- What exactly is an annual HR report?
- The HR report's purpose
- HR Metrics to include in an annual HR report
- Here are 17 metrics to consider for recruitment, retention, training, development, and engagement:
- HR Metrics for recruitment
- HR Metrics for Retention
- HR Metrics for Training and Development
- HR Metrics of Engagement
- HR Metrics for Productivity and Performance
- Here are 17 metrics to consider for recruitment, retention, training, development, and engagement:
- How to Apply HR Metrics
HR metrics is a tool a company uses to take into account the people data and analyze business performance and define its future goals.
One of HR’s many responsibilities is to act as an organization’s eyes, searching both internally and externally for information and comparisons that can help a company succeed. HR metrics are similar to a necessary pair of glasses: without them, workplace data is visible but incomprehensible. Patterns, trends, and discrepancies come into focus with the right lenses, and organizations can approach decision-making processes with a clearer picture of reality.
An annual HR report allows you to demonstrate to your stakeholders the value that HR brings to the organization. It includes both accomplishments and challenges encountered during the year. Furthermore, it emphasizes how the HR department contributes to your company’s performance, OKRs, and strategic goals.
Include the right HR metrics to clearly quantify how HR impacts strategic goals and organizational performance when creating an impactful annual HR report.
What exactly is an annual HR report?
Each year, the executive committee, in collaboration with the HR team, must carefully examine the business’s and employees’ performance. To accomplish this, they create an annual HR report that provides insight into the accomplishments and challenges related to people matters.
The annual HR report not only summarizes the previous year’s people strategy efforts but also plots a course for the coming year. Knowing what to include in an annual HR report is critical for anyone on the human resources team. Consider who you will present to and what information will be most beneficial to them.
The HR report’s purpose
Provides a comprehensive overview of employees and company trends, as well as ensures that HR practices are in line with various KPIs or OKRs. Although most HR professionals provide weekly or monthly reports, an annual report provides an important overview for making long-term strategic decisions.
- Provides stakeholders with detailed insights into the organization that is not immediately apparent.
- Provides an overview of the key initiatives and outcomes from the previous year.
- Includes both quantitative and qualitative data, allowing HR to measure and track key workforce metrics as well as successes and failures.
- Provides guidance for establishing precise, attainable goals for the coming year.
- Provide a qualitative retrospective so that stakeholders can develop a follow-up strategy.
HR Metrics to include in an annual HR report
Consider your annual HR report to be a plug-and-play model, with the appropriate HR metrics presented based on who is reading the report. Your HR team may require the entire report to evaluate their performance, whereas the CEO may only want to address the most pressing issues. Your hiring managers, for example, maybe more interested in retention metrics, whereas the internal team in charge of learning and development may be more interested in L&D metrics.
Your organization’s objectives:
You should tailor your annual HR report based on the business goals for that year. For example, if the key business decision was to grow the company through internal promotions, you should include metrics to support that decision.
Here are 17 metrics to consider for recruitment, retention, training, development, and engagement:
HR Metrics for recruitment
Lawrence Bossidy, the former CEO of General Electric, once stated, “Nothing we do is more important than hiring and developing people.” You bet on people, not strategies, at the end of the day.”
Recruitment metrics are used to assess the success of your hiring process and to improve the hiring process for your company. They provide the data required to improve your recruitment process, which has a direct impact on your company’s bottom line.
Incorporate the following HR metrics for recruitment into your annual HR report:
Cost per hire – This metric measures the efficiency and cost-effectiveness of your entire recruitment process. It includes both internal (compliance, tooling, administrative costs, and so on) and external costs (background checks, sourcing expenses, travel, marketing, etc.). It provides insight into your recruitment spending and how to optimize the money spent at each stage of the recruitment process.
Time to productivity/performance – This metric measures how long it takes new employees to become productive. It is the amount of time that elapses between the first day of employment and the point at which employees fully contribute to the organization.
The number of interviews a hiring manager had to conduct before making an offer is referred to as the interview-to-hire ratio. It’s an important metric to include because it indicates how many hours were spent interviewing. It also indicates whether the proper sourcing methods are used, the clarity of the job advertisement, and alignment between the recruiter and the hiring manager.
New hire turnover is the percentage of employees who leave your company during a specific time period, typically the first year. Divide the number of new hires who left by the total number of employees who left during the same time period to calculate new hire turnover. This metric assesses the quality of your onboarding program and how well your job matches the new hire. It also indicates how healthy your organizational culture is because if too many people leave in the first year, something is wrong.
“Quality of hire” is perhaps the most broad-reaching metric on this list, encompassing several different employee metrics (often referred to as “indicators” in this context). The indicators chosen will vary depending on the specific goals at hand.
Unlike cost per hire and time to hire, quality of hire attempts to demonstrate the value an employee brings to a company by focusing on the return on investment rather than the efficiency of the hiring process itself. According to the SHRM, quality of hire is the “holy grail” of recruiting metrics because it can address employee value more thoroughly than other, narrower metrics.
The general formula for hiring quality adds up the values from all of the employee indicators and divides the result by the total number of indicators used.
Ratios of Diversity
A “diverse” group of employees can mean a variety of things, but the term generally implies the inclusion of employees of various gender, racial, and cultural backgrounds, to name a few. As more businesses push to incorporate “diversity, equity, and inclusion” (DE&I) language into company cultures and hiring processes, it’s critical to have honest assessments of a company’s performance to back up the rhetoric. Understanding representation for HR departments frequently begins with employee diversity ratios.
The head counts for the two groups being compared are commonly placed side by side to express diversity data as a ratio. For example, a three-to-one (3:1) ratio means that there are three employees in the first category for every employee in the second. Ratios take the totals (in this case, the employee headcounts) of each group and divide them by the largest factor they share (their “greatest common factor”) for easy comparison, sometimes rounding if the groups are large.
Let’s say a company has 495 white employees and 163 people of color. HR may be interested in how this makeup compares to broader population metrics, smaller subsections within the company, previous internal data, or metrics from other similar companies. The ratio of 495:163 is not incorrect, but it is clumsy and difficult to compare. However, dividing the total of each group by 165 (an easy number very close to 163) yields 3 and 0.988. Because the latter figure is so close to one, we can simply state that the company’s workforce is made up of a 3:1 white-to-non-white ratio.
Comparisons like these can help HR by simplifying numbers and assisting in the development of specific goals. However, lumping all non-white employees into a single category has obvious practical limits, in addition to major ethical drawbacks, as does any act of overgeneralization for ease of comparison. Importantly, HR teams must understand that increasing headcounts within specific categories only addresses the first part of “DE&I.” The “equity and inclusion” aspects necessitate far more effort than simply hiring in accordance with favorable ratios.
HR Metrics for Retention
Recruiting the right people for your organization is critical, but keeping them is even more critical. That is why employee retention metrics are an important component of an annual HR report. Retention metrics provide a detailed picture of why employees stay and can be used to monitor at-risk employees as well as to reduce attrition over time.
Consider including the metrics for retention listed below in your annual HR report:
Workforce headcount – The total number of employees employed by your company at any given time. This includes full-time employees, contract employees, freelancers, and so on. Include a chart that shows headcount at various points throughout the year to make it more interesting for an annual report, or provide additional commentary if there are any significant changes during that time period.
Demographics and diversity – This shows how many employees you have in each demographic and diversity category. Report on metrics where the organization is strong and weak based on your company’s demographic and diversity goals. Keep track of any positive or negative trends.
Attrition rate – Simply put, attrition is the rate at which employees leave their jobs. To calculate this rate, divide the number of employees who left by the average headcount during the same time period and multiply by 100. An annual look at your attrition rate reveals how effective your company is at retaining talent, how appealing your brand is, and how engaging your programs are.
The average turnover cost – Your average cost of turnover, which is related to the attrition rate, shows how expensive it is to lose an employee. This is calculated by adding the average cost of filling a position to the costs of onboarding and orientation.
Penetration of the Salary Range
This metric describes how well an employee is currently paid in comparison to a salary range established by the employer for a position. There are numerous reasons why an employee might be at the high or low end of a salary range. From an HR standpoint, the most important aspect is ensuring that the reasons for any differences between employees are appropriate.
To begin, determine the minimum and maximum values for an employee’s estimated salary range. Subtract the minimum salary range from the employee’s current salary. Then divide this figure by the difference in the maximum and minimum ranges. Then multiply by 100.
The resulting percentage describes how far the employee has “penetrated” into an expected salary range, with 0% representing the minimum and 100% representing the maximum. In a position with a salary range of $80,000 to $100,000, for example, an employee earning $90,000 has 50% penetration; $95,000 would equal 75% penetration.
HR Metrics for Training and Development
When there is a budget crunch, one of the first costs to be cut is training and development.
“If you can’t measure it, you can’t improve it,” Peter Drucker famously said.
As a result, training and development HR metrics must be included in your annual HR report. Employees’ ability to upskill and relearn has grown in importance in recent years, so the more you can demonstrate how much was spent and the outcome, the better.
Consider including the metrics for training and development listed below in your annual HR report:
Training cost per employee – This is a simple metric that divides total training costs by the number of employees. This can be for a specific program or as a total of all training completed in a given year. You can compare the training cost per employee to industry standards as well as year over year.
Training Return on Investment – The return on investment (ROI) measures how much a company gains from investing in training. This financial metric elaborates on the benefits and business outcomes of a training program. It is not, however, a training satisfaction measure that indicates how satisfied employees are with the training.
HR Metrics of Engagement
HR metrics for engagement show how motivated and connected your employees are. An engaged employee is more productive and contributes more.
Consider including the metrics for engagement listed below in your annual HR report:
Employee Satisfaction Index (ESI) – THE ESI is a series of three questions that assesses how satisfied employees are with their jobs. The three questions are as follows:
How happy are you with your current job?
How well does your workplace meet your requirements?
How close is your current job to your ideal job?
Employees rate each question on a scale of 1 to 10. Create charts for your annual HR report based on the results divided by departments, demographics, year-on-year comparison, and any other relevant metric.
Employee net promoter score (eNPS) is one of the most widely used HR metrics (eNPS). These HR metrics are measured by the question “How likely are you to recommend this organization as a place to work on a scale of 1-10?” or “How likely are you to recommend our organization to a friend or colleague based on your experience?”
Because most organizations ask this question, comparing it to industry averages is a good idea.
HR Metrics for Productivity and Performance
Finally, it is critical to report on productivity and performance HR metrics, which show how well employees perform their jobs.
Consider including the metrics for productivity and performance listed below in your annual HR report:
Absenteeism rate – Absenteeism is an important indicator of organizational health and well-being. Knowing the exact absence rate will aid in the design of interventions.
Human Capital Return on Investment (HCROI) – This is one of the strategic HR metrics that illustrate in monetary terms the value that the workforce adds as a result of the money spent on them (i.e., training and development, compensation, talent management, recruitment, etc.). It accurately reflects the value of human capital in an organization.
Employee Growth Rate
This HR metric, also known as the “company growth rate,” indicates how much a company’s workforce is expanding or contracting. It describes this change over any given time period—say, a quarter, a year, or five years—by using a headcount at the beginning (“Point A”) and end (“Point B”).
Begin by subtracting the headcount at Point A from the headcount at Point B to calculate the employee growth rate. (If there was a net loss in employees, this value would be expressed as a negative number, resulting in a negative final result.) Divide this total by the number of people at Point A. Finally, divide the result by 100 to convert it to a percentage.
How to Apply HR Metrics
Simply having data and employee metrics on hand is only the beginning for HR teams, but it can be half the battle. If your organization is lacking in data collection, look for new ways to collect data or ways to interpret existing, unused data using statistics. Data collection does not have to imply invading employee privacy. It can be as simple as gathering data on employee bonuses in one place, for example, so that patterns can be identified and more bonuses can be awarded where they will be counted. Another excellent place to begin is with a simple employee survey, which can be surprisingly insightful.
Look for areas where your company is most interested in obtaining unknown information—evaluating candidates during the hiring process, for example, is a big one, as are the numerous factors that can boost or hinder employee productivity. Many businesses are also more “in the dark” than one might think about the factors that influence retention and attrition. In any case, a data-driven approach via HR metrics outperforms speculation.
Overlaying several HR metrics to create a larger picture is one of the best ways to use HR metrics. Many of the metrics listed here provide useful information on their own, but when combined, they provide real insight and change recommendations. Employee compensation metrics such as salary averages and salary range penetration, for example, simply allow HR to see who gets paid what. When this data is compared to employee satisfaction metrics like eNPSs or turnover rates, patterns may emerge, answering questions about how effectively (or ineffectively) compensation tools are increasing retention and where raises can be applied most efficiently.
Consider who your stakeholders are and what value HR has brought to the company’s strategic goals and corporate growth when choosing the most impactful metrics for your annual reporting and also when your organization is conducting problem analysis. The HR annual report provides an opportunity to highlight contributions, potential HR risks, and the overall impact of human capital investments.
So long as the data is correct, what we do with it and how we manipulate it to develop success metrics determines how successful our analysis will be. The most important job for successful HR teams and professional hr analysts is to put existing data to use and to look for new areas where uncollected data can be transformed into telling metrics. Workplace technology and data management tools have made this easier than ever before.