Human resources (HR) measurement metrics

Human resource function has serious impact on general business performance. In fact, an organization’s competitive advantage largely depends on the way it manages its largest asset – its people.

BSC Toolkit for HR

BSC Toolkit for HR includes 15 Balanced Scorecards for HR and 3 guides on how to use Balanced Scorecard for HR purposes. Download trial version of the BSC Toolkit for HR.

Human resources (HR) strategy

Human resources are the most critical asset of any organization. According to the latest research, the efficiency level of an organization largely depends on its human capital management (HCM). The study showed that over 80% of managing directors believed Human Capital Management to be vital for the fundamental success of a business, while effective measurement is crucial to deliver effective HCM. Comprehensive human resources measurement policy enables the organizational management to collect consistent information about the employee population, which alleviates decision-making and ensures that management and development activities remain relevant with overall business strategy. With a sound HR metrics program, HR management can make business decisions that are based on cold facts rather than “gut feeling”, and use the exact figures to back up business cases and requests for resource.

Main HR practices

Human resources practices have direct impact on general business performance. Typically, the most significant HR practices are viewed from 6 perspectives: rewards and accountability; collegial, flexible administration; recruiting and retention excellence, communications integrity, dedicated HR service technologies, prudent application of resources. Most research analyses have shown a strong correlation between these practices and a 30% increase in shareholder value.

HR strategy should be linked to the business goals and objectives. When creating effective HR measurements, an organizational management should consider whether each set of HR metrics contributes to its business performance and provides an insight into productivity assessment and resources appraisal which lead to efficiency gains and customer experience improvement.

Typically, HR metrics are classified in three key categories: historical, real-time and forward-looking. HR strategy should specify the starting point of business development in order to assess the motivation and future impact of the changes in the HR profile and general business structure. To evaluate the business development, the HR can either use its own historical data or benchmark its organization against other similarly sized businesses or industry ‘best of breeds’.

HR analysis requires the allocation of specific resources. It is essential to implement periodical assessment of HR performance without interfering with existing business procedures. Most companies prefer to employ dedicated technology to optimize the data collection. Besides, the HR report should be presented in comprehensive and clear format. For instance, graphical representations with short textual summaries provide for better accessibility and readability of the HR data. The HR report may also be presented in a form of HR scorecard, which is relevant not only to HR professionals, but also organizational management and employees.

HR metrics

The most widely used HR metrics are typically concerned with employee attitudes, employee turnover, employee skill levels, as well as outsourcing costs, service center operations, the number HR transactions processed, staffing process, training programs utilization and effectiveness, and promotions. These measurements are employed by 25 to 75% of all business organizations.

Each metric contains 2 to 5 performance indicators. For instance, “employee attitudes” metric includes the following indicators: Job Contentment (the percentage of employees satisfied with their job), and Manager Contentment (the percentage of employees satisfied with their manager).

“Employee turnover” metric generally include such indicators, as Cost per Hire (calculation of advertising, agency fees, employee referrals, relocation, recruiter pay and benefits costs and the number of hires), Turnover Cost (calculation of termination, new hire, vacancy and learning curve costs), Turnover Rate (rate of the employees leaving an organization), Time to Fill (the period from job requisition approval to new hire start date), Length of Employment (this indicator considers the job title, department, etc.).

“Recruiting” metric includes Vacant Period (number of overall days the positions were vacant), New Hires Performance Appraisal (average performance appraisal of new hires, compared to previous period), Manager Satisfaction (according to the survey of hiring managers, compared to previous period), Turnover Rates of New Hires (during a specified period), Financial Impact of Bad Hire (according to turnover cost and cost per hire).

BSC Toolkit for HR

BSC Toolkit for HR includes 15 Balanced Scorecards for HR and 3 guides on how to use Balanced Scorecard for HR purposes. Download trial version of the BSC Toolkit for HR.

“Retention” metric includes Overall Employee Turnover, especially in the key positions, Preventable Turnover (this indicator considers the reasons the employee left the organizations and what measures may be taken to prevent it), Diversity Turnover (turnover rate in professional, managerial, and technical positions), Financial Impact of Employee Turnover.

“Training and Development” metric includes Learning and Growth Opportunities (percentage of employees who are satisfied with the learning and growth opportunities in the organization), On-the-job learning Contentment (percentage of employees who are satisfied with on-the-job learning, project assignments for growth and development, and job rotations), Opportunities for New Hires (percentage of employees who report training opportunities among the top three reasons they accepted the job).

Although most organizations use similar set of HR measurements, however, even common metrics don't always include standard components. For instance, a common “cost per hire” metric may contain different expense categories, such as advertising, online services, background checks and recruiter costs. Recruiting and staffing metrics may also comprise various aspects. For instance, organizations usually measure “college recruiting” by analyzing the source of organization newcomers and their progress at the workplace.

HR measurements have significant implications for all areas of the business performance. For instance, employee attitudes and turnover metrics are reported to have key influence on decision making in the organization.

Implications of HR measurements

Download BSC Designer software, that is used to design Balanced Scorecards such as HR Balanced Scorecard.

The organizational leadership may benefit from periodical HR assessment if it employs HR methodology to identify the main areas of improvement in its human capital. For instance, tracking absenteeism can help increase productivity, or measuring diversity can help save a company from costly discrimination awards. Besides, HR data may be used in creating financial reports in order to link human resources measurements to investment return.

On the whole, HR measurements transform human resources capabilities to measurable strategic value, which provides for better accessibility and readability of HR data, and improves HR interconnection with leadership across the organization.

HR metrics in BSC Designer

Let me give some clarification about all mentioned reports, metrics and BSC Designer Software.

1) In this article we have described the most popular and useful HR metrics. There are many ways of how to use them. What we suggest are HR Metrics incorporated into balanced scorecard. In this way you can connect your future HR measures with your company strategy.

2) HR Metrics Balanced Scorecard is a tree of HR metrics, that you can see at this screeenshot. This is how this balanced scorecard looks in our Strategy2Act software. 

3) If you want to design your own HR metrics scorecard or invite expert to evaluate your company HR in compliance with your strategy tree, then you will need Strategy2Act files, here is download URL: HR Metrics Balanced Scorecard (already included in BSC download package). 

• To open these file you will need a BSC Designer Software. You can download it from www.bscdesigner.com

• To open a sample HR Metrics double click on ".bscs" file (recommended)

• To open a HR Strategy tree file click on ".bsct" file (it's a template for your own balanced scorecard)

• Remember that all these downloads are for evaluation purposes only, if you wish to use it in your business, please, purchase an appropriate number of licenses. 

• You can download a 30-day evaluation version of BSC Designer. Download Balanced Scorecard software.

• You can purchase BSC Designer Software on-line. Purchase Balanced Scorecard software.