5 People Metrics Every Entrepreneur MUST Understand

The HR function of a business has long been seen as a cost center.  But what happens when you begin measuring people matters and running your HR function more like a profit center?  As your business grows, there are certain people measurements that will enable you to make decisions that effectively and efficiently develop your organization.

1.  Revenue Factor:  total organization revenue/# of full time employees

This is an important factor, especially for small businesses.  As a company looks to grow, be sure to have a firm grip on this number.  You’ll soon realize the benefit to adding sales people or productive staff over administrative and overhead personnel.

2.  Total labor as a percent of operating expenses:  total labor costs/total operating expenses

Understanding how much your labor is costing you is important to look at while beginning and growing your business.  Labor is most likely your largest expense, so it’s important to have a pulse on where your labor costs stand.  Be sure to pay attention to it.

3.  Quality of Hire:  average job performance scores/performance scores for all employees or # new hires promoted within period/all employees promoted within period.

When you’re a small or growing business, the quality of your hire means everything.  Being able to quantify this factor could be key for your business.  Understanding the quality of hire could also help you improve your consistency in hiring high quality candidates if you have complete, historical and detailed information on this topic.  Improving the quality you hire?  Priceless.

4.  Cost per hire:  advertising + headhunters + referral bonus + travel costs + interviewer time + relocation/number of hires

Most great entrepreneurs know that second to a million dollar idea, successful business requires rock star talent.  It’s also commonly known that acquiring this talent can be expensive.  Understanding your cost per hire may better position you to make the strategic hires necessary to move your organization forward.

5.  Turnover:  # of employees terminated/total # of full time employees

This metric is important in every organization, regardless of function, industry, size, etc.  It may be of particular benefit to separate “voluntary turnover” as well as “desirable turnover” from this factor.  This factor can help you better understand many things about your business including morale, culture, labor forecasting, etc.  If you calculate no other HR metric, be sure to know your turnover.

Having and understanding data, and making informed decisions based on data are what moves an organization forward.  Imagine if you could progress your people function above the competition?  Jackpot.  There a variety of other HR metrics an organization can follow (and should follow).  But, we’ll save these for another day and another post.