Why are workforce metrics important to your business?

HR Metrics
Are you headed in the right direction? Discover how workforce metrics can benefit your business.

Most businesses understand the value of using metrics to assess the state of their company and validate the company is heading in the right direction. Finance, quality, and manufacturing are departments that are typically measured by a well-established set of metrics. Workforce metrics (also known as HR metrics), on the other hand, often get ignored. Let’s take a look at four compelling reasons for adding workforce metrics to your business intelligence.

1. You may not know what you think you know

Most companies are suffering from a significant disconnect between leadership and employees when it comes to performance measures. A study published by Dr. Harry Hertz, Director for the Baldridge Performance Excellence Program1,  indicated that organizational leader and employee perspectives had notable differences pertaining to the relationship between individual employee performance and organizational goals. Understanding and addressing disconnects can increase your company’s ability to achieve performance excellence while providing employees a clearer line of sight on how their daily activities impact financial results.  Regularly conducting internal surveys can be a reliable method for assessing the alignment as well as discovering areas where training, employee development or leadership development may benefit.

2. You realize closing your eyes and throwing a dart is a bad idea

Most likely, you wouldn’t consider a capital expenditure without first reviewing data such as financial reports and revenue forecasts. Similarly, decisions that may impact or be somewhat dependent on your workforce may be more successful when relevant workforce metrics are reviewed. For example, organizations that are targeting growth, may benefit from tracking Readiness. This metric is interesting because it measures the percent of important positions where a qualified team member is prepared to step in. When at least 75% of critical positions have a ready replacement, revenue per employee has been shown to rise2.

3. You want to get the most out of every employee

In recent years, so many companies have focused on how to decrease their spend, but it may be more relevant to measure and make decisions based on how your people dollars are contributing to your company’s success.  For example, if you knew your Revenue per FTE had steadily been declining and your Employee Engagement surveys indicated low levels of employee commitment and productivity, you may decide to not replace a departing employee. Instead, you may opt to invest resources into improving employee commitment and productivity, which has been shown to increase customer satisfaction and revenue. Metrics for measuring Human Capital ROI and Human Capital Value Added are also helpful indicators.

4. You need all of the wood behind the same arrow

Well-intended leaders dedicate a great deal of time and effort toward establishing meaningful strategic objectives for the business. Establishing a People Strategy that aligns with the company’s strategic objectives insures employees are equipped and motivated to contribute to the common goals of the organization and HR initiatives are designed to anticipate the current and future needs of the business. For example, if it is your company’s objective to become the technology leader in your space, you may want to focus on metrics such as Contingent Percentage and Turnover Rate as well as develop a long-term strategy for acquiring thought leaders and promoting a culture of innovation.

Getting Started

If you have limited or no HR expertise on staff, working with an HR services provider that is dedicated to quality and increasing organization results through people, may be helpful in selecting meaningful HR metrics tied to your strategies. Then, establishing a method for tracking those metrics allows you to monitor your progress.  If your organization is relatively large or growing at a rapid rate, investing in an HRIS (human resource information system) may also be a worthwhile consideration. Regardless of the metrics you use or your method for tracking, make sure to educate your organization on how the metrics are derived, what they indicate, and how they will be used in addition to regularly communicating relevant metrics to your team members.

» Commonly used HR metrics and their formulas

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Hertz, Dr. Harry. “The Results are In…What Leaders and Employees Believe.” Baldrige Performance Excellence Program (NIST). August 2011. Web.

Fitz-Enz, Jac. The ROI of Human Capital. New York: AMACON, 2009. Print