Which HR metrics really matter (Part I)?

Often in HR we present statistics about headcount, attrition, and # of hires when updating the business and board. These are useful descriptive numbers — kind of like when the pediatrician provides my son’s height and weight at his annual checkup. I want to know and it matters.

But to know what is really going on with an organization, I think there’s an additional level of synthesis that’s needed. There are metrics that take more time to get, and that involve judgment calls to design, and that can provide a deeper view of how the company is operating (and where to intervene to make it operate better).

I’ve trialed a bunch of different metrics over time and these are my current top 8. I strive with my teams to develop these metrics and then understand the drivers of performance behind them. I use these metrics to explore and explain the story of what is happening at the company and in HR.

Metric 1: New hire attrition. I like this metric because it’s a general sniff test on the aggregate quality of the hiring and onboarding at the company. Are hiring managers and talent acquisition (TA) partners communicating and aligning on who/what is needed for the role? Is the TA team aligning candidates around the realities of the role? And is the overall employee value proposition of the role and of working at our company strong? Metric design and details: I usually define new hire attrition as attrition of employees hired under 12 months before their term date. I like to include voluntary and involuntary departures in the figure because in my mind it doesn’t matter if the person left or we exited them — things didn’t work out which means we had the wrong person for the role. I do usually look at the numbers split by organic vs. inorganic because M&A-related attrition often happens for different reasons and can make the data noisy. And if the company recently went through a re-org or layoff, there is some work needed to parse out the data so that underlying trends are not masked by big events. Target: under 10% organic.

Metric 2: Qualified candidates per hire. This metric tells you if you are getting enough qualified candidates for roles into the recruitment funnel to ensure a quality hire at the end of the process. There are so many talent acquisition funnel effectiveness metrics and I’m choosing this one among several others that could be equally helpful. What I like about this metric is it guides you to the most important interventions you need to make right away to fix TA (if something needs to be fixed). Because I believe you have to get this right before you start to fine-tune other parts of the process further down the funnel (interviewing, selection, offer etc.). Metric design and details: Most ATS systems if implemented well will be able to provide you with qualified hires data— you just need to pull that number overall per month or quarter across all roles. Then create a ratio with your total number of hires for that month or quarter across all roles. Sometimes it’s useful to break the numbers out by go-to-market, technical, and other roles, or even by recruiter or business line depending on what you are trying to dig into. If your ATS does not provide this in a quick and easy way (outdated ATS, poorly implemented ATS), I’ve sat with my head of TA for several days and calculated it manually together for 700 hires (boy was that fun). We calculated qualified candidates by tallying the number of candidates submitted to hiring managers (HMs). Target: 4:1.

Metric 3: Diversity through the funnel. This tells you about potential bias per recruiting stage. Each stage of recruitment involves different processes (some processes are automated while some are not, some are more susceptible to bias, some involve only the recruitment team while some involve hiring managers and hiring teams). Fixing a biased system requires knowing where the process needs most attention and this view gives you a starting view of the problem (if there is one). At one company, we started to produce a quarterly graph like this per department, which led to great conversations and course-corrections in order to reduce bias process-by-process team-by-team, quarter-by-quarter. Metric design and details: this metric is a little maddening if you have significant operations outside of the US because non-US teams rarely track race (for a variety of important reasons ranging from regulation to the complexity of racial identification in various locales). Within the US, if your EEOC-mandated tracking (if you are over 100 employees the Equal Employment Opportunity Commission of the federal government mandates you track this) is not yet good, you can still start with the data you have and it is often quite illuminating. Targets: set annual targets once you understand your starting point.

Metric 4: Regrettable loss. I am seeing this more and more in HR presentations and that’s a great thing. Attrition data on its own only tells you how many people are leaving a company. Maybe some of those people were the right people for the company at a different time. Maybe some of those people were poor performers (tracking involuntary attrition alone does not tell the story of poor performer attrition). Attrition data on its own also doesn’t tell you how to intervene. Tracking how many people are leaving who we wish would stay is a better metric for understanding if we’re losing people. That’s regrettable loss. If you also track the reasons why people leave your company, you can drill down on the primary reasons your regrettable losses leave. This will lead to a better understanding of the issues, and help you design interventions. Metric design and details: To capture this metric systematically you need (1) to configure your HR system so that terminations can be tagged as regrettable, and (2) to train your HRBP team (or whoever is on the front line of entering terminations in your online HR system) on how to enter it. Ideally, you also have a system that is configured to allow HR to select a reason for the employee’s departure. I usually have worked with HR tech to define a tight menu of 5–6 possible “reasons for leaving”. And then it’s important to train the HR team every year or whenever a new member joins on what your organization regards as the criteria for ‘regrettable’ and how to select a reason for leaving. Exit interviews are the gold standard for confirming the reason for leaving, but often shorter quicker conversations with the employee can be enough if your HR team is too small to do exit interviews systematically and comprehensively. Target: under 10%.

See Part II here for the next 4 metrics (summarized below):

Metric 5: Strategic Clarity and Role Clarity scores. This is the organizational “soft” metric most correlated to Total Return to Shareholder and EBITDA.

Metric 6: Manager ‘Experience of HR’ ratings. Is HR creating real results for managers?

Metric 7: Compa-ratios. Help you see the quality of overall talent and attrition risk across your organization, as well as understand where the organization is over-investing or under-investing in talent.

Metric 8: Inclusion, Values and Purpose ratings. How inclusive and values-led your culture is.