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.
