The Ultimate Metrics Toolkit For Business Leaders
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CONTENTS
02
05
08
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Hiring Metrics You Cannot Afford To Ignore
Retention Metrics To Improve Your Bottom-Line
Top 3 Workforce Productivity Metrics
5 Ways to Measure Employee Performance Like A Pro
Best Practice Compensation Metrics
2
Hiring the right Talent is costly for businesses, and when you think about the amount of time and money spent just looking for that ‘perfect’ candidate, it’s imperative to keep tabs on expenditure, recruiting effectiveness and not hire blindly.
How are you currently measuring your organisation’s recruitment efforts?
(hint: if you’re like the majority of companies, you will be focussing on the 2 most common metrics)
Source: Josh Bersin CEO & President, Bersin & Associates.
“”
Companies are spending an average of $3,500 for every new hire brought into the organization – about three times the amount spent on training per employee.
Workforce Insights For Business Leaders
Hiring Metrics You Cannot Afford To Ignore
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Workforce Insights For Business Leaders
1. Time-to-fill?
2. Cost-per-hire?
A measurement of how long it takes an organisation
A measurement of total cost incurred per hire. Costs include advertising fees, agency fees, employee referrals, travel expenses, relocation expenses and internal recruiter costs. Keeping track of cost-per-hire helps with budgets but it
Efficiency of recruiting has always been dependent on these two commonly measured metrics, but as businesses operate and take a more results-based, data-driven approach to decision making, you need metrics that do more than just measure time and cost.
Here are 5 other metrics you will need to track on top of time-to-fill & cost-per-hire in order to measure recruiting effectiveness:
does not take into account of length of time to make a successful hire and the quality of the hire. What good is a very low cost-per-hire if revenue producing positions remain unfilled for long periods of time?
3. Source of Hire Tracking source of hire helps the organisation better understand the quality of their sources and determine which channels is the most effective. This helps hiring managers identify which is the most effective sourcing channel(s) to recruit high quality Talent and justify sources they should no longer use.
How to measure?
Percentage of new hires from a particular source with highest performance and tenure rates.
4. Quality of HireIn order to save money and improve productivity, you need to move beyond costs/time and into measuring the quality of new hires. Quality hires translate into higher performance which drives more revenue, and higher profits for the organisation.
How to measure?
There is no standard formula for defining quality of hire as every firm defines quality in its own unique way. You will need to sit down with the management to determine what makes a quality hire.
Usually, data from performance appraisals is used but it’s crucial to keep in mind that such data is based on subjective feedback i.e manager’s satisfaction and feelings towards the candidate. Quality of hire can be based on performance-related factors like adaptability, consistency and
to fill a vacant position.
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Workforce Insights For Business Leaders
5. Workforce Productivity Though you might have a fast time-to-fill, hiring managers will soon realise that recruiting candidates who are slow to reach the expected performance level is the result of a poor hiring process.
New employees typically show less productivity compared to experienced staff, but they should steadily increase their speed and performance over time.
How to measure?
The average number of days that it takes for a new hire to reach the minimum or expected output for the job role.
involvement or result-focused like contribution to sales growth, increased value to share-holders or exceeding set targets and expectations.
6. New Hire Termination A quick termination rate indicates a fail somewhere in the hiring process as it means increased expenses to make new hires and puts a negative impact on the organisation’s business performance.
How to measure?
New hire termination represents the number of new hires who were terminated within a year of joining. This can be measured by the ratio of new hires terminated within the first year compared to the total number of new hires made.
7. Vacancy Rate Every extra day a critical position is vacant translates into a dip in business performance. There could be delays in important projects or missed opportunities because of these unfilled positions. Ideally, if your organisation is executing on effective hiring strategies, the vacancy rate should be close to zero or as low as possible.
How to measure?
The ratio of vacant job positions in the organisation compared to the total number of job positions.
Really, your ultimate goal should be recruiting the best people to achieve business goals and gain the highest ROI possible for the organisation. HR and business leaders should look beyond basic metrics and start monitoring critical metrics related to business impact like quality of hire, performance, and tenure rates.
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Workforce Insights For Business Leaders
Retention Metrics To Improve Your Bottom-Line
Retention remains one of the key workforce issues for business leaders to keep a
hawk-eye on, largely because of its huge impact on turnover and profitability. A high level
of churn negatively affects employee morale, productivity and customer satisfaction…
while reducing turnover can dramatically shrink accrued separation, hiring, training and
overtime costs for your organisation.
Stats that Shock Replacing staff costs businesses £4 Billion each year.
The cost of losing an executive is astronomical – up to 213% of the employee’s salary
Average employee turnover rates over the next 5 years are predicted to rise from 20.6% to 23.4%.
– 2014,The Telegraph –
– Center of American Progress (CAP) –
– HayGroup –
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Workforce Insights For Business Leaders
Consistently tracking retention metrics over time is crucial for spotting trends and
addressing them before they develop into business-threats. General metrics such as basic
retention and turnover numbers are inadequate in today’s competitive economy and
talent-centric business world. Needless to say, the parsing of a large list of specific metrics
is both counter-productive and difficult to maintain. So which are the most important
metrics that you, as business leaders, need to track?
1. New Employee Attrition RateEmployee attrition happens when new employees leave the organisation for another when they get a ‘better’ offer.
A high attrition rate is an indication of possible management issues within the department, job or salary dissatisfaction, etc. It could useful for HR team to conduct exit interviews to understand why new people are so quickly vacating their positions and rectify the problems before they escalate.
When a high attrition rate goes unattended for a period of time, your organisation could be incurring extra costs overtime when it comes to hiring and training.
How to measure?
Number of new employees who left the company voluntarily divided by the number of employees employed by the company during a given time period.
Here are the 5 retention metrics that are most relevant to your bottom-line:
2. Promotion Rate / Promotion Wait Time
A delayed promotion could result in a high level of dissatisfaction and may force an employee to leave the organisation in search of better opportunities. Promotions are highly desired because of it’s positive impact on pay, authority and the ability of the employee to influence the business.
Timely promotion helps improve employee retention so make sure that you keep promotion wait times at an acceptable level. One good way is to set time parameters for evaluations and use reviews as a basis for career advancement.
How to measure?
The ratio of employees who were promoted, and the average time (in years) between promotions.
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Workforce Insights For Business Leaders
3. High/Low Performer Retention Rate
4. Engagement Index
5. Retirement Rate
You cannot afford to lose your best performers to another organisation, let alone to a competitor. Effective HR programs should improve retention for high performers while creating a positive turnover for low performers. A bad retention rate for high performers is an urgent call to work on ideas that foster engagement and retention of best performers. Likewise, it also makes sense to study resignation rates by department or manager to sniff out potential managerial issues.
Engagement is not simply about job satisfaction, it also correlates with long-term productive tenure of staffs. Numerous studies have shown that high levels of engagement will produce higher quality work, productivity and attendance levels.
In a perfect world, retirement rate for organisations should remain at 0% as employee retirement from your company only means Talent and knowledge drain. If the retirement rate is creeping up, it could be an indication of ageing workforce...time to work on succession planning and keep the Talent pipeline pumping! Start preparing new hires and current employees to take on new roles within the organisation.
How to measure?
How to measure?
How to measure?
Number of top/low performers who remained in the company divided by the number of top/low performers employed by the company during a given time period.
Engagement Index measures the overall level of engagement of employees within the organization - usually derived from employee engagement survey based on the percentage of favourable responses to key questions.
Number of Employees reaching retirement age divided by total number of employees in the organisation.
Leaders must keep business-critical Talent from jumping ship and look out for key employees who are potential flight-risks. The longer a position in the organisation remains vacant, the higher the turnover costs, and productivity losses will snowball. Build a culture of workforce retention for your organisation quickly by analysing these 5 retention metrics.
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Workforce Insights For Business Leaders
Top 3 Workforce Productivity Metrics
Generally understood as the ratio of output to input, all business
leaders will agree that the productivity of an organisation’s workforce
has a direct impact on efficiency and profitability.
The objective is to continually reduce employee costs related to
wages, benefits and other miscellaneous expenses while growing
company revenue…but it’s not simply about cutting costs. It’s about
doing the right things to attain an optimised level of workforce
performance and productivity for organisational success.
Are you measuring what matters when it comes to ROI of
Human Capital?
Peter Drucker, 1974, Pioneer of Modern Management Theory
“
”
Without productivity objectives, a business does not have direction.
Without productivity measurement, a business does not have control.
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Workforce Insights For Business Leaders
1. Profit Per Full-Time Employee (FTE)
2. Human Capital Return on Investment (HCROI)
Ideally, profit per FTE should be increasing year on year.
Annual reports provide a good benchmark on how your organisation is performing as both revenue and employee size will often be published in these reports. Calculate your own numbers against other firms of a similar size or your competitors to see how your company fares.
This metric gives you a clear picture of the value derived from your workforce. The larger the percentage return, the more effective your people investment.
How to measure?
How to measure?
Total Profit / Total number of FTE
HCROI = {(Revenue – (Operating Cost – Labour Cost))/Labour Cost}-1
Here are 3 best-practice productivity metrics you need to watch out for:
1. See if the organisation is en route to reach revenue targets with current workforce productivity
2. intervention of management to introduce training programs, invest in new technology or streamline production process to enhance productivity
Workforce productivity metrics is crucial for business leaders to:
3. Ratio of Labour Cost to Overall Costs
Any changes in productivity levels should be in line with the changes in labour costs in order for a company to maintain market competitiveness. Improving productivity means keeping the ratio low or at least at a constant.
How to measure?
Total Labour cost / Total Cost
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Workforce Insights For Business Leaders
5 Ways to Measure Employee Performance Like A Pro
Every organization wants its employees to be productive but business leaders cannot
hope to enhance corporate performance if it’s not even being measured. In order to gain
an accurate picture of employee performance, business leaders need to keep a balanced
scorecard of your organization’s performance.
Here are 5 simple ways to measure employee performance like a pro:
1. Star Employees
2. Performance Appraisals
Who are your top performers and how many of them are there?
High performers are key drivers of businesses. A high turnover rate has a direct influence on succession planning strategies and could indicate teething employee retention issues within the organization.
Appraisals are useful indicator of performance as it assesses an individual employee’s job performance and productivity in relation to certain pre-established criteria and organizational objectives.
How to measure?
How to measure?
% of star employees who left over past year / total number of star employees
*A star employee is someone who ranks above average on performance evaluation.
Types of appraisals include self, peer and manager appraisals. However, the most comprehensive assessment is the 360° or ‘Full-Circle’ appraisal where the employee’s performance is appraised by everyone with whom he or she interacts, including managers, peers, customers and members of other departments.
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Workforce Insights For Business Leaders
3. Performance Rating Distribution
4. Gross Margin/ Profit
5. Customer Satisfaction
This is not about pitting departments or employees against each other but you need a clear picture of how performance is distributed throughout the departments of the organization.
The mother of all performance metrics, ‘Gross Margin’ is the fastest way to determine if your organization is on the right track or not. It also works as an early warning system for you to implement margin improvement strategies.
Customer satisfaction level should always be on your radar… every happy, satisfied customer will always be one who will continue to work with you. When you think profits, think customers!
How to measure?
How to measure?
How to measure?
Cross-compare performance and productivity metrics across departments. For example, sales & marketing should be matching up, operations and support teams should be working in tandem.
Total Revenue – Total Cost
One of the best ways to measure customer satisfaction is by carrying out a customer satisfaction survey. When designing the survey, focus on issues that you can measure and have the biggest impact.
Get the guide: Top 3 Workforce Productivity For Business Leaders
Performance metrics are bread and butter numbers that connect your workforce to the results they drive. The heart of your business depends on these 5 metrics so start measuring the right performance indicators you need.
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Workforce Insights For Business Leaders
Only by implementing the right measures can organisations effectively use what they spend on their people and execute the right strategy aligned towards business goals.
Here are the 5 key compensation metrics to help access and manage compensation effectiveness:
Employee compensation is one of the largest expenses for any organisation, but more
often than not, it’s unfortunately also the least well-managed.
Just ask yourself these 3 simple questions:99 Are you adequately rewarding top performers?
99 Are you over- and/or underpaying jobs relative to the market?
99 Have you overlooked and allowed employees to suspect that they are not being paid fairly?
“ ”What gets measured gets done
Best Practice Compensation Metrics
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Workforce Insights For Business Leaders
1. Compensation Revenue Factor
2. Average Compensation per Employee
This metric gives you an idea of how much was invested in employee compensation in order to generate revenue. Over time, this will indicate if the company is obtaining more or less return for every $ invested in its people.
It’s a challenge to maintain a balance between costs and competitive compensation packages for high performers. Tracking this will provide an assessment of your company’s compensation plans relative to your competitors. It can also help to track the national averages published or other benchmark statistics.
(Compensation Total / Revenue ) x 100%
If your compensation revenue factor is 15%, it means that you are spending 15 cents in compensation for every one dollar earned in revenue.
How to measure?
How to measure?
(Compensation Total / Headcount ) x 100%
3. Compensation and Benefits Satisfaction Factor
4. Pay Differential
If conducted and analyzed properly, satisfaction surveys reveal a lot about how employees feel about compensation plans in the company. Low levels of satisfaction might be a key flight-risk indicator and poor performance.
When it comes to keeping employees happy, making sure that employees feel that they are paid fairly compared to their co-workers is a key consideration. Performance-based pay is usually considered the most fair but if employees have to work together, an extremely wide pay differential can have a divisive effect that could cause a lower performance in the department or team.
How to measure?
How to measure?
Percentage of employees satisfied with compensation
Compensation for high performers / compensation for non-high performers
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Workforce Insights For Business Leaders
5. Direct Compensation Increase Direct compensation refers to salaries, bonuses, incentives and allowances. It’s important to keep track of these as they can be compared to performance ratings for different roles and across office locations.
How to measure?
Total spend on direct compensation compared to performance ratings across company
97 % of CEOs in a global survey by PricewaterhouseCoopers said that retention of key talent is their #1 source of competitive advantage in sustaining growth over the long-term. Business leaders must start paying more attention to the role of compensation as a key lever of lever for engaging and retaining top performers for the continued growth and success of the business.
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Workforce Insights For Business Leaders
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Born in Asia in 2011, HRBoss is headquartered in Singapore and maintains presence across the globe with offices throughout the Asia-Pacific region in 6 countries today. All HRBoss Cloud solutions are intuitive, highly-configurable and are supported locally on-the-ground across Asia.
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Workforce Insights For Business Leaders
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