HR leaders often face with overwhelming metrics to track, many of which seem helpful but may not directly contribute to key decisions. The challenge lies in identifying which metrics matter and how they can improve hiring, retention, and employee performance.
By tracking the right metrics, the HR team understands what’s working and where changes are needed. These metrics offer valuable insights that can influence important decisions, such as refining recruitment strategies, addressing turnover issues, and improving employee engagement.
This article will cover key HR metrics that every leader should focus on, including hiring, employee retention, performance, productivity metrics, and how HR leaders can leverage these data points for more informed, data-driven decisions.
Hiring Metrics: Measuring Recruitment Success
Hiring the right people is one of the most critical functions of HR. A strong recruitment process ensures companies attract, evaluate, and retain top talent. However, without tracking key hiring metrics, HR teams may struggle to identify inefficiencies, leading to longer hiring cycles, higher costs, or poor-quality hires.
Imagine a company struggling with high recruitment costs despite recently improving its hiring process. By analyzing cost per hire, HR realizes that excessive spending on job ads and external recruiters isn’t leading to better hires. Instead, optimizing sourcing channels, leveraging employee referrals, and streamlining interviews could reduce costs while maintaining candidate quality.
Analyzing these metrics helps HR identify inefficiencies, control spending, and improve hiring outcomes. It also enhances the candidate experience, making it easier to attract skilled professionals. When a process is efficient and transparent, it minimize frustration and show skilled professionals that the company values their time and talent, making them more inclined to apply. Let’s explore the key hiring metrics:
Time to Hire
The number of days between when a job opening is posted and when a candidate accepts an offer. A shorter time-to-hire means a more efficient recruitment process.
Formula:
Time to Hire=Date of offer acceptance−Date job was posted
Time to hire can indicate how well the recruitment process functions, but the ideal timeframe depends on the role. For most positions, filling a vacancy within 10 to 30 days allows for thorough evaluation without unnecessary delays. A process shorter than 10 days may suggest rushed decisions, increasing the risk of poor hires. If hiring takes more than 30 days, strong candidates might lose interest or accept other offers. When the process exceeds 45 days, it signals severe bottlenecks in sourcing, screening, or approvals that need attention. However, highly specialized roles may naturally require more time to find the right fit.
Cost per Hire
The total cost of hiring a new employee, including recruitment expenses such as job ads, recruiter fees, and onboarding costs. A lower cost per hire indicates a more efficient hiring process, but cutting costs too much may affect candidate quality.
Formula:
Cost per Hire=Total recruitment costs/Number of hires
Tracking cost per hire helps HR optimize recruitment spending. High costs may indicate inefficiencies in sourcing. For example, posting a job ad on a Ukrainian job board may cost between 1,000 UAH and 5,000 UAH, with total advertising costs reaching 10,000 UAH or more if multiple platforms are used. Additional costs include recruitment tools, agency fees, and interview-related expenses. If costs are unusually low, it may suggest the hiring process isn’t attracting strong candidates, potentially leading to higher turnover and added expenses in the long run.
Candidate Quality
A measure of how well new hires perform and stay with the company, reflecting the effectiveness of the hiring process. Strong candidate quality means new employees meet expectations and contribute to long-term success.
How to measure:
- Performance scores from initial evaluations and manager feedback
- Retention rates after 6 to 12 months
- Hiring source effectiveness, identifying which recruitment channels bring in the best candidates
Frequent underperformance or turnover within the first few months suggests problems with candidate selection, job descriptions, or onboarding. For example, new hires may feel unsupported if they lack clear guidance or training during their initial weeks, leading to frustration and early departure. A disorganized onboarding process can also hinder their ability to integrate with the team or grasp essential systems, impacting overall performance.
Employee Retention Metrics: Reducing Turnover
Employee retention metrics help HR track how well the company keep its employees and identify the reasons behind turnover. High turnover can be costly, often leading to additional recruitment and training expenses and lost productivity. By monitoring these metrics, HR can pinpoint issues early and take proactive steps to improve employee satisfaction. Here are the main employee retention metrics:
Employee Turnover Rate
The percentage of employees who leave the company within a specific period, either voluntarily or involuntarily. A high turnover rate can indicate issues with employee satisfaction, management, compensation, or even company culture.
Formula:
Employee Turnover Rate=(Number of employees who left/Average number of employees)×100
A turnover rate above 15-20% suggests that retention efforts need attention. HR should explore factors like work conditions, leadership, and compensation. Exit interviews can help uncover why employees are leaving, while anonymous surveys and stay interviews offer valuable feedback from current staff. Additionally, benchmarking against industry standards can reveal areas for improvement, such as salary competitiveness or company culture.
Retention Rate
The percentage of employees who remain with the company over a given period. A high retention rate suggests employees are satisfied, while a low rate may indicate dissatisfaction or a poor work environment.
Formula:
Retention Rate=(Number of employees who stayed/Total number of employees at the start of the period)×100
A retention rate above 85% is generally considered healthy but may vary depending on the industry and role.
New Hire Turnover
The percentage of new employees who leave the company within a specific period, typically within the first year. High new hire turnover can indicate problems with onboarding, unrealistic job expectations, or lack of support after hire.
Formula:
New Hire Turnover=(Number of new hires who left/Total number of new hires)×100
A high new hire turnover rate (above 20%) may signal issues with the hiring process or onboarding experience. It's a more immediate indicator that helps HR identify early problems. On the other hand, general turnover reflects employees leaving after a longer period and may point to broader company issues like culture, leadership, or compensation.
Employee Engagement Score
A measure of how committed and motivated employees are in their roles, reflecting their overall satisfaction and alignment with the company's goals. High engagement leads to better performance and retention.
Formula:
Employee Engagement Score=(Sum of employee engagement survey responses/Total number of survey responses)×100
Tracking employee engagement through surveys or feedback tools helps HR understand morale and identify areas for improvement. For example, HR can conduct annual or quarterly surveys using a 1-5 scale, where employees rate satisfaction with leadership, work-life balance, and recognition. The average score reflects overall engagement. A score below three may indicate issues with leadership, workload, or work culture. How to foster employee motivation and engagement through the company culture?
Performance & Productivity Metrics
Performance and productivity metrics help HR measure how effectively employees meet job expectations and contribute to company goals. These metrics provide insights into employee effectiveness, efficiency, and work quality, helping HR identify high performers and areas of improvement. Tracking these metrics allows HR to make informed decisions about compensation, promotions, and training needs.
By monitoring performance and productivity, HR can address underperformance, optimize resource allocation, and improve overall workforce engagement, ultimately driving organizational success.
Time to Productivity
The amount of time it takes for a new hire to reach full productivity in their role.
Formula:
Time to Productivity=Time taken for an employee to reach full productivity/Total time from hiring
A shorter time to productivity is ideal, typically within 3-6 months, depending on the role. To track Time to Productivity, more generally, establish KPIs that monitor the transition of new hires from onboarding to full productivity. Faster ramp-up times lead to better business performance and cost savings.
Absenteeism Rate
The percentage of workdays missed by employees due to illness, personal reasons, or other unplanned absences. High absenteeism can point to employee disengagement, burnout, or personal issues affecting job performance. Learn how to overcome burnout and revitalize your remote team here.
Formula:
Absenteeism Rate=(Total number of days absent/Total number of workdays)×100
An absenteeism rate above 5% may signal low morale or poor health. Tracking absenteeism helps HR spot trends and address factors such as work-life balance or job stress. To maintain a healthy work environment, HR can check in with employees through surveys or feedback to ensure proper work-life balance and offer support programs to promote well-being.
Internal Promotion Rate
The percentage of job openings filled by current employees. A high internal promotion rate signals strong talent development, employee satisfaction, and opportunities for career growth within the company.
Formula:
Internal Promotion Rate=(Number of positions filled by internal candidates/Total number of positions filled)×100
An internal promotion rate above 30% reflects effective career development and a strong company culture. It helps HR evaluate training programs, reduces recruitment costs, and promotes retention. However, internal promotions may not always be possible due to skill gaps or limited opportunities. In such cases, HR should focus on aligning external hires with company goals and diversity needs. To track this metric, HR can calculate the percentage of internal candidates filling open roles and use this data to refine development strategies.
How HR Leaders Can Use These Metrics for Data-Driven Decisions
To effectively collect and analyze HR data, HR leaders need reliable tools that provide consistent and relevant information. This data should be kept up-to-date to ensure it remains accurate and useful. Instead of just the numbers, HR teams should look for trends and patterns, using tools like dashboards to transform data into actionable insights.
For example, if HR notices high turnover in a specific department, they can dive into metrics like engagement scores, feedback from exit interviews, and absenteeism rates. If the data indicate low engagement and inadequate work-life balance, HR can implement targeted solutions such as flexible working hours or wellness programs to enhance employee satisfaction and reduce turnover.
The Lagoteam experts have outlined three key tips for effective HR data collection and analysis:
- Contextualize data with employee feedback: For instance, rather than solely tracking turnover rates, HR can connect this data with exit interviews or pulse survey responses. This combination indicates whether employees leave due to poor leadership, lack of career growth, or work-life balance issues.
*Pulse survey responses refer to employee feedback through short, frequent surveys aimed at gauging their feelings, opinions, and engagement levels on specific topics.
- Leverage predictive analytics: Use historical data to build models predicting future turnover trends or skill gaps. For instance, by analyzing tenure and exit data, HR can predict when employees are most likely to leave, allowing the company to implement retention strategies before key talent exits.
- Integrate data across systems: Combine data from performance management systems, payroll, and employee surveys. For example, linking performance reviews with salary data can help identify underpaid high performers who may be at risk of leaving. Integrated data gives HR a complete picture of the employee lifecycle, making it easier to target specific areas for improvement.
Several commonly used free tools can simplify the tracking of HR metrics:
Trello
Trello allows HR to efficiently track various metrics like Time to Hire, Employee Retention, and Internal Promotion Rate by creating a simple, visual workflow. For example, HR can set up a Kanban board with lists representing each recruitment stage (e.g., Application Received, Screening, Interview, Offer, Hired). By tracking how long candidates stay on each list, HR can measure the Time to Hire. Additionally, labels or due dates can be used to monitor employee performance and identify those at risk of leaving, helping HR manage Employee Retention more effectively.
Microsoft Power BI
Microsoft Power BI enables HR to track key metrics through customizable dashboards. For example, HR can integrate survey results to track the Employee Engagement Score over time, identifying trends that may indicate issues with morale or satisfaction. By combining data from performance management systems, HR can also measure Time to Productivity, tracking how long it takes for new hires to reach key performance benchmarks. Additionally, Power BI allows HR to visualize the Employee Turnover Rate and monitor the Absenteeism Rate, providing insights into retention and attendance patterns.
Google Sheets
Google Sheets is a simple tool for tracking HR metrics. You can easily use built-in formulas to calculate key performance indicators (KPIs) such as Time to Hire, Cost per Hire, Employee Turnover Rate, and Absenteeism Rate. For example, formulas like DATEDIF can help calculate Time to Hire, and simple division can track turnover or absenteeism rates.
Additionally, you can enhance your workflow by integrating Google Sheets with AI tools like ChatGPT. For instance, you could use ChatGPT to generate reports based on the data in your sheets or even create summaries and insights from large datasets.
Bottom Line
In conclusion, tracking the right HR metrics helps address key HR challenges like high turnover, long hiring times, and low employee engagement. By gathering data on aspects such as Time to Hire or Employee Turnover Rate, HR teams can identify problems early and take targeted actions. While every team may have different metrics to focus on, tracking these metrics leads to better decision-making and healthier organizational growth.
At Lagoteam, we know how important it is to use data to guide your decisions. As your reliable outsourcing partner in Ukraine, we specialize in outstaffing solutions that help optimize HR processes and put you on the path to better outcomes. Contact us today to see how we can help your team make more effective decision-making: https://www.lagoteam.io/#contact.