Human Capital Metrics

Carol Eliason Nibley
Carol Eliason Nibley

Table of Contents

Have you ever wondered if your recruiting efforts are cost-effective? Perhaps you want to know if a new rewards program is reducing employee turnover or a training program is increasing employee productivity. Human capital metrics, also known as HR metrics, help employers make decisions by tracking operational measures and evaluating business success.

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Why are Human Capital Metrics Important?

Measuring the effectiveness of HR programs is critical to business success. In some organizations, the expenditures for human capital are their largest business expense. Measuring, benchmarking, and analyzing these metrics help companies improve performance and minimize losses. Let’s examine these benefits more closely.

  • Illuminating trends. Human capital metrics help companies see trends that may not be noticeable in the early stages. For example, slight upticks in absenteeism can be costly, but the company leadership may not have visibility into this trend until it has become a bigger problem. Companies that measure absenteeism, especially by department, can become aware of emerging trends and employ solutions quickly.
  • Impacting business decisions. Companies may execute a strategy only to see it isn’t as successful as they expected. By collecting and using data, these strategic plans can be adjusted before additional resources are wasted. Examples may include training programs that aren’t delivering desired results or recruiting programs that are not providing expected value.
  • Benchmarking. Companies can compare their metrics with those of other companies, both competitors and those in similar industries, to determine how successful their programs are and if further analysis is needed. If a company compares favorably to other companies in a particular metric, that information can strengthen the commitment to the company’s investment in supporting programs.
  • Improving productivity and strengthening the bottom line. Ultimately, companies need to be successful in order to survive. Measuring performance can improve productivity and help companies set and accomplish goals.

The Most Important Metrics to Track

While there are hundreds of metrics that can be measured, here are a few that are most commonly used.

Employee Turnover

Turnover metrics give insight into how many employees leave an organization over a given time period, usually annually. This metric can further be divided into voluntary or involuntary turnover, calculated by the manager or by the department and sorted by employee tenure.

A general employee turnover calculation divides the number of employees who leave by the average number of employees during that time period. Multiplying this by 100 gives a percentage.

Time to Hire/Time to Fill

Time to hire helps companies evaluate recruiting efficiency and measures the time from a candidate’s initial application to acceptance of a job offer. A long time-to-hire measure may indicate inefficient HR processes and decreased candidate satisfaction.

The time-to-hire metric is calculated by subtracting the number of days from the date the candidate accepts a position from the date the candidate enters the applicant pipeline.

Time to fill is a broader measure looking at how long it takes to fill a position from the date a job is posted until the date an offer is accepted. This metric is especially helpful when predicting and planning recruitment efforts.

Revenue Per Employee

Revenue per employee helps organizations understand the efficiency of the organization and the quality of employees. Across industries, the average number varies. It’s a good benchmark number for employers to use.

The revenue per employee calculation is measured by dividing the total revenue of the organization by the total number of employees.

Absenteeism

Absenteeism rates provide insights into employee dissatisfaction and can predict future turnover. This is a common benchmark for companies to watch and can be calculated on a companywide, department, or individual basis.

The absenteeism metric is calculated by dividing the total number of absenteeism days (or hours) by the number of available days (or hours) in the measurement period. The measurement period can be monthly, annually, or any time period that is significant to the company.

Other Human Capital Metrics to Consider

Besides the metrics listed above, there may be others that provide important insights to your company’s leadership.

  • If you want to determine the effectiveness of training programs, you may consider training costs per employee and training participation rates.
  • If you want to measure the effectiveness of your recruiting function, you may look at cost per hire, candidate acceptance rates, and new hire turnover in addition to the time to fill metrics already listed.
  • Effective employee onboarding metrics include time to productivity.

Ultimately it’s important to consider the metrics of most importance to your organization and then determine how best to measure them. A famous business management consultant, Peter Drucker, is known for stating that, “what’s measured improves.” 

Best Practices for Using Human Capital Metrics

If you decide you want to use human capital metrics to improve your organization, here are some suggestions.

Start Slowly

It will be overwhelming and counterproductive to implement more than a few metrics at first. Consider the most important organizational goals and create metrics that will illuminate progress toward them. Ignore metrics that won’t be actionable for your company as they will waste resources. Once you are comfortable tracking and using a few metrics, you’ll be more successful in adding to them over time.

Select and Use the Right Tools

Many human capital management software tools are available to companies. You may already have software systems in place that can measure what you need. For example, an applicant tracking system should have a dashboard that shows time to fill metrics by position. Your payroll program may show data reflecting absenteeism and turnover. Don’t purchase new tools and programs to track metrics until you understand what you have already. When you are ready to invest in new software tools, make sure they will calculate the metrics that are important to your organization.

Seek Input from Stakeholders

Members of the executive leadership teams should be involved in determining which metrics are important for your company. Regularly review together and analyze the metrics you are tracking.

Benchmark

Use industry standards to compare your metrics with those of top-performing organizations. Look for areas where your organization can improve.

Share Metrics with Employees

Employees may be interested in what you are measuring and can participate in process improvements as indicated by them. Employee involvement is a great way to strengthen their commitment to the organization. Celebrate successes together as metrics reveal progress toward company goals.

Questions You’ve Asked Us About Human Capital Metrics

While human capital metrics and human capital analytics are often used interchangeably, they are closely intertwined but separate concepts. Human capital metrics is measuring data. Human capital analytics is interpreting and analyzing the data. Both are important.
The most commonly used human capital metrics will vary by organization. At the most basic level, workforce headcount (aka the number of employees in the organization) is probably the most fundamental of all metrics.
Carol Eliason Nibley
Carol Eliason Nibley

Carol Eliason Nibley, SPHR, GPHR and Principal Consultant at PeopleServe, has more than 25 years of experience in human resources, most recently serving as Vice President of Human Resources for a technology company in Utah County. Carol has taught HR certificate courses at Mountainland Technical College and in other settings for more than 12 years.

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