How to Determine What HR Metrics to Measure
* Review business strategy and both long- and short-term goals with executives to ensure HR is aligned with these objectives. Identify how HR will contribute to achieving those goals, and pinpoint which measurements will provide targeted, relevant information about how those functions affect business objectives and strategies.
Simply defined, human resources metrics are different measurements that are used to show the value that the human resources function provides to the organization. These measurements demonstrate how effective the efforts of the human resources department are to the overall success of the organization.
Determining what metrics to measure and report will depend on your organization’s strategy and goals. A good approach is to focus on the metrics that affect progress toward business goals. However, assessing what data are meaningful, determining how to measure them and choosing appropriate communication methods can seem daunting. When choosing what HR metrics to focus on, consider the following:
* Define each HR metric and its formula. Not all organizations define metrics the same way or use the same formulas. For example, some companies measure the cost for each new hire without including payment for recruiters as a related expense.
* Determine what data must be collected, what collection methods are available, and how the data will be gathered. For instance, will all data for cost-per-hire be captured in human resource information systems? Or will some data need to be obtained from another department?
* Decide how often HR metrics information will be collected and reported. Will it be monthly, quarterly or annually?
* Choose what format will be used to report the data and who will receive the report. Will the data be part of a regular operations report or scorecard? Will it be a stand-alone document? Who will receive the report?
* Review what is being measured on a regular basis to ensure that HR is providing relevant information. Have goals changed? Does HR need to be providing different metrics to support business objectives?
An effective HR metrics reporting practice provides measurable value to the organization by pinpointing where human capital issues exist and allowing HR staff to monitor trends.