Posted: April 24th, 2025

chap 14

https://www.forbes.com/sites/forbeshumanresourcescouncil/2021/12/07/top-10-issues-facing-hr-leaders-heading-into-2022/?sh=57d0293d474e

Chapter 14: HR Metrics and Workforce Analytics

Introduction
Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
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Satisfies Learning Objective 14.1: Discuss why the objective of analytics efforts needs to be improving decisions and why doing so is critical to generating return on investment.

Increasing interest in human resources (HR) metrics and analytics:
HR metrics and workforce analytics have been a topic of interest in almost every organization.
However, today, more factors are driving organizations to use these tools to enhance organizational effectiveness.

The growing power of Human Resource Information Systems (HRIS):
Integrated HRIS is one of the main reasons for the increasing interest in HR metrics and analytics.
Modern HRIS is powered by more capable computers, high-speed Internet, enhanced connectivity, and access to user-friendly analytics software.
As a result, the dynamics of human capital assessment in organizations have changed drastically.

Other factors driving the interest:
Higher potential for near real-time analysis and distribution of information.
Growth in evidence-based management.
Greater availability of information from third-party sources.

Increasing interest in human resources (HR) metrics and analytics.

The growing power of Human Resource Information Systems (HRIS).

Factors driving the interest.

A Brief History of HR Metrics and Analytics
Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
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Satisfies Learning Objective 14.2: Discuss how a decision-based view of HR can be used to identify important workforce analyses that can drive improved value in almost any organization.

The evolution of HR metrics and analytics:
Measures to capture the effectiveness of employees have been in place since days of scientific management and industrial and organizational psychology.
More study in the area happened during the great post-war industrial expansion in the United States.
However, assessment of HR metrics became popular with the pioneering work of Dr. Jac Fitz-enz and the early benchmarking work he conducted through the Saratoga Institute. (1984)

Measures developed with the Saratoga Institute:
Through the joint efforts of the Saratoga Institute and the American Society for Personnel Administration (ASPA), 30 metrics were developed. (Table 14.1)
Some of them include revenue per employee, expense per employee, cost of hire, and so on.
Metrics were initially used to measure aspects of HR programs and activities and were later employed to measure HR effectiveness.
Following this, Society for Human Resource Management has identified several metrics (HR Metrics Toolbox Table 14.2) that helped to build more detailed approaches for the measuring and benchmarking of employees’ behaviors. (Show PDF)

Kaplan’s and Norton’s balanced scorecard:
With Kaplan’s and Norton’s balanced scorecard came more refined thoughts about metrics.
Balanced scorecards: Focused on creating leading indicators of performance from several important perspectives (such as customer satisfaction, process effectiveness, and employee development) as well as financial performance.

The work of Huselid: Around 1995, Huselid showed that the systematic management of human resources was associated with significant differences in organizational effectiveness thus indicating the strategic potential of human resource management.

During this period where we start seeing HR with a focus on managing people to get results, instead of just a cost to control

The evolution of HR metrics and analytics.

Measures developed with the Saratoga Institute.

Kaplan’s and Norton’s balanced scorecard.

The work of Huselid.

Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
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Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
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Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
Limitations of Historical Metrics
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Satisfies Learning Objective 14.1: Discuss why the objective of analytics efforts needs to be improving decisions and why doing so is critical to generating return on investment.

Question 2 – What are some of the limitations of early attempts at HR Metrics

HR metrics: unchanged:
Computing and communication tools that support HR metrics have evolved drastically in the past years.
However, HR metrics have remained unchanged since the time when computerization of HR transactions were absent.
As a result, most metrics tend to focus on the cost involved and do not account for the benefits derived.
With cost as a standalone factor for influencing managerial decisions, the perception of HR as a “cost center” is only perpetuated.
An effective HR metric focuses on both costs and benefits of a decision, thus allowing a fair estimation of ROI.

Use of organization level data:
When metrics use data aggregated at the organization level, it is difficult to identify and diagnose within-organization differences.
To solve this issue, organizations are leaning towards interactive reporting portals that allow managers to drill down to lower-level details in aggregate data.

Lack of real-time feedback metrics:
When feedback metrics are delayed, responses to opportunities and problems are slowed down too.
Metrics that support real-time remedial action to minimize any negative effects are considered most effective.

Focus on costs–limited value to managers. If managers are only provided information about costs, with little or no information about benefits, costs are likely to become the primary driver of managerial decisions. This perpetuates the still common perception of HR as a “cost center.” Tended to aggregate data to the level of the organization. As such, they offer limited information that could be used to identify and diagnose within-organization differences—produced “after the fact,” resulting in slow responses to problems or opportunities. Because they provide data “after the fact,” these are described as “feedback” metrics.
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HR metrics: unchanged.

Use of organization-level data.

Lack of real-time feedback metrics.

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Contemporary HR Metrics and Workforce Analytics (1 of 8)
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Satisfies Learning Objective 14.2: Discuss how a decision-based view of HR can be used to identify important workforce analyses that can drive improved value in almost any organization.

HR metrics: Attributes of an organization’s HR programs and activities, or its related outcomes.
Some examples of HR metrics include, turnover rate, head count, cost of conducting a training program etc.

HR metrics that must be tracked:
Tracking common organizational metrics can aid in benchmarking efforts.
However, an organization can derive the best benefits only when specific metrics with specific calculations are customized to the specific needs of organizational decision makers.
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HR Metrics

Attributes of HR programs and activities.

HR metrics that must be tracked.

Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
Contemporary HR Metrics and Workforce Analytics (2 of 8)
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Satisfies Learning Objective 14.2: Discuss how a decision-based view of HR can be used to identify important workforce analyses that can drive improved value in almost any organization.

Workforce analytics: Strategies for combining data elements into metrics and for examining changes in metrics or the magnitude of relationships among them

Purpose of workforce analytics:
Helps to inform managers about the state of human capital in an organization and its impact on decision-making.
Helps to determine what metrics the organization needs, what data elements are relevant and need to be captured, and how these data elements should be combined.
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Workforce Analytics

Examination of changes in metrics.

Purpose of workforce analytics.

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Contemporary HR Metrics and Workforce Analytics (3 of 8)
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Satisfies Learning Objective 14.2: Discuss how a decision-based view of HR can be used to identify important workforce analyses that can drive improved value in almost any organization.

Benchmarking: It is a method of creating useful comparisons between or within organizations.
The Saratoga Institute premiered in developing information on standard HR metrics and informed managers about differences in HR outcomes among major organizations.

The purpose of benchmarking:
Benchmarking helps to draw comparisons between HR practices and human capital in terms of cost and outcomes.
It helps an organization to understand where it is currently placed in the HR landscape and what level can it reach in terms of HR outcomes.

Challenge in benchmarking HR metrics:
The challenges faced by an organization and its corresponding HR practices differ from other organizations.
Therefore, direct comparison of external benchmarks of HR metric data to one’s own organization may not reflect a realistic picture and may also not provide the right guidelines for goal setting or for planning remedial actions.

Workforce Analytics: Benchmarking

Comparison between organizations.

The purpose benchmarking.

Challenge in benchmarking HR metrics.

Contemporary HR Metrics and Workforce Analytics (4 of 8)
Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
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Satisfies Learning Objective 14.3: Discuss the roles that activities such as data mining, predictive analytics, and operational experiments play in increasing organizational effectiveness

Data mining: It is the effort used to identify patterns that exist within data and which in turn may identify unrecognized causal mechanisms that can be used to enhance decision-making.
To identify causal mechanisms, data mining uses correlation and multiple regression methods and identifies patterns of relationships.

Value of Big Data:
Big Data: It is used to extract insights when multiple transaction systems generate large datasets (of many terabytes).
Consider the case of Google or any social media website that can generate very large datasets.
The data can be mined to draw inferences about customer preferences and can thus help managers to achieve better sales, customer satisfaction, and reduced costs.
Big Data is considered valuable because of three important characteristics: volume, variety, and velocity.
Volume: It offers very large amount of data that is sufficient to draw useful patterns and, in some cases, additional insights too.
Variety: Offers access to wide range of data elements, thus making new data available to the organization.
Velocity: Data are generated at a fast pace thus making decision cycles shorter.

Caveats of data mining in human capital:
In any domain, data mining can expose spurious or nonsensical relationships.
In other words, relationships between variables can be identified but data mining plays no role in determining if these relationships are meaningful, casual, or of any significance to the organization. Example: taller employees have higher leadership scores.
Another drawback of data mining is that it can capture relationships that existed in previous patterns of relationship too.

Workforce Analytics: Data mining and “Big” Data

Identification of unrecognized causal mechanisms.

Value of Big Data.

Caveats of data mining in human capital.

Contemporary HR Metrics and Workforce Analytics (5 of 8)
Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
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Satisfies Learning Objective 14.3: Discuss the roles that activities such as data mining, predictive analytics, and operational experiments play in increasing organizational effectiveness

Predictive analysis: The creation of models of organizational systems to predict their future outcomes at some point.
It can also help in predicting how changes in the environment and planned organizational interventions can impact key outcomes.

Benefits of predictive analysis:
Predictive analysis makes organizational planning more proactive.
By knowing what to expect, managers can act to enhance positive effects or mitigate negative ones from any internal or external action.

Tools used in predictive analysis:.
From the simple trend analysis technique to highly sophisticated models, predictive analysis uses a whole range of tools.
Also, efforts to develop balanced scorecards are examples of elementary predictive systems.

Enhancing the quality of models:
The quality of predictive analyses models can be enhanced through regular testing of assumptions in these models.
Testing and revision of assumptions lead to identification of additional leading indicators and better specifications about the nature of the relationships between predictors and outcomes.
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Workforce Analytics: Predictive Analyses

Models to predict the future.

Benefits of predictive analysis.

Tools used in predictive analysis.

Enhancing the quality of models.

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Contemporary HR Metrics and Workforce Analytics (6 of 8)
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Satisfies Learning Objective 14.3: Discuss the roles that activities such as data mining, predictive analytics, and operational experiments play in increasing organizational effectiveness

Artificial intelligence enhances human decision-making:
Artificial intelligence: The approach used to automate or enhance aspects of human decision-making.
Decision-making models are fed with data about correct and incorrect decisions and factors related to decisions made thus far.
These models use multiple regression and related technologies to identify data elements and decision rules that lead to the greatest number of correct decisions.
Artificial systems are more effective than human decision-making because they are faster and always apply the optimum decision rule.
By using artificial intelligence in less ambiguous circumstances, decision-making is made more effective, and humans are allowed more time in decision contexts that are more ambiguous and uncertain.

Machine learning and unstructured data:
Machine learning: Refers to the use of algorithms that work with large volumes of data (moderately structured or unstructured) to learn relationships among data elements that can be useful in improving decision-making.
Machine learning tools are used along with human decision-makers and are specifically useful to those who may not have a deep systematic understanding of certain fields or problem domains.

Workforce Analytics: Artificial Intelligence and Machine Learning

Artificial intelligence enhances human decision-making.

Machine learning and unstructured data.

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Contemporary HR Metrics and Workforce Analytics (7 of 8)
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SKIP
Satisfies Learning Objective 14.3: Discuss the roles that activities such as data mining, predictive analytics, and operational experiments play in increasing organizational effectiveness

Difference between data mining and modeling:
Modeling and optimization involve the creation of highly accurate models of key organizational systems.
Modeling varies from data mining in that the former has a more accurate understanding of the system of relationships and interrelationships (between variables affecting specific outcomes) than the latter.

Uses of modeling:
Accurate models can be used to assess the required input for a given level of output.
They can estimate the joint effects of environmental change or organizational action.
Using modeling, refined theories about the effects of new or untested interventions can be generated.

Workforce modeling: This application tries to draw a relationship between an organization’s human capital needs and expected changes in the organization’s environment.

Workforce Analytics: Modeling and Optimization

Difference between data mining and modeling.

Uses of modeling.

Workforce modeling.

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Contemporary HR Metrics and Workforce Analytics (8 of 8)
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SKIP
Satisfies Learning Objective 14.3: Discuss the roles that activities such as data mining, predictive analytics, and operational experiments play in increasing organizational effectiveness

Operational experiments: An effective method of developing the evidence on which to base decisions that can be conducted with the organization.

Decisions based on actual evidence:
Within an organization, a lot of assumptions about “how things work” exist and managers have their own philosophies.
However, when it comes to decision making, it is the actual evidence from the functioning of the system that must drive decisions.

Google uses operational experiments:
Google does not rely on assumptions or any experts about which ad wording is more effective.
Instead, it creates an experiment, by configuring its site to alternate the presentation of competing ad text to visitors to its site and then tracks the number of “click-throughs” on the ad during a given time period.
With the help of the results, Google adopts the most effective ad wording.

Workforce Analytics: Operational Experiments

Effective method to develop the evidence.

Decisions based on actual evidence.

Google uses operational experiments.

HR Metrics, Workforce Analytics, and Organizational Effectiveness (1 of 4)
Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
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Satisfies Learning Objective 14.5: Discuss why the information from HR metrics and workforce analytics may fail to generate value for an organization

The impact of workforce analytics efforts:
Multiple metrics are reported with increased frequency to a broader range of managers in order to improve human capital management in an organization.
However, these efforts taken by HR professionals do not always have significant impact on organizational effectiveness.

Common problem areas:
Often HR professionals complain that managers do not tell them what information they need or use HR metrics from existing reports or even acknowledge receipt of the HR reports.
Clearly, this indicates the existence of some fundamental challenges that need to be dealt with.
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The impact of workforce analytics efforts.

Common problem areas.

HR Metrics, Workforce Analytics, and Organizational Effectiveness (2 of 4)

Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
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Satisfies Learning Objective 14.5: Discuss why the information from HR metrics and workforce analytics may fail to generate value for an organization

Common misconceptions about HR metrics:
Assessing and reporting HR metrics is perceived to yield better organizational performance.
But the links between reporting more HR metrics and better performance of individuals and units and ultimately the organization are not well-established.
Further, the misperception about workforce analytics is that it must simply derive value from HR data, workforce analytics starts with HR data rather than from the organizational problems that need to be resolved.

Result of the misconceptions:
As a result of this approach, more time and struggle goes into determination of metrics that may not be relevant to the organization and their ways of calculation.
Also, most metrics end up being of very little use and relevance in making key decisions.

Alternative way to drive decision-making:
The right approach is however to start with the problems or opportunities faced by the organization.
This allows a deeper understanding of the information needed, helps identifying the relevant data metrics and the corresponding data elements.

“Data first” versus “problem first”:
In the “problem first” approach, the main focus is on specific managerial decisions.
Since the targets are specific, fewer metrics are calculated and reported thus reducing the cost simultaneously.
In the “data first,” data remains the main focus.

A Common and Troublesome View

Common misconceptions about HR metrics.

Result of the misconceptions.

Alternative way to drive decision making.

Data first versus problem first.

HR Metrics, Workforce Analytics, and Organizational Effectiveness (3 of 4)

Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
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Satisfies Learning Objective 14.5: Discuss why the information from HR metrics and workforce analytics may fail to generate value for an organization

Fundamental problem with HR metrics:
The most fundamental problem for many HR metrics is that a clear impact of the metrics on important managerial decisions remains unestablished.
Workforce analytics efforts must allow managers to access information that can help them to make better decisions regarding the acquisition and deployment of an organization’s human capital.
In other words, it is not sufficient to simply to “do” metrics and analytics, but the focus must be on deriving the potential return on investment from the efforts.

Ways to make better decisions:
It is not sufficient for analyses to simply confirm the decisions that were already about to be made.
2. With workforce analysis, managers can make better decisions in three ways:
A different and better decision is made after receiving the results of the analysis (when compared to the decision that was about to be made before the results).
The same decision is made but it is done sooner.
The manager can avoid making a decision at certain instance as the results show no requirement for intervention.

Maximizing the Impact of Workforce Analytics Efforts

Fundamental problem with HR metrics.

Ways to make better decisions.

HR Metrics, Workforce Analytics, and Organizational Effectiveness (4 of 4)

Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
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Satisfies Learning Objective 14.5: Discuss why the information from HR metrics and workforce analytics may fail to generate value for an organization

Varying opportunities for workforce analysis:
Most workforce analyses demand the same amount of effort and time and yet do not yield the same level of ROI.
For instance, a large organization that is just introducing workforce analysis, may find multiple opportunities to generate thousands of dollars in return.
However, with the same analyst effort, opportunities that yield millions of dollars can also be found.

Taking advantage of the opportunities: To enjoy optimal ROI, organizations must develop the capacity and discipline to recognize large analytics opportunities and focus their analysis there.
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Triage in Evaluating Workforce Analysis Opportunities

Varying opportunities for workforce analysis.

Taking advantage of the opportunities.

Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
So Where Are the Best Workforce Analytics Opportunities Likely to Be Found? (1 of 4)
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Satisfies Learning Objective 14.4: Discuss the differences between analytics used to assess efficiency, operational effectiveness, and organizational realignment, and offer examples of each

Administrative process efficiency:
Most organizations invest time and effort in workforce analysis to report HR administrative process efficiency to accomplish how the critical human resource management (HRM) processes are in support of organizational effectiveness.
Some common metrics used to indicate the administrative efficiency of HR department are cost per hire, HR department costs, days taken to fill positions and so on.

Significance of HR process efficiency analytics:
HR process efficiency analytics is considered necessary to create credibility for HRM managers in some cases, while sometimes, they offer only limited potential in influencing organizational effectiveness.
In short, the efficiency of HR processes is important, but it is often less critical than assuring that the organization has the right processes in place.

HR Process Efficiency

Administrative process efficiency.

Significance of HR process efficiency analytics.

Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
So Where Are the Best Workforce Analytics Opportunities Likely to Be Found? (2 of 4)
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Satisfies Learning Objective 14.4: Discuss the differences between analytics used to assess efficiency, operational effectiveness, and organizational realignment, and offer examples of each

Question 1 – What is Operational Effectiveness?

Operational effectiveness: Analyses focus on identifying opportunities to enhance operational outcomes in an organization.
In this process, the analysts use the technical competence of HR professionals.
For instance, the analysis can draw links between HR functions like recruiting, training, and job design and operational outcomes like on-time deliveries, units sold, and so on.

Maximizing human capital intervention:
To achieve operational effectiveness in different units of an organization, workforce analysts play a consultative role and help to identify opportunities where human capital interventions can contribute.
When organizations shift from HR process efficiency to operational effectiveness, the impact of workforce analysis recommendations on organizational outcomes is significantly increased.

Operational Effectiveness

Opportunities to improve operational outcomes.

Maximising human capital interventions.

So Where Are the Best Workforce Analytics Opportunities Likely to Be Found? (3 of 4)
Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
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Satisfies Learning Objective 14.4: Discuss the differences between analytics used to assess efficiency, operational effectiveness, and organizational realignment, and offer examples of each

Strategic alignment: Refers to the human resource planning efforts that focus on the long-term goal to ensure replacement of the labor power for smooth operation of an organization as well as on planning for needed strategic changes in the organization.

New situations and circumstances: When an organization encounters a new situation such as a merger, entry into a new market or so on, HRM analytics plays an important role in estimating the future demand for and supply of needed human capital.

Highest potential effect: While workforce analytics to improve strategic realignment is yet to develop in most organizations, these analyses have the greatest potential to influence an organization’s bottom line.

Strategic realignment

Human resource planning.

New situations and circumstances.

Highest potential effect.

So Where Are the Best Workforce Analytics Opportunities Likely to Be Found? (4 of 4)
Starting with the end in mind
Identifying the problem or opportunity.
Triaging analytical opportunities.
Identifying influences and interventions.
Intermediate and ultimate outcomes.

Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
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Satisfies Learning Objective 14.6: Describe what factors managers should consider when building workforce analytics capability in an organization

Identifying the problem or opportunity:
In order to build an effective workforce analysis, one must start with identifying the biggest challenge or opportunity within the organization.
The next step would be to understand what outcome variables might change if the opportunity was captured or the challenge was solved.
The outcome variables are then represented using numbers with the help of available metrics.
A dollar value is attached to them and the difference in the values of outcomes are determined.

Triaging analytical opportunities:
Triaging refers to the determination of the highest priority analytical opportunity amongst all the available ones.
The gain achieved from each analytical opportunity and the cost of conducting the analysis is estimated.
Triage decisions are influenced by the potential benefits, rather than the cost of conducting the analysis because while cost remains more or less the same across opportunities, the difference in benefits is vast.

Identifying influences and interventions:
When the most ideal outcomes are identified, the factors influencing the outcomes and available intervention options (and the cost involved) are determined.
Most organizations do not thoroughly understand the system of factors that influence outcomes of interest and the types of available interventions and their effects.

Intermediate and ultimate outcomes:
To understand how interventions and influences impact the outcomes, it is important to determine if the chosen outcome is an intermediate or an ultimate one.
If an outcome directly leads to increases in revenue, reductions in cost, or some combination thereof, then it is an ultimate outcome, and all other outcomes are intermediate.
In human resources, most often, interventions never impact an ultimate outcome directly.
They act on an intermediate outcome which may sequentially affect one or more additional intermediate outcomes before impacting the ultimate outcome.
The challenge here is to understand the exact sequence and determine the expected effects of an HR intervention.
Limits in this understanding can lead to incorrect decisions by analysts and therefore it is recommended that they work with managers to surface the assumptions associated with the causal sequences expected from interventions so that the validity of these hypotheses can be tested.

An Example Analysis: The Case of Staffing (3 of 3)
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Satisfies Learning Objective 14.6: Describe what factors managers should consider when building workforce analytics capability in an organization

Intermediate outcomes: cannot be interpreted in dollars:
Most staffing analyses focus on intermediate outcomes.
While these outcomes are important, they cannot be directly interpreted in dollars and cannot be compared to changes in costs directly.

Boudreau’s utility analysis:
Boudreau’s utility analysis lays the initial step to estimate the value of the greater contributions of better employees to organization effectiveness.

Results derived using the analysis:
When done right, the analysis can yield consistent results for low autonomy positions.
The same cannot be said about high autonomy jobs, as high responsibility increases the potential impact of each decision and involves more dollars or impacts more people.

Assessing the Financial Impact of Staffing Decisions: Utility Analysis

Intermediate outcomes: cannot be interpreted in dollars.

Boudreau’s utility analysis.

Results derived using the analysis.

Building a Workforce Analytics Function (1 of 3)
Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
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Satisfies Learning Objective 14.6: Describe what factors managers should consider when building workforce analytics capability in an organization

Getting started:
Since most organizations are yet to find their feet in establishing HR metrics and analytics, it is recommended that they focus on a limited number of potentially high-payback opportunities to build their workforce analytics upon.
A good way to get started is by determining the most critical problems in the organization that are worth solving or opportunities that best enhance organizational effectiveness.

Understanding why: Choice of outcome:
Most often, organizations use their own personal theories about organizational functioning to choose the outcome measures.
However, the chosen outcome may only be an intermediate one and may not have the expected impact on the ultimate or distal outcomes.

The why test: The why test makes organizations to ask why it is interested in a specific outcome and ensures that changes to an intermediate outcome also positively impacts the distal outcome.

The example of employee turnover:
Consider the case of employee turnover. High employee turnover costs much to the organization and can be disruptive to operations too.
By asking why turnover is important, we understand that high employee turnover can lead to loss of knowledge and important skill sets. However, this does not imply a direct loss in company profits.
By asking why, the organization can highlight the potential causal sequence through which employee turnover can influence the distal outcome.
Building this ability to understand the causal sequences and how interventions can affect through them is an important capability for an organization’s workforce analysts.

Getting started.

Understanding why.

Choice of outcome.

The why test.

The example of employee turnover.

Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
Building a Workforce Analytics Function (2 of 3)
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Satisfies Learning Objective 14.6: Describe what factors managers should consider when building workforce analytics capability in an organization.

Question 4 – Why is it important to put HR Metrics and Analytics in Context?

Reporting trend information:
In order to make HR metrics data more meaningful and consequently enhance managerial decision-making, data must be placed in context.
Reporting trend information is one way to do that.

Benchmarking:
Benchmarking also allows organizations to place data in context.
By collecting data from other organizations within the same industry, a company’s performance relative to peers can be assessed.

Internal and external benchmarking:
Since, not all organizations structure the HRM function in the same way and this can impact the value of HR efficiency metrics, external benchmarking must be done with care.
For this reason, internal benchmarking can provide more appropriate data for establishing operational objectives for the HR efficiency benchmarks.

Putting HR Metrics and Analytics Data in Context

Reporting trend information.

Benchmarking.

Internal and external benchmarking.

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Building a Workforce Analytics Function (3 of 3)
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Satisfies Learning Objective 14.6: Describe what factors managers should consider when building workforce analytics capability in an organization.

Reporting what we find: Questions to be addressed:
Reporting metrics involves addressing some important questions.
What metrics must be reported? (must be dealt with after considering an organization’s problems and opportunities)
How metrics must be reported? (channels for distributing the metrics such as email, website, extraction when needed)
Whom should the metrics be reported? (Senior executives alone or managers too)

Push and pull systems:
While there are many way to communicate workforce analytics information, a mix of push and pull systems is considered more effective.
Push systems : Uses push communication channels such as email, to send relevant information to decision makers. Best suited for information that is time-critical, and that the manager is unaware of.
Pull systems: Makes information available to managers at a time when it is most needed or relevant for making useful decisions. Example: posting HR metrics on internal websites.
Pull systems avoid information clutter but can be ineffective if managers do not know what information is available and where to look for it.

Frequency of reporting:
Frequency of reporting combined with proper packaging of data play a critical role in supporting effective decision making.
Long reporting cycles and aggregating too much data can pose sufficient risks.

Question 5 – What is the value of an HR Dashboard?

HR Dashboards:
Dashboards showcase the efforts taken to align real-time analysis of organizational processes (including HR) as well as the increased capacity to aggregate organizational data.
More than often, analysts wonder whether anyone pays any attention to the reports they produce.
The solution to this problem is to ensure that data is reported in context and with a meaning attached to it.
Also, workforce analysts must be consultative to understand the needs of the recipients and fit the data to the information needs of the decision maker.

Reporting what we find.

Questions to be addressed.

Push and pull systems.

Frequency of reporting.

HR dashboards.

Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
Useful Things to Remember About HR Metrics and Analytics (1 of 3)
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Satisfies Learning Objective 14.6: Describe what factors managers should consider when building workforce analytics capability in an organization.

Question 3 – What is the Primary determinant of the success of a metric and analytics project?

Don’t “do metrics”: Primary objective of HR metrics: The main aim behind developing workforce analytics and HR metrics is not to simply maintain a menu of metrics and increase organization cost, but to increase organizational effectiveness through better decision making.

Real test to assess the value of HR metrics:
Workforce analytics deliver information that supports managers in making informed and better decisions.
Therefore, the real test to assess value of the analytics project, organizations must determine the improvement in managerial decision making

Bigger: not always better: Measuring the success of analytics projects:
The success of a analytics project is gauged through the impact that the project’s results have on managerial decisions and not on the number of metrics or people involved.

Advantage of small analytics projects:
Small analytics projects require a lesser amount of time and resources.
They are less visible during the initial stages, allowing the team to learn better through trial and error.
Ultimately, small projects provide greater flexibility and allow the team to focus on critical HR metrics.

Don’t “do metrics.”

Primary objective of HR metrics.

Real test to assess the value of HR metrics.

Bigger: not always better.

Measuring the success of analytics projects.

Advantages of small analytics projects.

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Useful Things to Remember About HR Metrics and Analytics (2 of 3)
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Satisfies Learning Objective 14.6: Describe what factors managers should consider when building workforce analytics capability in an organization.

Avoid the temptation to measure everything aggressively:
It is not important for every HR metric to be measured.
While trying to resolve a problem or capture an opportunity, the metric outcomes that are most likely to have the greatest impact on managerial decision-making alone must be considered.

HR metrics and analytics is a journey – Not a destination:
HR metrics and workforce analytics change with time, and the corresponding problems or opportunities are unlikely to require the same analytics the next time when they are dealt with.
Therefore, organizations are required to identify new metrics and consider adjustments to the existing projects.

Be willing to learn:
Just like any other operational function, HR metrics and analytics efforts can be examined regularly for improvement.
Organizations should have a metrics and analytics “laboratory” where new analyses can be experimented with and existing assumptions about organizational requirements can be tested.
This action fosters new approaches and allows new metrics and analytics to be created.

Avoid the temptation to measure everything aggressively.

HR metrics and analytics is a journey – Not a destination.

Be willing to learn.

Useful Things to Remember About HR Metrics and Analytics (3 of 3)
Johnson, HR Metrics and Workforce Analytics, Fifth Edition. © SAGE Publications, 2021
29

Satisfies Learning Objective 14.6: Describe what factors managers should consider when building workforce analytics capability in an organization.

Source of competitive advantage:
Organizations that develop useful and effective workforce analytics are likely to have a significant source of competitive advantage over their peers.
With the available tools and computing infrastructure, organizations can effectively manage and improve HR programs and HRIS use.

Managerial benefits of metrics for organizations:
Since data from various individual applications is integrated, operational reporting will become easier and cost-efficient.
Graphically rich information will be easily available to decision makers.
HR investments and practices can be optimized and aligned to enterprise performance goals.

Benchmarking: Organizations will begin to understand the competitive value of HR metrics and workforce analysis and therefore access to benchmarking will become more difficult.

Workforce Analytics and the Future

Source of competitive advantage.

Managerial benefits of metrics for organizations.

Benchmarking.

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SHRM

HR Metrics

Change Management: Leading Successful Transformations
©2019 Society for Human Resource Management

Page 1

HR Metrics (based on Functional Areas)
Table of Contents

Metrics Introduction …………………………………………………………………………………………………………………… 1

Strategic Management………………………………………………………………………………………………………………… 2

Return Analyses…………………………………………………………………………………………………………………………………………….. 2

HR Management …………………………………………………………………………………………………………………………………………… 3

Financial Management …………………………………………………………………………………………………………………………………… 4

Workforce Planning and Staffing ………………………………………………………………………………………………….. 6

Staffing ………………………………………………………………………………………………………………………………………………………… 6

Talent Management ………………………………………………………………………………………………………………….. 10

Development ………………………………………………………………………………………………………………………………………………. 10

Training ……………………………………………………………………………………………………………………………………………………… 10

Performance Management …………………………………………………………………………………………………………………………… 11

Succession Planning …………………………………………………………………………………………………………………………………….. 12

Total Rewards …………………………………………………………………………………………………………………………… 12

Pay …………………………………………………………………………………………………………………………………………………………….. 12

Benefits ……………………………………………………………………………………………………………………………………………………… 13

Employee Relations …………………………………………………………………………………………………………………… 14

Organizational Effectiveness …………………………………………………………………………………………………………………………. 14

EEO Compliance ………………………………………………………………………………………………………………………………………….. 15

Risk Management …………………………………………………………………………………………………………………….. 15

Safety and Health ………………………………………………………………………………………………………………………………………… 15

Liability ………………………………………………………………………………………………………………………………………………………. 15

SHRM HR Metrics

Change Management: Leading Successful Transformations
©2019 Society for Human Resource Management Page 1

Metrics Introduction

Included in this Job Aid are suggested metrics for each of the HR functional areas. Several
important points should be noted about the use of metrics in HR and Human Capital
management.

First, metrics are only truly useful when they provide a basis for analysis. They should not be
used separate of analysis for any purpose other than compliance reporting, and even then it is
encouraged that a thorough analysis of the data accompanies the reporting to insure a fuller
understanding. Applying basic statistical techniques, doing dimensional segmentation, and/or
trending one metric to another, or to a target or benchmark is sufficient to turn metrics into
analytics and information into insight. It is the insight that produces value, not the metric itself.
Reporting is insufficient, and it could be argued a complete waste of time. Analysis is necessary
and critical.

Second, the primary purpose of analytics is to support and improve decision making. Any metric
that does not lead to action is not worth the time and effort to calculate and report it. Typically
today HR departments overproduce data and information yet provide little to no insight that
achieves this primary purpose. Less is more when it comes to metrics and analytics.

Third, identify the appropriate audience for each metric. Many metrics are useful to those
responsible to manage an HR process because they provide insights into process improvement
opportunities. But these metrics may not be useful or important to line management. Other
metrics successfully illuminate risks to organization success and therefore provide valuable
insight to your executive team. Don’t waste anyone’s time with metrics or analytics that are not
relevant to their responsibilities and decisions.

Fourth, with most metrics there is no one defined desirable outcome. Organizations must set
desired outcomes, or targets, for metrics that align with organization strategy, goals, and
objectives. The target must be such that it reasonable leads to organization success.

Finally, identifying the handful of analytics that connect Human Capital management to
organization strategy and key goals and objectives is the most important step you can take in
making metrics meaningful to your organization. SHRM’s course on Critical Evaluation: Building
HR Metrics to Guide Decisions shows you how to do this.

SHRM HR Metrics

Change Management: Leading Successful Transformations
©2019 Society for Human Resource Management Page 2

Strategic Management
Return Analyses
Break‐even Point
The point in time when costs invested in developing or improving an
HR program is equal to or greater than the returns. In other words,
the break‐even point is reached when returns to‐date are equal to
investments.

Formula
Development cost/Annual return

Example
A new on‐line training program has a
development cost of $100,000. It is
expected to generate a return of
$50,000 in reduced delivery costs
each year.

Break‐even point = $100,000 /
$50,000 = 2 years

Cost‐Benefit Ratio
How the Benefits of a program or activity relate to the Costs
associated with developing and executing that program or activity.

When you are calculating Costs for any HR program be clear as to
what you have included. In our example here we have included the
salary + benefit costs for a new program lead and the use of a
consultant to help develop the new program and make the systems
changes to our HRIS necessary to capture Successor and High
Potential identification. We have not included the cost of the time of
managers and HRBPs to participate in the program.

Example
The new succession management
program will produce a savings of
$500,000 in reduced search firm fees
over the targeted time frame (2
years) and will cost $250,000 to
develop and manage over that same
period.

Cost‐benefit ratio =
$500,000:$250,000 = 2:1
Total Cost‐Benefit ratio is 2 to 1.

SHRM HR Metrics

Change Management: Leading Successful Transformations
©2019 Society for Human Resource Management Page 3

ROI (Return on Investment)
The return on a company’s monetary investment in a new program
or activity or change to a current program or activity. The
measurement of ROI can be calculated in several ways. If your
organization has a standard formula, it’s best to use that formula. If
not, this formula can work for most situations.

Anticipated Benefits can be ascertained by looking at potential
reductions in the costs of administering and delivering the program
(e.g., reduced vendor fees, lower headcount needed to administer),
increases in productivity or reductions in costs enabled by the
methodology or other aspect of the program (e.g., less time away
from work and reduced travel expenses by putting a program on‐
line), and improved outcomes (e.g., reducing turnover and
employee relations issues, and increasing employee productivity
with a better leadership program). Quantify these benefits as much
as possible.

Costs and Benefits must be calculated for a set period of time that
represents a reasonable life time for the program.

A complete ROI analysis should also highlight those benefits that
cannot be financially quantified but still represent desired outcomes.

Formula
((Anticipated Benefits – Total
Development Cost of Program)/ Total
Development Cost of Program) x 100

HR Management
HR Expense to Revenue Ratio
This information is useful for fiscal budgeting. To have this for each
fiscal year creates a standard for projected budgeting costs for each
year on HR expenses. HR Expenses should include outsourcing
expenses.

Formula
Total HR Expenses ÷ Revenue

Percentage of exceptions processed for payroll, benefits, promotions,
and other HR
This metric is helpful to understand the amount of special effort
required to process benefits, promotions, and other HR transactions
that are out of the standard protocol.

Formula
Total number of exceptions processed
by HR ÷ all HR transactions

HR‐to‐Employee/Worker Ratio
The HR‐to‐Employee ratio and HR‐to‐Worker ratios provide a way to
compare HR staffing levels across and within organizations. It
represents the number of HR staff per 100 employees/workers
supported by HR in the organization.

Formula
(HR FTEs ÷ total number of FTEs in the
organization) x 100

(HR FTEs / total number of workers
supported by HR) x 100

Percentage of HR Staff in Supervisory Roles
This is useful in determining span of control within HR.

Formula
Number of HR staff in supervisory
positions ÷ total number of HR staff

SHRM HR Metrics

Change Management: Leading Successful Transformations
©2019 Society for Human Resource Management Page 4

Percentage of HR Staff in Professional and/or Technical Roles
This is very useful, especially for issues such as budgeting in regards
to FLSA. Generally positions are exempt, only allowing straight time
for overtime if allocated. If overtime is warranted, this would need
to be assessed for the year’s budget. Positions in this category may
be called recruiter, benefits administrator, HR generalist, etc.

Formula
Number of HR staff in professional
technical positions ÷ the total number
of HR staff

Percentage of HR Staff in Administrative Support Roles
Often, but not always, positions in this category are non‐exempt.
They may be called coordinator, assistant, etc.

Formula
Number of HR staff in administrative
support positions ÷ by the total HR
staff

HR Expenses
Human resource expenses represent HR’s total costs for a given
fiscal year.

Formula
No further computations are required
beyond what is listed for the
completion of this metric.

HR Expense to Operating Expense Ratio
This ratio depicts the amount of HR expenses as a percentage of
total operating expenses, which is an indication of the proportion of
dollars an organization invests in its HR function.

Formula
Total HR expenses ÷ total operating
expenses

HR Expense per FTE/FTW
HR expense by FTE/ FTW ratio represents the amount of human
resource dollars spent per FTE or FTW in the organization.

FTWs include employees and non‐employee workers (temps,
contractors, interims) supported by HR.

Formula
HR expenses/ Total number of FTEs or
FTWs

Financial Management
Revenue per Total Human Capital (HC) $pend
The total amount of revenue received during an organization’s fiscal year divided by the
total spend on Human Capital. This ratio conceptually links the costs associated with the
firm’s human capital to its productivity. If the revenue‐per‐THCS ratio increases, it
indicates that there is greater efficiency and productivity because more output is being
produced per $ spent on human capital. If the ratio decreases, it indicates there is less
efficiency and productivity.

Total Human Capital Spend should include wages, benefits; independent contractors,
temps and other non‐employee workers; and, HR program costs (non‐staff) including
outsourcing.

Formula
Revenue ÷ Total
HC $pend

Total Human Capital (HC) $pend to Total Operating Spend Ratio
Comparing total HC spend to the organization’s total spend on all operating expenses,
including human capital, shows the organization’s relative prioritization regarding
operational expense priorities and needs. Changes in this ratio can also show the relative
changes in efficiency and productivity between operating expense areas, like IT, real
estate, and human capital. It is also useful for budgeting purposes.

Formula
Total HC Spend/
Total Operating
Spend

SHRM HR Metrics

Change Management: Leading Successful Transformations
©2019 Society for Human Resource Management Page 5

Revenue Per FTE
The Total Revenue divided by the number of FTEs. This ratio conceptually measures the
efficiency and productive use of human capital because it links the time and effort
associated with the firm’s human capital to its revenue output. If the revenue‐per‐FTE
ratio increases, it might indicate that more output is being produced per FTE.

However, if it increases due primarily to major declines in FTEs from involuntary staff
reductions or increased outsourcing, this may be misleading. The metric can temporarily
look like increased efficiency or productivity. If revenue is not sustained over time with
the lower staff levels then productivity and/or efficiency have not actually improved.

Formula
Revenue ÷
number of FTEs

Earnings before investments and taxes (EBIT) per FTE
EBIT per FTE is a better measure of the efficiency and productive use of human capital
because it incorporates the operating costs involved in productivity improvements, like
investments in IT. Increasing revenue, lowering expenses, reducing employees, and
increasing worker productivity have a positive impact on this metric.

This metric can be improved further if you use Total FTE’s vs Employee FTEs since Total
FTEs incorporates the productivity contributions of the contingent element of your
workforce.

Formula
EBIT ÷ number of
FTEs

Earnings before investments and Taxes per Human Capital Expense
EBIT per FTE is the best of the three measures of human capital efficiency and
productivity because it incorporates all human capital expenditures, including
compensation, benefits, talent development, outsourcing and contingents. Increasing
revenue, lowering expenses, and increasing organization productivity have a positive
impact on this metric.

Formula
EBIT ÷ total
human capital
expense

Productivity
Describes the relationship between real output and the amount of labor time involved in
its production.

Formula
Revenue/ Labor
hour

SHRM HR Metrics

Change Management: Leading Successful Transformations
©2019 Society for Human Resource Management Page 6

Workforce Planning and Staffing
Staffing
Contingent Representation Rate
Degree of contingent staff within your total workforce. Establishing targets for this
metric monitoring it will tell you if you are complying with the contingent vs
employee organization balance you have determined Is optimal for the
accomplishment of organization goals and objectives, including human capital and
operating expense targets.

Formula
(Contingent headcount
FTEs/ Total Workforce
FTEs) x 100

Time‐to‐Start
Average number of days it took to fill a position. This metric typically includes
positions filled by both external and internal hires.

Starting with the day the position became available – which can be the date of
resignation of the prior incumbent or the day the position received budget
approval or simply when the hiring manager communicated that he/she was ready
to fill the position ‐ rather than when a requisition is received by HR, and ending
with start date vs date filled, show a more organization vs HR focus; and, help
show whether activities outside HR are helping or hindering efficient hiring. Sub‐
metrics within this metric which can be measured to help improve process
elements include Time to Approval, Time to 1st Interview, Time to Offer, and Time
to Fill. You should measure Time to Start for both External Hires and Internal Hires.

You need agreement on whether you are counting calendar days or working days,
and whether you minus days that recruiting is suspended.

Formula
(Total days elapsed
from the date each
filled position was
available to the date
each new person
started in the position)
/ Number of positions
filled

Time‐to‐Productivity
Average number of days to satisfactory productivity. This metric typically includes
positions filled by both external and internal hires.

You need agreement on whether you are counting calendar days or working days,
and whether you minus days that recruiting is suspended.

Organizations are finding unique and simple ways to identify the date of minimal
acceptable productivity from using manager self‐service reporting to very brief
surveys (often just one question) that are set to automatically check in with hiring
managers weekly until they receive a positive response. This metric is crucial since
it reflects the organization’s need for productivity vs just having a person in the
job. Outcomes with this metric can reflect on the quality of your recruitment,
selection, onboarding, and management of new employees.

Formula
(Total days elapsed
from the date each
filled position was
available to the date
each new person
achieved satisfactory
productivity) / Number
of positions filled

SHRM HR Metrics

Change Management: Leading Successful Transformations
©2019 Society for Human Resource Management Page 7

Turnover Rate
Rate at which employees are leaving the organization in a given time period.

It is suggested that Turnover be categorized as Employer Intended vs Employer
Unintended, and the latter category be further divided into Voluntary and All
Others. The objective of measuring turnover is to determine where and when the
organization has risk of losing talent that it doesn’t want to lose, and to determine
how to mitigate that risk. Therefore identifying Employer Intended separations
segments out of that risk analysis terminations for poor performance or cause,
layoffs or job eliminations, acceptance of early retirement offers, etc. which are
irrelevant to identifying and mitigating the risk. Identifying Voluntary (resignation
and retirement) separately from other Employer Unintended, like death,
incarceration, job abandonment, refusal to accept new assignment, etc. also helps
to focus our risk analysis. The Voluntary category is the most relevant to the
Turnover risk analysis.

Turnover of New Hires and Failure to Start Rate are also good metrics for Staffing
professionals to be measuring.

Other Turnover subgroups are important to other areas of analysis and decision
making. For example, Turnover of Poor Performers can provide insight into the
effectiveness of your Performance Management. Turnover rates are also useful
inputs into Workforce Planning.

The reporting of overall turnover is no longer considered best practice. This metric
is unlikely to inform and improve decision making. Focus on key employee
populations: Top Performers, New Hires, Poor Performers, Successors, High
Potentials, Key Positions, High Risk Employees. These are the groups worth acting
on if Turnover becomes unacceptable.

Formula
(Number of separations
during the time period
÷ average actual
number of employees
during the time period)
x 100

Time periods – typically
year, quarter, month,
pay period

Cost of Turnover and Cost per Turnover
The average direct monetary costs associated with a position that was vacant due
to turnover and is refilled. Costs include separation pay, payables to temps and
contractors, overtime pay to other employees to cover, and staffing costs for
replacement hiring.

It should be noted that this metric does not reflect significant non‐direct costs like
loss of revenue, damage to customer relationships, and temporary or long‐term
productivity and performance differentials.

Formula
Total of the costs of
separation + vacancy +
replacement
Turnover costs/ # of
positions filled due to
separation

SHRM HR Metrics

Turnover Impact and Impact per Employer Unintended Separation
Total and Average Experience Lost due to Employer Unintended turnover.

Formula
Total years of
experience of all
Employer Unintended
separations

Turnover Impact/
Number of Employer
Unintended
separations

Cost Per Hire
Average cost incurred with an external hire.

Total costs should include the sum of all direct costs (e.g., advertising, hiring
events, agencies, search firms, employee referral programs, onboarding and travel
for applicants and interviewers) incurred in attracting and hiring employees.

Some organizations also include relocation costs, interviewer pay, and staffing
department operating expenses. If the HR interviewers have other responsibilities
like internal hiring or generalist duties then pay would need to be pro‐rated for the
time involved in external recruiting. If you include management interviewers you
would also need to pro‐rate pay since they have many other duties.

Formula
Total costs related to all
external hires/ Number
of external hires

Vacancy Costs and Cost per Vacancy
Total and average direct costs resulting from vacant positions.

Formula
(Total of the costs of
temporary workers +
independent
contractors +
temporary outsourcing
+ overtime) ‐ wages
and benefits not paid to
vacant positions
Vacancy Costs/ # of
vacant positions

Vacancy/Occupancy Rate
Measures the percentage of approved positions that is unfilled or filled at a given
time.

Positions may be vacant due to turnover or because they are new and have never
been filled.

These measures are particularly important for key positions, e.g., strategic jobs,
time consuming and expensive to fill jobs, critical project staff.

Formula
(Total number of
vacant or occupied
positions ÷ total
number of approved
positions) x 100

SHRM HR Metrics

Retention
Degree to which an organization is retaining key employees.

As an example, this can tell you what the retention rate of University Relations
hires is at 1, 3, and 5 years of service and whether the rate is different for different
Universities or for those that interned with your organization vs those that did not.

Formula
# of employees in the
selected group
employed at the
designated time/ # of
employees in that
selected group
originally

Yield or Selection Rate
Measures efficiency of each stage in the staffing process.

The dilemma with Selection or Yield rates is determining what is a good vs a bad
outcome. Using our example, is a rate higher than 50% better since it might
indicate that you attracted more qualified resumes or is a rate lower than 50%
better since it might indicate that your assessment is better and you’ve really
narrowed down to the best possibilities therefore saving time and effort during
the remainder of the process.

While this measure could be helpful in finding a way to improve process efficiency,
It should be noted that efficiency is less important than effectiveness.

Formula
Percentage of persons
moving to next stage/
number of persons at
prior stage.

Example
100 resumes received,
50 found acceptable =
50% yield

Offer Rate
Percentage of applicants interviewed that receive offers.

Formula
(Total number of
candidates offered ÷
number of candidates
interviewed) x 100

Offer Decline Rate
Percentage offers extended that are declined.

It is suggested that data be tracked and measured as to the reasons for offer
declines so that action may be taken to mitigate this outcome.

This metric provides insight into the frequency with which you are not hiring the
top candidate or are starting a search over. It may also be helpful in identifying
areas where your total compensation may not be market comparable, your
organization not as well regarded as competition, your selling of the job and
organization not effective, or your matching of applicant to job not accurate. It is
important to capture and understand the specific reasons for the decline – not just
“accepted other offer”.

Formula
(Number of offer
declines ÷ number of
offers extended) x 100

Promotion Rate
Average rate at which employees are promoted.

Organizations must first define ‘promotion’. In many companies a promotion
requires a change in position as well as pay grade. This serves to eliminate job re‐
evaluations that change an employee’s grade due to changes in market conditions
not changes in duties and responsibilities.

Formula
(Number of promotions
÷ number of eligible
employees) x 100

SHRM HR Metrics

Retirement Risk
Talent loss risk related to retirement.

It’s best to focus your analysis of retirement risk on individual or groups of key
employees where the quality of the loss is relevant. However don’t forget that
looking at it by job and organization structure can also reveal risks based on sheer
quantity.

Trending Retirement Risk with Retirement Rate (actual retirements/# of
employees eligible to retire) can tell you how risk and reality relate. Understanding
what % of your eligibles is actually retiring is extremely relevant to assessing your
risk.

Formula
(# of employees eligible
to retire/ # of
employees) X 100

Talent Management
Development
Readiness
Reflects how ready the organization is from a human capital perspective to
execute on strategy and achieve key goals and objectives. Readiness is a function
of Occupancy (the rate of the approved positions being filled) and Competency (to
what degree do incumbents have the competencies to achieve performance
objectives).

It is recommended that you only calculate Readiness for those positions that are
critical to the execution of strategy and the accomplishment of key goals and
objectives.

Formula
(Occupancy Rate (see
Staffing) x Competency
Rate (see Training)) X
100

Competency Rate
Degree to which employees in key positions have the competencies necessary to
achieve their performance objectives.

Formula
(# of incumbents with
competency ratings of
Acceptable or better/ #
of incumbents who
have received
competency
assessments) x 100

Training
Training Participation Rate
Percentage of employees who participated in company
paid training.

Formula
(Number of employees who participated in at
least one company paid training activity/
Number of employees eligible for training) x
100

SHRM HR Metrics

Training Spend Rates
Relative importance of spend on training vs other
operating and human capital activities.

The importance is derived by comparing these metrics to
your unique targets since various circumstances drive what
is optimal for any one organization.

Formula
(Training spend/ Total Human Capital Spend) x
100

(Training spend/ Total Operating Spend) x 100

Average Training Spend
The monetary investment in training at an individual level.

The expenses should include all direct training costs: e.g.,
materials, trainer, associated travel, logistics.

Formula
Training spend ÷ Number of workers
participating in training

Average Training Hours
The time investment in training at an individual level.

Formula
Total training hours ÷ total number of workers
participating in training

Required Training Completion Rate
Shows compliance with training requirements. It is also
useful for budget and resource planning.

Formula
(Total number of workers who have completed
a specific required training ÷ total number of
workers who are required to take that training)
x 100

Performance Management
Performance Review Completion Rate
Percentage of completed reviews

Formula
(Number of completed performance reviews/
Number of completed performance reviews due) x
100

Average Performance Rating
The mean performance rating across a selected
group of employees receiving performance
assessments.

Formula
(Total of all Performance Ratings/ Number of
employees who received a Performance Rating) x
100

Performance Rating Distribution
The employee representation across each of the
available Performance Ratings.

This distribution can provide insight into the degree
of use of the full scale, suggest possible rating
inflation, illustrate where there are issues with under
performance, and reveal any variance with
organization distribution targets.

Formula
(Number of employees who received each rating/
Number of employees who received a Performance
Rating) x 100

SHRM HR Metrics

Succession Planning
Succession Breadth
Extent to which you have Ready Now Successors or
your succession positions.

Formula
(Number of Successor positions with a minimum of
one Ready Now Successors/Number of Succession
positions) x 100

Succession Depth
Extent to which you have unique Ready Now
Successors

Formula
(Number of Successor positions with a minimum of
one unique Ready Now successor/ Number of
Successor positions) x 100

Succession Fill Rate
Degree to which your Succession Management
program is providing viable candidates for successor
positions.

Formula
(Number of succession positions filled with a
Successor/ Number of succession positions filled) x
100

Successor and High Potential Retention
Degree to which you are retaining those employees
who are successors, and those who have been
assessed as having the potential to be successors.

Formula
(Number of Successor or High Potential employees at
the targeted time period/Number of Successor or
High Potential employees originally) x 100

Total Rewards
Pay
Annual Base Salary Increase
Percentage increase in base salaries from one time
period to another, e.g., year over year, or quarter
over quarter (different quarters within same year or
same quarter within different years)

Formula
(Targeted base salary spend after Increase/ Current
base salary spend) x 100

Target Bonus for Non‐Executives
The average percentage of base pay that is targeted
to be paid out in cash bonuses to non‐executive staff
during a given year

Formula
Total bonus pay spend at target for non‐executive
staff/Total base pay spend for non‐executive staff

Target Bonus for Executives
The average percentage of base pay that is targeted
to be paid out in cash bonuses to non‐executive staff
during a given year

Formula
Total bonus pay spend at target for executive
staff/Total base pay spend for executive staff

Compa Ratio and Average Compa Ratio
The compensation ratio is defined as the relationship
of current salaries to the midpoints of the salary
rates. This metric can be used at the individual,
segment, or organization level to show if an
employee or group of employees is being paid
appropriately on basis of their skills, experience and
performance.

Formula
Pay rate ÷ pay range midpoint (for individual)

Total of all Compa‐ratios of employees in the
segment or organization/ Number of employees in
the segment or organization

Both must be in same format: annual, pay period, or
hourly

SHRM HR Metrics

Total Compensation Spend Rate
The relationship of costs associated with Total
Compensation spend, including salaries, overtime,
benefits, incentives and bonuses, to an organization’s
Total Operating Costs.

TCS rate provides management with insight into the
largest category of human capital costs. Also looking
at (and perhaps benchmarking) fixed and variable
compensation as a percentage of total compensation
is helpful in budgeting, workforce planning, and
devising compensation strategies.

Formula
((Direct compensation + Indirect compensation)/
Total operating spend) x 100

Compensation Ratios
Direct: The direct compensation ratio is defined as
the relationship of direct pay to the midpoints of the
salary ranges.

Indirect: The indirect compensation ratio is defined
as the relationship of indirect pay to the midpoints of
the salary ranges.

Formula
Direct: Direct compensation (base pay + differential
pay + short & long term incentive pay + cash awards)
÷ pay range midpoint.

Indirect: Indirect compensation (legally required
benefits + disability + medical, dental, life, vision
insurance + pay for time not worked + unpaid leave +
flexible benefits + non‐cash awards) ÷ pay range
midpoint

Benefits
Benefit Participation Rate
The percentage of employees that participated in a
particular optional benefit Plan or Program.

Formula
(Number of employees participating in Plan or
Program/Number of employees eligible for Plan or
Program) x 100

Benefits Spend Share
Percentage of Total Compensation Spend that is
spent on Benefits.

Formula
Total Benefits Spend/ Total Compensation Spend

Annual Change in Benefits Spend
The rate increase/decrease in an organization’s
benefits spend vs. a comparator, e.g., prior time
period, target or projection.

Formula
(Current benefits spend – Comparator
Spend/Comparator Spend) x 100

Health Care Spend Rate
Average cost of providing health care to enrolled
employees.

Total health care expenses include both employee
and company paid premiums, stop‐loss insurance
and administrative fees.

This metric can be calculated for other benefits as
well.

Formula
Total health care expenses ÷ number of employees
enrolled in a health care plan.

SHRM HR Metrics

Organization Share of Health Care Premiums
The percentage of health care premiums
paid by the organization. Best to measure
this against targets and appropriate
benchmarks.

Formula
Employee‐only coverage premiums paid by
organization ÷ total premiums

Employee and dependent coverage premiums paid
by organization ÷ total premiums

Employee Relations
Organizational Effectiveness
Employee Engagement
Degree to which employees are engaged with and
committed to the strategy and objectives of the
organization, and demonstrate their commitment to
organization success through the contribution of
their skills, knowledge, abilities and performance.

Formula
There is no one way to measure Engagement. Many
companies use surveys. However surveys have
challenges – self reporting can be flawed,
participation is typically not 100% and is skewed to
favor engaged vs non‐engaged employees, output is
dated since surveys are often done only annually,
and they reflect attitudes or opinions not necessarily
behavior.

Each organization must drive a metric that reflects
employee behavioral alignment with their unique
strategy and objectives.

Employee Relations Incidents (Total and Average)
Metric reflects the prevalence of employee relations
incidents. Each organization must define what
constitutes an incident.

It is suggested that organizations use workforce
headcount vs employee headcount since many
employee relations laws and policies, e.g., sexual
harassment, apply to non‐employees in the
workplace as well as to employees.

Formula
Number of Incidents

Number of incidents/Workforce headcount

Span of Control (Average and Median)
Number of direct reports per people manager. This is
a reflection of organization structure and of culture
in some organizations.

Formula
Number of employees/ Number of employees with
people management responsibilities

Number of direct reports that represents the half‐
way point where 50% of people managers have more
and 50% have less

SHRM HR Metrics

EEO Compliance
EEO Compliance
This data provides information about the composition of the
organization’s work force, applicants and candidates, and degree to
which the organization is in compliance with EE regulations.

Formula
EEO ‐1 reporting

Internal pay equity
Average Compa‐ratio by gender, race and ethnicity.

Formula
No further computations are required
beyond what is listed for the
completion of this metric.

Risk Management
Safety and Health
Workers Compensation Spend Rate
Average cost of worker’s compensation costs. Allows
companies to monitor and benchmark workers
compensation costs.

Formula
Total worker’s compensation spend/ Number of
covered employees

Workers Compensation claims filed (Total and
Average)
Provides an indirect measure of workplace safety,
and an indication of company risk of incurring high
workers compensation costs.

Formula
Total of all claims filed

Total of all claims filed/ Number of employees

Total of all claims filed/ Number of labor hours

Accidents (Total and Averages)
Provides a direct measure of workplace safety, and
an indication of company risk of incurring high
workers compensation costs.

Formula
Number of accidents

Number of accidents/Number of employees

Number of accidents/Number of labor hours

Liability
Internal and External Complaints (Total and Average)
Metrics are used to provide insight into health of the
organization and help to devise long and short‐term
solutions in order to improve performance and
productivity issues, and mitigate liability risk.

Formula
Number of complaints

Number of complaints/Number of employees

SHRM HR Metrics

Employment Practices Claims Initiated (Total and
Average)
Metric is used to evaluate EPL risk and exposure.
Increases in annual EPL claims are an indicator for an
organization to reevaluate their employment
practices, implement loss‐control tools and consider
risk‐transfer alternatives

Formula
Number of claims initiated

Number of claims initiated/Number of employees

Employment Liability Spend (Total and Averages)
Metrics are used to monitor, manage, budget for and
mitigate employment claim related costs.

Formula
Total Spend for: Employment practices liability (EPL)
insurance + Cost of defending claims + Resolution
payout fees + Risk‐reduction services from an EPL
provider

(Total Employment Liability Spend/Number of
employees

(Total Employment Liability Spend/Number of claims

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