It’s true that all HR metrics are not created equal. Just like any other type of statistic or measurement, the numbers only matter if they are helping you determine the right solution.
For example, if your company tracks your employee turnover rate – without carving out voluntary, key talent, and low performers, for example – your turnover rate won’t accurately reflect what this metric can help you solve for: knowing how many good employees you are losing.
Another example is if you’re tracking time to fill across the board, without carving out variables around skill set requirements, special certifications, seniority, and so on. You’ll be tracking in general, how long it takes to fill roles at your company, but it will be skewed as an aggregate, versus understanding the time it takes to fill difficult to recruit for roles, versus entry level roles – and thereby not getting a realistic view on the “war for talent.”
If you’re not sure where to start or which HR metrics to track, here’s your first step. Once you know the four easy steps to your first HR metric, it’s time to start applying them and seeing them in action.
How an HR Department of One Used HR Metrics to Increase Retention
Just like Sarah did. Sarah is the HR director, in an HR department of one – where she oversees all HR activities for a small business located in Atlanta, GA with 150 employees. When she started, there was just over 50 employees – so growth has been rapid, and so have the HR issues!
When she on-boarded, it was quickly apparent that the work environment had a lot of issues. Most of which could be attributed to the CEO who has a rather brash personality and a very particular belief on how things should be done (ahem, his way).
The employees were extremely unhappy. People were leaving weekly. Senior leaders averaged about four months in the role. And the leaders who stayed, were constantly picked on and were in constant threat of being demoted.
It was a hostile work environment in many regards. And that’s why Sarah was brought on – to try and “police” the employees, bring them up to the CEO’s standards and stop the revolving door. We can breakdown all of those fun things another time, but the point is – Sarah definitely had her work cut out for her.
When #HR comes on-board with a slew of issues on-hand, it's critical to start with what the #HRMetrics are telling you. Click To Tweet
Sarah knew that she had to start using something more objective in order to make her business case to the CEO – and help him see where the pain points were and contributing factors to their employee turnover. It was critical that she was able to remove as much subjectivity as possible and let the data help tell the right story to influence change.
Metric 1: Employee Retention Rates
The first HR metric she started with, was the employee turnover rate. Since the small company felt more like a revolving door than a place to stay and build a career, she needed to dig deeper to understand if that was truly the case and if so, why people were leaving – and why people were staying.
She reviewed the employee files and tracked hire dates, roles/titles, pay, manager information, and termination dates and reasons, over the past year. Once she compiled that information, she then went forward with compiling the data and calculating the retention rate – with some additional details added into her numbers.
When people left, was it voluntary or involuntary? Was the employee’s performance strong? Were there any write-ups or ER issues, and so on?
She calculated the retention rate as follows:
- First, she only tracked voluntary turnover – people who resigned voluntarily (and gave two weeks’ notice). This is an important caveat for this company because with such high turnover in an unpleasant workplace, having a professional separation was critical to help the CEO see the numbers – as he would consistently say those who ghosted, weren’t good employees anyway. Note: Employees who left without notice and/or had an ER write-up, were considered “smart” turnover – which will be tackled with involuntary separately.
- Second, she parsed out turnover by title/years of experience. With a small company, there weren’t many layers of leadership, but she tracked the front-line workers, supervisors and senior leaders separately.
- Third, she looked at the current number of employees in each group by title/years of experience, to get her baseline number.
Once she had this information, she started creating the metric, below is what it looked like. She entered the number of voluntary terminations by her three levels, and then indicated the number of employees at each level.
You can interpret the number of employees two ways – either the number of employees currently filling the role or, as Sarah did, the number of headcount assigned to each role. She used the latter because with so much turnover, all roles were not filled and would not accurately show the rate she was looking for.
YTD Voluntary Turnover
June 1, 2017
|Level||Total Voluntary Terms||# Employees at Level|
From the numbers alone, you can see a lot of people who they didn’t want to leave, was leaving. Here’s how we calculated the actual retention rates for each level in Excel, for year-to-date information (June 1).
= 1 – (Total Number of Employees at the Level/Total Number of Voluntary Terminations) × Days in Year ÷ Average of 30 days per month (360) × (Start Date – as a numeric, Current Date – as a numeric)
For the front line employee population, here is the exact formula:
Which equates to a -8.15% retention rate.
Annual Retention Rate %
EEK! A negative retention rate is rare but also helps show a very important story that Sarah could share with the CEO.
People were leaving in all levels of the organization in staggering numbers, but especially managers.
With these metrics now available, Sarah needed to create a business case to set the employees up for success at the company and also help remove the CEO from direct management and oversight of the employee population. It was a direct correlation between the more interactions an employee had with him, the more likely they were to leave.
But what HR person wants to walk-in and deliver that news? Any takers?
Using HR Metrics to Influence the Outcome
Instead of simply sending the retention rate numbers along to leave them up for interpretation, misunderstanding or being ignored, Sarah created a plan to guide the CEO in the right direction with these metrics.
Her idea: Have the management of all employees role up to his number two, a long-time employee that often smoothed things over between employees and the CEO, playing peacekeeper more often than not. Position it to the CEO that he needed more time and space to continue to lead and grow the company in his strength areas – while letting the employee day-to-day management be run by his trusted leader.
Her business case included items such as:
- With retention rates as follows, you (the CEO) are spending a significant amount of your time focused on hiring, on-boarding, and daily management of the employee population – bogging you down in a lot of details, interviews, and disappointments – and not on what you do best, bringing in new customers and accounts.
- By moving the reporting of employee/staff operations under your COO, you will free up a significant amount of time to scale. Based on your calendar last week, you would have an additional four hours of just interviews and two hours of meet-and-greets, freed up – that’s 15% more time back into your week.
- Let’s do a 60-day trial of this new reporting structure and revisit the retention rates – year-to-date and for that 60-day time period and see what’s working and where we need to readjust and implement a new plan.
For Sarah and this small business, the first HR metric she implemented was the most critical for their business – as a significant amount of time and energy was being spent on the “revolving door” of employees… and no one knew how to tell the CEO that he was a major part of the problem, without fear of losing his/her own job.
In addition, customizing the metric to measure exactly what retention meant for that specific company – helped create more objectivity and viability as a measurement. Coupled with a business case and a specific solution, allowed the metric to be more than just the numbers. Instead, it became a comprehensive HR strategy.The right #HRMetric is more than just the numbers. Instead, it becomes a comprehensive #HR strategy. Click To Tweet
Whether you’re an HR department of one or one of many, using the right metrics for your situation, is a critical tool to ensure your overall success as an HR partner. In this case, not only did it change the lives of each employee at the company, but it also helped Sarah focus her time and energy on the right things as well – not having to constantly replace every role as people left in an ongoing basis, allowing her to deliver better HR in a consistent basis.