The competition for talent is heating up just as the workforce is shrinking. In today’s talent-driven economy, staying on top of your people data is more important than ever. Effective metrics and KPIs can help HR teams flag areas of trouble early and make the necessary adjustments quickly.
There are many metrics that go into workforce analysis. Below, are four KPIs that every HR department should include to get the most out of their recruiting processes, workplace culture, employee programs and other aspects of people management.
Turnover rate: Too many people joining and then quitting an organization can be a red flag that HR needs to be aware of. High turnover rates can cost a company, big time. Josh Bersin of Deloitte believes the cost of losing an employee can range from tens of thousands of dollars to 1.5–2.0x the employee’s annual salary. HR can nip this problem in the bud by establishing strategies to reduce attrition when voluntary resignation numbers climb above a certain limit. While there’s no clear-cut answer, one simple and effective way to measure turnover is to take the number of monthly terminations and divide it by the average number of employee at mid-month times 100.
Absenteeism rate: This KPI gives you an important perspective on the amount of work and productivity that your organization is losing because of sickness and unpredicted leave. A survey of European countries reveals that, on average, rates of absence across Europe are between 3% and 6% of working time. A generally accepted formula for measuring absenteeism is to take the total number of lost workdays due to absence and divide this by the number of available workdays in an organization. But there are many different ways to gauge this KPI and every HR team needs to develop a metric that best suits its unique organizational goals.
Retention rate: Sure, there’s a connection between employee retention and employee turnover, but they should still be measured separately. It’s a mistake to assume that retention rates are simply the opposite of the turnover KPI. The average length of time that a person spends with a company can be a powerful indicator of job satisfaction. With technological advances creating new jobs every day, it’s not a surprise that employee retention rates are decreasing. This decline has made employee retention crucial to measure. One study found that 40% of employers rate retention as more important today that it was five years ago.
Pay gap: Women at work continue to earn less than their male counterparts. Today, the gender pay gap is more than a social or legal issue: it can make it more difficult for employers to attract and retain top talent. One increasingly popular way to address the gender pay gap is by performing an internal gender pay audit. Once the payroll data’s been processed, HR practitioners can then make recommendations to senior management about how to lower gender barriers in recruitment, hiring, pay and promotions. HiBob and other people management platforms are making it easier for organizations to spot such inequalities so that they can take initiatives to correct them.
The key to KPIs in HR analysis
The KPIs your organization chooses to focus on showing what its priorities are. As the old saying goes, “what gets measured, gets managed.” But whatever HR-related metrics you use, getting the most out of KPIs depends on the numbers you put into them. Our economy’s data-driven, meaning that we have the tools today to develop super-accurate KPIs to measure pretty much everything connected to your people’s lives at work. When done right, these four KPIs can help boost your people’s morale, encourage professional development and support your organization’s wider business objectives.