HR Metrics in Perspective
For any project or business, there are three main constraints to take into consideration and to keep in balance: time, cost and quality. Metrics help us to measure, understand and evaluate these constraints, to make better decisions and to act more efficiently and effectively. The core metrics used in HR Dashboards today focus on time, money and quality and are defined and discussed accordingly.
Time Metrics are easy to measure. Time is quantifiable and easy to define:
Time-to-fill is the time it takes to fill a position from the date the position opens. Calculate it by subtracting the date the requirement is approved/opened from the date the candidate accepts the offer (position is filled).
- Example: Management approves and posts a requirement on 01/01/2011. The recruiter makes an offer to the candidate on 01/05/2011. Time-to-fill is 4 days.
Calculation: 01/05/2011–01/01/2011 = 4 days
Time-to-start differs from Time-to-fill as it measures the time it takes a candidate to begin working from the date the position opens. Calculate it by subtracting the date the requirement is opened from the date the employee begins work.
- Example: The candidate, who accepted the offer on 01/05/2011, needed to give his employer 2 weeks’ notice and could not start until 01/19/2011. Time-to-start is 18 days. Calculation: 01/19/2011–01/01/2011 = 18 days
Turnover measures the percentage of employees leaving/separating from the organization for any specific period. Calculate turnover by dividing the number of employees separatingby the average number of employeesand multiplying by 100 for a specific period (month, year, etc.).
- Example: Company XYZ, had an average of 2000 employees for the year. Over the year, 200 employees left.
Calculation: 200 employees/2000 employees = .1*100=10% turnover
Money Metrics are in most cases easy to measure, as they are usually quantifiable. In some cases, some factors may be intangible or unknown, such as the loss/gain of reputation or an unknown outcome or risk if using the metric as a predictive analytical tool upon which to base a decision.
Cost-per-hire is determined by adding up the costs, both external (i.e. advertising, agency fees, sourcing fees, etc.) and internal (i.e. company recruiter time, employee referral fees, hiring manager’s interviewing time, travel costs, relocation costs, etc.) . These costs or expenses can vary depending on a company and its recruiting plan.
- Example: Company XYZ’s CEO, after discovering the company has a 10% turnover rate, decides to hire a new Director of Recruiting and Retention. The CEO decides to use an Executive Placement Agency and hires a new Director for $130,000, paying the agency a 20% fee of $26,000. On top of the agency fee, the company had internal costs including travel, relocation, and internal recruiting time, amounting to $16,000. XYZ had a cost-per-hire of $42,000 for this particular position.
Calculation: $26,000(External Costs) + $16,000(Internal Costs) = $42,000
Return on Investment (ROI), measures the gain or loss derived from an investment or cost.
- Example: Company XYZ’s new Director of Recruiting and Retention decides that to increase productivity, the company needs a new training program, costing the company $2,000 and lost time in wages of $18,000 for a total of $20,000. Productivity does go up and there is a $30,000 increase or gain in profits.
Calculation: ($30k(Gain) - $20k(Investment))/$20k (Investment) = 50% ROI
Quality Metrics can be very difficult to measure and can vary greatly between companies. These metrics often depend on more quantifiable metrics.
Quality of Hireis very abstract. It can be extremely subjective if left to opinions of managers/peers or rating based performance management systems. A customized formula really is the best way to calculate quality of hire for an employee. This formula, depending on the company, will include a combination of metrics, such as length of employment for the employee, cost-per-hire, profit/benefit the employee has brought to the company, and whether the employee has reached his/her goals.
It is important to remember that although certain elements are quantifiable, other elements are not due to the fourth constraint, the human factor.
- Example: Company XYZ’s Sales Direct decides that the Sales Department needs a new Sales Manager and that the candidates need to be charismatic.
Calculation for charisma: Undefined
This is what makes quality metrics so difficult to measure. It is through our unique human senses and consciousness that we define quality.