Think data analytics is the future of HR? It could be time to update yourself! HR analytics is already here, being used by companies worldwide to reveal hidden insights into workforce hiring and management with the objective of increasing operational efficiencies.
Its adoption has witnessed a huge surge in the last 10 years with a growing number of businesses relying on hard data and information to drive HR-related decision-making and improve business outcomes.
If you, too, are considering a drive towards HR digitalisation and analytics, it is important to start with an in-depth understanding of key HR metrics and the principles underlying them. Below we discuss seven key metrics that HR professionals should keep in mind in their quest to pursue a data-driven HR strategy.
1. Time to Hire
Positions that are open for long periods of time often lead to employee stress, decline in productivity, and end up impacting your bottom-line. HR departments must learn to strike a balance between finding the right hire and filling the position within a reasonable amount of time. High ‘time-to-hire’ numbers may indicate a larger problem related to recruiting efficiency. One way to address the problem is to outsource the recruitment process either partly or entirely.
2. Cost Per Hire
The ‘cost per hire’ metric performs a host of useful functions, including:
- Enabling comparisons between your hiring expenses and that of the industry average
- Highlighting which portion of the recruitment process is raking up the maximum expenditure, opening the way for cost optimisation
- Providing useful information for budgeting and planning
- Acting as a performance measure for the recruitment department
A high cost per hire is not necessarily a red flag, but it may indicate trouble if it is accompanied by high ‘early turnover’ levels. Use the industry average as a benchmark to analyse your recruitment expenses and match them to employee performance.
3. Voluntary Turnover Rate
The ‘voluntary turnover rate’ allows you to measure the proportion of employees that have left the organisation on their own, as opposed to being asked to resign. Through it, companies can measure the effectiveness of their employee retention policies. Businesses may also choose to drill down on specifics through the calculation of metrics like ‘early turnover rate’ (the proportion of employees that leave the organisation within the first year of joining) and ‘turnover rate per manager’ to access detailed information as a prelude to taking the necessary steps for corrective action.
Companies often tend to link absence with productivity, although the link between the two is certainly tenuous. It is possible that an employee with high absenteeism is much more productive than another one with a good attendance record. The real use of the metric lies in red-flagging possible employee-related issues through the use of tools such as the Bradford Factor. This is a predictive tool used by HR departments worldwide to assess the risk level associated with employees by studying their absenteeism patterns.
5. Employee Engagement
Employee engagement is arguably a better indicator of productivity than employee absence. The problem with employee engagement is that it can be hard to measure as it is difficult to quantify, unlike the previous metrics. Internal surveys (‘pulse checks’), focus groups, exit interviews etc. are some of the means that companies use to measure employee engagement. These days, one can also find apps that track engagement levels and provide a host of valuable insights.
Despite the popularity of performance appraisals in the business world, very few companies actually get it right. The annual performance appraisal system may potentially lead to biased reviews due to the length of the period under review. A quarterly system is much more effective in this regard.
Furthermore, HR departments should try and get a holistic picture of the performance of an employee by asking all stakeholders to share their opinion on the worker. To be really effective, performance appraisals must be accompanied by a credible performance improvement plan to help employees develop into better professionals.
Companies tend to pay overtime depending on the nature of the business. For example, seasonal businesses may require employees to work longer hours during certain parts of the year. Similarly, looming delivery schedules with regard to specific projects may also result in the payment of overtime to employees. But overtime pay should be the exception rather than the norm. Inflated overtime bills are usually an indicator of the fact that the company needs to hire more people, either on a permanent or temporary basis, depending on their needs.
Moving Towards Analytics
Most of these metrics are easily available on your HRMS. For those parameters that defy quantification, such as employee engagement, the firm may invest in relevant apps or get in touch with survey companies for assistance. If you are working with an HR outsourcing company, ask for access to the above metrics to help you streamline your HR policy. A sharp digital strategy has the potential to positively impact your HR operations in all aspects, from recruitment to retention and everything in-between.
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