum up what you contribute to employees’ premiums over a year and divide it by the number of insured employees, as follows:
Total healthcare costs ÷ number of employees in the plan = healthcare costs per employee.
Keeping track of employee metrics and HR costs is essential in determining whether you’re using business costs wisely. Using all or just some of the metrics outlined here will provide crucial data. This in turn will help you to plan future budgets and maximize company productivity.
If you are interested in even more business-related articles and information from us here at Bit Rebels, then we have a lot to choose from.
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