Do you want to use data to help guide business strategy while improving goals and profits? If so, these three HR metrics should be top of mind.
Today’s technology gives us easy access to more data than ever before, allowing us to measure anything and everything. As a result, business leaders are now using HR analytics to help guide strategy and boost profits.
In fact, according to Deloitte’s 2017 Global Human Capital Trends report, 71 percent of companies report that people analytics – “using digital tools and data to measure, report and understand employee performance” – is a high priority in their company.
But when it comes to measuring human-resources data to better your business, what should you measure? I asked human resources experts to weigh in on the HR metrics that matter most, and why.
#1 – Productivity
“The most important HR measure is and always will be productivity, the ratio of inputs to outputs,” says Mitchell Langbert, Ph.D, an associate professor of business who teaches human resources at Brooklyn College. Luckily, there are many convenient productivity measures, says Langbert, who adds that these measures may combine using HR metrics with other analytics, such as sales.
“For instance, Scanlon gainsharing plans measure productivity by taking the ratio of total payroll cost to the sales value of production,” he explains.
Labor productivity is a critical HR metric because it encompasses several important aspects of human resources.
“First, it reflects the economy with which labor is used,” says Langbert. “Second, it reflects innovation and use of technology. New approaches that are productive will generate greater revenues and so enhance productivity.”
Langbert says that the better use of technology means that each unit of labor generates more output.
In addition, keeping a close eye on the human resources metrics that impact productivity in multiple capacities is key. “Work arrangements, leadership, lean production practices, team building, human capital investment, and dynamic corporate cultures all contribute to productivity rates.”
Businesses that overlook productivity metrics run the risk of missing signs that all is not well, which could prove fatal as other businesses grow and improve their own productivity.
“Firms that sustain the highest total factor productivity rates will outperform their competitors,” says Langbert. “The sustenance of high total factor productivity guarantees the firm’s survival.”
Related Article: Top 7 Tips to Increase Employee Productivity in 2017
#2 – Time to Fill an Open Position
Time to Fill an Open Position tracks the time that passes between publishing a job opening and actually getting a job offer accepted. It’s a metric that Ron Hamilton, a senior HR consultant and professor who covers HR at Webster University, says is a significant one. And he’s not alone in this assessment.
The Deloitte report notes that analytics are being used on one of the biggest business challenges: hiring and recruitment. Hiring has proven to be a challenge for employers, with the NFIB Research Foundation reporting that in 2016, 58 percent of small businesses were “hiring” or “trying to hire” new staff, while 52 percent were having a tough time filling their open positions.
The Time To Fill metric may suggest gaps or problems such as:
- Inaccurate business planning if the estimated time to fill an open position is underestimated
- Ineffective advertising or recruitment strategies
And while it may seem simple, according to Hamilton, effectively counting the number of days it takes to fill an open position can provide critical information on where you could improve other business practices that directly impact your bottom line.
“For example, If you can fill a position in 45 days rather than 60, you are getting more productivity faster,” Hamilton explains. “That means that the business need is being satisfied more quickly. And that means more sales, more productivity, or better service.”
Related Article:What’s the True Cost of a Bad Hire
#3 – Employee Engagement
Are your employees happy at work? And is their happiness really that important? According to Amy Cooper Hakim, Ph.D, and industrial-organizational psychology practitioner, it most certainly is.
“When an employee is engaged, he is happier, more productive, more creative, and more dedicated to the workplace,” says Hakim, who is also the author and founder of The Cooper Strategic Group.
The studies back up this idea. In fact, the Harvard Business Review recently reported that “inspired employees are 125 percent more productive than employees who are merely satisfied.” Unfortunately, only a mere 33 percent of employees are actually engaged, according to Gallup’s 2017 State of the American Workplace Report.
Want to see what bucket your employees fall into? To measure employee engagement, Hakim suggests employers deliver annual engagement surveys and share the results with all employees in the organization. Above all, Hakim says leaders must act on their findings. “Specific steps should be taken by executives to enhance employee engagement based on results of the survey. This is critical, because it shows employees that their voices are heard and that they count.”
Letting employees know actions are being taken based on their input improves employee engagement, which boosts loyalty and may even reduce turnover.
“When we feel valued, we are more committed and are more likely to perform well and to remain with the organization,” she says.
The Bottom Line
As advances in technology continue to help business leaders access data related to every aspect of their company, knowing which metrics to focus on can be tough. However, honing in on just these three HR metrics can positively impact your company’s bottom line.
Wondering how to gain access to this kind of information for your own company? Get a free demo of the Zenefits Business Intelligence Reports today.