Most of the HR and recruiting metrics such as absence rate, overtime expense, and employee productivity don’t tie in with the strategic goals of an organization, something that your CEO is laser-focused about. As a result, when these metrics are reported to the executive team, it results in no positive response. In fact, according to a study by HR thought-leader, Dr. John Sullivan, only 12% CEOs had faith in Human Capital metrics of their organization.
If your HR metrics are not directly and unambiguously related to strategic goals like increasing revenue, or innovation, they just won’t get the executives to act. Here are 7 HR metrics that have a high impact on your revenues, that you should be tracking to get your CEO’s attention.
1. Revenue per Employee
It’s the most effective way to measure employee productivity and innovation output of your workforce. In fact, it’s widely accepted by CFOs as the standard workforce productivity metric because it measures the output of your firm’s workforce in revenue dollars. It’s also easy to calculate. It’s basically the total annual revenue divided by the average number of full-time employees in your organization. Here’s the best part. Since it uses publicly available information, it’s easy to compare this metric with those of your competitors. In fact, you can find revenue per employee for all public companies on MarketWatch.
2. Performance improvement of new hires
This talent management metric is essential to measure the quality of new hire recruiting. If you hire a bunch of new employees, and they perform a few percent better than the previous batch, it will improve the overall productivity of your organization. Keep it simple and don’t try to measure the productivity of all new hires. Focus on those jobs that are already quantified in dollars – such as sales, collection, customer support agents. You can also supplement it with new-hire retention rates, and work with your CFO to measure the increase in revenue as a result of better new-hires.
3. Turnover in key jobs
It’s always expensive to lose top performers in an organization. Measure the percent of employees, in key positions, that quit voluntarily every month, and every year. It’s more expensive to lose a top performer than a low-performer turnover. So weigh your turnover(i.e, put a weight equal to the percent that the departed employee performed above the average) by employee performance. Calculate and report the dollar impact from top-performer turnover in key positions.
4. Revenue lost due to vacant positions
This HR metric focuses on revenue and productivity losses due to slow recruiting. When an employee quits, it leads to loss of revenue. Slow recruiting only makes it worse. Since vacancy days have the most impact on revenue-generating jobs, focus your metric on those positions. Calculate the revenue lost per day, by dividing the average annual revenue generated by a vacant position, by the total number of vacant days. This will help C-suite see how vacant positions are costing their business. Also, report how reducing the vacant days helps reduce revenue losses.
5. Metric covering the ‘hot’ talent problem at your firm
In addition to tracking the fixed metrics mentioned above, you should also track a dynamic metric that covers the latest talent problem on your CEO’s agenda that are keeping your executives up at night. Begin with the high-impact areas such as increasing innovation, effective onboarding, developing leaders, skill shortage, internal movement.
6. Productivity survey to identify HR programs that increased productivity
One of the best ways to determine the impact of HR programs such as training & onboarding is to conduct a survey of managers and employees. Survey a sample of employees & managers and ask them to rate (on a scale of 1 to 10, 10 for being excellent) how each HR program helped them reach their productivity goals. For programs with a rating of eight or lower, ask the surveyed people to estimate the revenue loss due to their reduced productivity.
7. Percent of HR goals met
All strategic HR initiatives must meet their goals. Every 6 months or so, ensure that the HR department reports to the executives, the percent of its strategic goals that were met. For major sub areas like recruiting, list each goal and which ones were accomplished. This will help you communicate your progress and get enough attention to roll out new initiatives
In addition to supplying the right metrics to your CEO, there are a few other things you need to do to make them act. First, quantify the impact of each metric on revenue dollars. This will put HR problems at par with those in other business areas. Second, show them a trendline that predicts how the problem is likely to get worse, if left unattended. This will prove that what you’re presenting is not a one-time problem, and compel them to act. Third, provide a list of possible solutions along with your recommendation, to speed up decision-making and drive action.
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