Getting Started with Human Capital Metrics: How to Figure Out the Right Data to Measure

“Finding the appropriate measurement is thus not a mathematical exercise. It is a risk-taking judgment” – Pete Drucker

Every human resource conference has at least one session about the values of HR metrics and dashboards. In this day of “big data” when HR is striving to be a strategic partner with senior leadership, our ability to demonstrate business impact is key. However, at those same presentations, large numbers of HR practitioners acknowledge they aren’t currently measuring anything. Often that is simply because it can be daunting to get started and there are so many things you can measure it makes your head spin. Add to that there’s no one list of metrics that’s going to be applicable to all employers, so how can you get started? I have compiled a list of metrics here that are commonly tracked along with things you should consider as you put together your thoughts on what to track.

Determine Why You’re Measuring

But, before you start gathering data, the first thing you need to know is that it’s not worth measuring anything if you don’t know why you’re measuring it. The most important thing that you can do as an HR practitioner is to understand the business that you’re in before you try to measure anything. Your ability to provide business metrics and produce dashboards for leaders is only valuable if you can draw a line to help them connect what you are measuring and the health of the business.

If you aren’t sure what those elements might be, start with some research to better understand your business. If you don’t already have a copy of your company’s annual report, budget or financial statement get one and read through it. If your background isn’t in finance and you don’t feel comfortable with those sorts of documents, consider asking your CFO to give you a 15-minute overview of company finances and its strengths and weaknesses. It’s important to understand how your company makes money and how it spends it. From there, take a day and shadow other jobs in the business, go out on a sales call, have someone walk you through the production line so you can see your product from start to finish or listen in on client calls in your customer service area.

As you take that in, think about two or three things you can measure with data you already have so that you don’t have to create a new process to gather it. If you have an HCM system, there may also be pre-built reports that can provide you with some common metrics.

For example, something like turnover is usually an easy one as you already have lists of employees either in your HCM platform or your payroll records. Think about what you’ve seen in your tour of the departments as you evaluate the data. Is turnover high or low in the departments you would expect. If you have multiple teams doing the same thing is the turnover similar across them or is it better or worse for specific supervisors?

A search of the internet will give you dozens of articles with hundreds of things you could be tracking. We can provide some direction to get you started as well, but not all of these will be helpful to you, and you need to make yourself the expert in what matters to your business. Make sure to start your process by reviewing your business and your place in that business to validate that what you measure is meaningful and demonstrates the impact that HR has on the healthy function of the business.

Commonly Tracked Metrics Include

Turnover // Turnover by itself isn’t always helpful other than seeing if it’s getting better or worse. Where it becomes strategically useful is if you can break it down into smaller groups such as location, department, job or supervisor. Just make sure your groups aren’t too small to be useful. Also look at turnover based on length of service at the time of separation. It can be useful to see if there are patterns as to when in the employee life cycle people choose to leave.

Talent Source // It’s valuable to know where people you hire heard about you so that you can maximize your reach. Where it can start to really drive your HR strategy is if you can tie referral source back to something like tenure or employee performance. For example, if all your top performers are coming from the same college recruiting event, it’s worth focusing on event if that’s only a small one.

HR Operations // HR has many tactical things that must get done. People must get paid; benefit enrollments need to be processed, leave requests need to be evaluated. Consider looking inward at the day-to-day HR items and measuring those. It can both illustrate HR value and provide you with valuable information on your own staff budgetary needs

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CATEGORIES: Workforce Management
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