In any professional relationship, performance and output are usually the benchmarks for success. However, too many companies make the mistake of not applying a similar benchmark to their human resources management staff. This can very well prove to be a fatal mistake, in as much as the success of future talent acquisition strategies and workforce capacity depends on clear vision and competency. Like any other facet of the business, human resources divisions should work towards certain key performance indicators. There are certain key metrics businesses can leverage to evaluate the efficacy of their HR staff. Read on to discover more about these.
Table of Contents
Why Is Measuring HR Performance Necessary?
For any business, efficiency and cost-effectiveness are key success drivers. HR divisions should not be exempt from those divisions. While HR does not directly add to output or profitability, that branch is still a key business function. Accordingly, it needs performance monitoring and improvement, just like sales, customer support, or any other branch of the business. Of course, the measure of success will be different than in other departments. The following metrics, among others, should be of great help:
Employee Net Promoter Score or NPS is a somewhat broad (but still important) way to measure workforce management success within an organization. NPS allows businesses to measure how many of their current employees would recommend them to their network as a desirable workplace.
An NPS can be measured after conducting a workforce survey, with values assigned from 0 to 10. A score of 9-10 is typically indicative of happy and motivated workers, while 7-8 would typically include a majority of neutral or passive employees. A score between 0-6 is usually a sign of detractors or dissatisfied employees. An employee Net Promoter Score is a great way to gauge if an employer’s workplace strategies are boosting or inhibiting worker satisfaction.
Another key metric employers need to keep a careful eye on is the employee turnover rate. Employee turnover, also referred to as attrition, measures the number of outgoing employees during a given period. While no employer has a 0% worker attrition rate, most employers would find it beneficial to keep this metric as low as possible.
A lower rate indicates a company keeps its employees satisfied enough to retain them. On the other hand, higher worker attrition or turnover rate means a business is struggling to retain its workers. While zeroing on the specific cause can take more time, a high turnover rate requires immediate attention; otherwise, it can quickly start to threaten business output, profitability, and sustainability.
Employee Absenteeism Rates
Employee absenteeism, also called the absence rate, is the rate of unplanned absences during a period (excluding holidays or tardiness). It can include absence due to sick days, stress, or even a casual leave. Absenteeism rates below 1.5% are usually considered nothing to worry about. But any higher, it could be symptomatic of much deeper issues. These could include problems with workplace safety, employee engagement, potentially toxic work cultures, and so forth.
Cost of Talent Acquisitions
Human resources divisions typically aren’t limited to just managing existing employees. They are also usually the primary channel to acquire new talent, especially for businesses with centralized hiring models. However, it is not simply a matter of how many employees the HR department onboards in a given period. Equal importance should be given to the cost of each new acquisition. In other words, the cost per acquisition is a reliable measure of how efficiently internal recruiters are handling new hires. If the cost is too high, it will place a growing strain on payroll sustainability.
Cost of HR Staff
Businesses allocate budgets to HR staff and should be able to measure the return against that budget. Where an HR department is unable to justify its budget, it could mean one of two things: either the department has too many employees or too few. Either way, the cost per employee in the HR department can help a business understand whether the HR department is becoming too expensive to maintain internally.
In case an internal recruitment department is not performing as expected, employers may have to decide to partner with a third-party recruiter instead. A hiring partner, such as a local staffing agency, can help take on most of the hiring responsibility. And, given the nature of hiring agencies, they are usually a lot more focused on successful hiring. Even if a business’s HR division is doing well, supplementing it with a specialized recruiting firm may prove worthwhile.