Human resource metrics (HR Metrics) are measures that are used to determine the effectiveness of human resources in generating the results required. The origin of measures to determine the effectiveness of an organization’s workforce can be traced to the scientific management period. The measures continued being used during world war II and throughout the industrial expansion period after the war. During this period, most of the HR metrics in use today were developed. The HR Metrics need to show that the organization is utilizing human capital effectively and that it attracts, acquires, and develops a suitable workforce. HR Metrics that are needed by a mid-sized company are key to the organization’s decision making are as explained below.
Mid-Sized HR Metrics
Employee turnover rate measures the frequency of employees exiting the organization. This is determined by dividing the number of staff who have quit by the average number of staff in the firm. This data can be sourced from the company’s books. A high turnover rate is an expense to the organization as it means a high number of employees have quit. The cost of finding a replacement is high, and it also lowers productivity in the company. Turnover may be either voluntary or involuntary (Kavanagh & Johnson, 2017). Voluntary turnover rate points to management issues, while the involuntary turnover rate suggests the company is hiring the wrong workforce. Mid-sized companies should strive to maintain a low turnover rate by ensuring good policies on retention strategies.
Overtime Cost metric is the cost of pay for the overtime the employees put in the organization. When the cost is high, it may signify that there is an issue of scheduling or that the workforce is below the required level in the organization. There is also the butterfly effect of employee turnover when there is excessive overtime for long periods of time. The cost can be mitigated by having a scheduling system that favors all employees in the short run. When there are persistent overtime costs, the company can hire additional employees.
Revenue per employee is used to measure the amount of profit that the employees generate for the company. This metric is arrived at by dividing the total profit and the average number of staff in the company. This is a measure of much each staff is contributing or has achieved in the company (Wolf, 2016). The desired ratio is that each staff should generate more revenue than what was used to hire and train each employee. This ratio justifies that the employee is right for the job he or she was hired for. There are various reasons for the decline of the profit per employee, such as the exponential growth of the company, lack of proper training to employees, or obsolete cost control measures.
Absenteeism from the organization can be used as a measure of wellness of the workforce. The data can be sourced from the organization records of how many hours each employee puts in a specified period of time. This is used to determine the productivity of the existing employees. When the absenteeism rate is high, it may point to issues of unfavorable
work climate or stress in the workplace. The management hence can put in place measures to improve the work conditions in order to improve the productivity of the workforce.
The comparative-ratio metric is the measure of how far the salary the organization’s salaries are from the market salary range for similar positions in other companies. This ratio helps the company to know if they are compensating their employees appropriately in comparison with the market standards. The ratio is 100% when the organization is compensating the employees according to the market range. An organization risks losing high-quality employees and attracting lower quality employees when the employee compensation ratio is low. High compensation rates show that the company is mismanaging resources, which may result in reduced revenue to the organization.
Sources of Comparative Human Resource Metrics Data
Comparative human resource metrics data can be sourced from public or private sources that are internal and external sources. The sources provide data that organizations can use for comparability in order to determine the HR metrics suitable for the growth of the company (Iwu & Kapondoro et al. 2016). Sources of such data are; websites of the companies, employee work tenure, details got from the recruitment process for new employees, interviews for the existing and exiting employees, direct observation, and conducting surveys and questionnaires.
This data provides the organization with the quantifiable data that can be used to determine the metrics that are working in the company, and the loopholes the management should strive to fill. The sources provide raw information; hence the company has the obligation of interpreting the information in the right way to draw a statistical analysis that can help in identifying the problems which could affect employee motivation and productivity and the company at large. For mid-sized entities, the direct observation method of sourcing the metrics is recommended. This ensures that the data is got directly from the activities of the business hence able to come up with a good statistical analysis on which metrics the company has in place and those that the company needs in order to thrive in the market and plan accordingly.
HR metrics serve as actionable evidence for the company decision making process as they enable companies to track trends in the company. These trends help the organization measure the organization’s resources spent on human resource management training and initiatives. Organizations deploy different types of HR metrics based on the overall business needs as a company. Each organization should source its data and perform a comprehensive analysis to determine which type of metric can favor it positively hence utilize it to improve the productivity of the organization.
Wolf, R. (2016). Dashboard design: using metrics to drive business performance. Strategic Finance, 97(12), 20-28.
Kavanagh, M. J., & Johnson, R. D. (Eds.). (2017). Human resource information systems: Basics, applications, and future directions. Sage Publications.
Iwu, C. G., Kapondoro, L., Twum-Darko, M., & Lose, T. (2016). Strategic human resource metrics: a perspective of the general systems theory.
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