HR metrics and the overall digitalization of HR might seem like yesterday's topic. This is understandable, given that in 2024 and 2025, the focus has shifted heavily towards the application of AI in HR. However, HR metrics are more nuanced than they might initially appear. Just as AI provides the most popular answer, HR metrics can be both obvious and subtle. Remote workers socialize less within the company and often feel a weaker emotional connection to their teams. For distributed teams, tracking the right metrics is even more crucial than for office-based companies because HR and leaders can't "feel the situation" and manage based on intuition. It’s not just about tracking metrics but also comparing them to market benchmarks and understanding the interconnections between HR metrics. That’s what we’ll delve into today.
When dealing with HR metrics, it makes sense to cascade them, much like goals in OKR. Top-level metrics should be monitored not only by HR but also by founders or the CEO. Lower-level metrics should be tracked by HR BPs and mid-level managers.
Top-Level Metrics: Staffing Level Percentage – This is a crucial metric that shows the percentage of required personnel that you currently have. Labor Productivity: Revenue, turnover, profit, GMV per employee. This metric indicates how efficient the company is overall. Monitoring revenue per employee against industry benchmarks is a good practice. It’s relatively easy to do this by reviewing the financial reports of publicly traded competitors.
Mid-Level Metrics: Turnover Rate: This is a classic and widely beloved metric, but on its own, it doesn’t say much. Imagine you have a 16% annual turnover rate. So what? Is that good or bad? How does it compare to competitors? Who are the people who left the company over the year? Do we regret their departure? These and other questions highlight the need to break down the turnover rate into more detailed components:
Regretted Attrition Rate: This is an excellent metric that reflects the percentage of people whose departure the company regrets.
Non-Regretted Attrition Rate: The percentage of employees who left, and whose departure the company doesn’t regret.
Why Are These HR Metrics Important?
Regretted attrition shows the percentage of employees the company failed to retain. Exit interviews can reveal the reasons and help the company take measures to avoid losing valuable employees in the future. Additionally, after some time, you can reach out to former employees and offer them a chance to return. One of the best types of hires is re-hiring former employees whose departure was regretted. On the other hand, the non-regretted attrition metric is a reason to closely examine your recruitment and performance evaluation processes.
In other words, regretted attrition reflects management mistakes, while non-regretted attrition often points to recruitment errors, especially if it occurs within the first year of employment.
Probation Success Rate: This is one of the trickiest HR metrics, so let’s break it down. Typically, the probation period is short, ranging from 1 to 6 months; in Europe, sometimes the first contract is for a year, after which the employee transitions to a permanent contract. The percentage of new hires who successfully pass the probation period can often give HR an easy win. The reality is that managers often start evaluating the effectiveness of newcomers only after the probation period ends. The second issue is that knowledge workers typically reach their true productivity level much later than the end of the probation period, on average 8-10 months later. As a result, this HR metric becomes almost useless. If your team primarily consists of marketers and software developers, you should track the percentage of those who successfully passed the 100-day mark. If newcomers, for example, leave after 7-8 months, it won’t be reflected in the statistics, meaning the company has spent a lot on recruitment, salary, and onboarding, but the employee left before reaching full productivity.
The correct approach to this HR metric is cohort analysis, which looks at the percentage of people who stayed for 3 months, 6 months, a year, and two years.
Employee Satisfaction Index: This is an extremely important metric that directly impacts labor productivity! You might be surprised, but this metric can even outweigh metrics related to salary competitiveness. Yes, pay levels directly affect satisfaction, but the paradox is that satisfaction, in turn, influences productivity. Satisfaction, however, is influenced by more than just salary and bonuses. Factors such as the ability to work remotely, relationships with the team, company culture, and management support all play a role. In other words, you need to not only track satisfaction levels but also understand the factors influencing them. This way, you can more effectively manage productivity and budgets.
Time to Fill: A fairly straightforward metric that is calculated as the average time from when a job opening is posted to when an employee starts. The key nuance here is that this metric will vary across different professions and levels. When aiming for a fast hire, it’s important not to let the metric for the percentage of employees who stay for a year decline. This is a prime example of the speed versus quality trade-off.
Cost per Hire: A great metric that shows how much it will cost to replace or hire a new employee. Startups don’t need to be overly meticulous in calculating every cent of the actual hiring cost. But understanding the real costs of hiring is a great idea. The next time the question of raising an employee’s salary comes up, managers will be able to quickly assess the cost of refusal.
Salary Cost Efficiency: If you assume that the salary level in your region is 1 and your entire team is hired in San Francisco, what percentage of this amount are you spending now? What if you hire part of the team in Eastern Europe? Mexico? India?
Hidden Costs: How much do you need to add to the salary to hire an employee in a particular region? If you decide to hire an AI developer in San Jose, it’s likely you’ll also need to cover contributions like 401K, HSA, 529 Plan, ESPP, ESAs, Commuter Benefits, and so on.
You might think that tracking all these metrics is something only corporations can afford, not Series A startups or small companies with 100 employees. But that’s not the case! All the HR metrics mentioned can be easily tracked using modern HRIS, which is exactly what we’re developing. Tribune makes it easy to get accurate information on the HR metrics that matter. And the time you save from not having to fill out endless Google Sheets can be spent on improving those metrics. Or just having a coffee. In any case, by tracking these metrics and understanding their interconnections, HR and managers can manage their teams more effectively.
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