“Information wants to be free.”
― Stewart Brand

One of the key elements in business is tracking its financial status, progress or regress. For that to turn into a feasible information, you need metrics which will translate the tracking parameters (KPIs) into data usable for further development. Departments individually have their own KPIs to track how well the job activities are being done and HR is no different. The usual metrics in HR are mainly related to staff, like turnover or cost per hire, so I wanted to disect the most important and useful ones in different types of businesses. The main goal of any business, next to making profit obviously, is to reduce costs as much as possible and going into to new year with the looming recession on the horizon, it’s going to be prioritized the most again. Most of the HR metrics emphasize on the aspects which contribute to hidden costs but which can easily be influenced on to increase the underlying effect. Let’s dive into a couple of different KPIs and describe how they can help the business in the long run.

KPI metrics that matter

There are couple of them which are universally useful for any type of business, with exceptions of course which we will mention, but are some to name a few. „Time to hire“ is the basic one which tells you how much time was needed to close the vacancy from the moment the decision to hire was made up until offer agreement. Time is always currency and different parameters influence this metric, such as recruiter’s overall ability to act, coordinate and lead the process; less time to hire means less hidden costs in performance and productivity. „Cost of hire“ is the next one which basically tells us how much of the budget was spent in total to make the particular hire. That includes everything from the ad costs to salary expenditure, really useful for planning recruitment activities ahead. „Quality of hire“ is a bit complex one but also quite usable in terms of how well the budget is spent. This metric also incorporates couple of different elements, like performance, productivity, cultural fit, employee engagement etc. It’s open to be customized based on the business needs and thus the formula can be interchangeable as well. „Turnover“ with „Retention rate“ are quite the easy and most prevalent ones to see how frequently you have staff fluctuation which can give you many different insights into what can be improved in terms of employee satisfaction, for example. The more business direct ones which matter the most on the surface are „Absenteeism“ and „Overtime“ which hit the budget like a truck so it’s always useful to track metrics of them on the monthly basis. They can tell you how much you’re losing in productivity or how many more staff you need employed.

Differences in usability according to business type

All of the aforementioned metrics are viable in general but not all of them are as effective in one type of business as they would be in other. In an IT company offering any type of business solutions, employing primarily developers, in other words white-collar workers, time to hire, cost per hire, quality per hire are good KPIs to follow in order to hold control. On the other hand, in a manufacturing company which primarily employs blue-collar workers, any „-to hire“ metric isn’t that effective because of the high and frequent turnover, as well as high absenteeism rate. The metrics we choose are highly dependent upon the workforce mentality we employ and to have correct data derived from that particular business requires the said, right metrics to use.

Other benefits of metrics

Other than reducing costs directly, having metrics can help an HR professional or a manager to influence further decision-making in the process evaluation or an argument for a bigger budget. If the numbers picture room for improvement, then certainly there is no better argument than numbered data. It all comes full circle in the end because as metrics’ endgame is direct influence on business costs, it can also pull some strings in minor changes like proactivity, production, motivation, communication with employees.

Takeaway

For a complete strategic and financial outlook of any business or their department, having metrics/KPIs is essential. Insight into a data-driven results from an activity, task or a project is valuable information for further increasing the effect, performance and productivity. Mentioned HR metrics are only a set of the usual ones widely used, but businesses should choose the KPIs based on their business model needs and ease of transforming the state of business goals into numbers. As recession is on the rise again, having based metrics for reducing costs is one of the most important agendas for many companies this year and probably beyond so it’s best to get this right.