5 Metrics That You Can’t Track in Your HR Systems, But Need To Include In Your HR Reporting
In the past 10 years, HR has undergone a big technology shift with the emergence of new HR softwares that gives people leaders a new way to report on their KPIs and metrics.
Although we’ve seen a lot of organizations adopt these technologies, most of the metrics and KPIs in these HR systems are not financial. This is a problem because CEOs and other senior leadership decision makers focus on financial results as a critical part of their decision making process. The lack of financials puts HR leaders at a huge disadvantage when reporting on their KPIs and metrics to key stakeholders. It makes it harder to get bigger budgets, change people strategies, implement new solutions and more.
Below are 5 important people metrics that you need to include in your HR reporting, but can’t track in your HR systems that are more financial-driven.
1. Optimal Cost Per Hire (OPCH)
One metrics that is critical especially is you are hiring for many open roles is optimal cost per hire. Most HR systems use Cost Per Hire (CPH) as a way to assess costs around each hire they make. The problem with this metric is it leads to decision making that may not be optimal for your organization. As an example, if you are hiring for your sales team, and you target your CPH to low, you could be doing this at the expense long-term revenue growth. This might lead you to not go the extra mile and spend money on that extra software platform or recruiter, but could actually hurt your long-term revenue growth if you maximize your CPH for short-term cost savings only.
2. Fill Rates Revenue Loss (FRRL)
When growing your team, everyone wants to fill there roles as fast as possible without sacrificing candidates quality. The problem is that most HR systems track your fill rates only, which only tells you the amount of days its taking you to fill roles. The problem with this metric is it doesn’t give you an idea if allocating resources to speed up your fill rate would be worth the effort. If you have a revenue goal for your organization, and it requires you to hire a certain amount of employees to hit that goal, you need to know what the revenue impact of your fill rate is on each team to make sure you stay on pace.
3. Employee ROI
Another important metrics you can’t track in your HR systems is employee ROI. Employee ROI refers to the revenue the employees brings in minus salary, commissions (if applicable), cost to on-board, hire and any ongoing people related investments (enablement, training, etc.). This number helps you better understand what your revenue to cost multiplier is per/employee and gives you a baseline to see where each of the ROI factors can be improved over time. It also provides you insight into where you could make adjustments to increase employee ROI, whether its increasing cost efficiency in certain people functions or implementing new solutions that grow this number.
4. Promotion Value (PV)
Every organization wants to hire and promote their employees internally. With Promotion Value (PV), you need to know the value of internal promotion within your organization for each department and role and compare that number to the cost of turnover. This can help you determine when it makes sense when to promote employees, figure out the right level of benefits and compensation to retain them and even determine how budget you should allocate for people development.
5. Cost Per Quality Applicant (CPQA)
When growing your organization, the top of the hiring funnel is critical to your ability to hire quickly and efficiently. It can be easy for you to get applicants (ex. via Linkedin and Indeed), but the cost of getting a quality applicants is more important. Every organization defines a quality applicant differently, but we like to define it as someone who moved on passed the 1st round of the interview process. The higher volume and less costly it is for you to get a quality applicant, the more likely you are going to be able to fill your organization with top talent. By using this metric, it allows you to optimize recruiting sources that have better CPQAs then CPAs so you can prioritize your resources and allocate your HR more efficiently.
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