HR metrics: What they are, why they matter, and which ones to track

As an HR professional, you have an impact on a huge variety of functions within your organization. HR teams play an integral role in everything from recruitment to retention, training to turnover. And if you want to maximize your impact, you need to measure it. That’s where HR metrics come in.

The struggle for talent is real. The Great Resignation is far from over, and now new data is saying that managers and leaders are joining the exodus. But why are they leaving, and how do you encourage them to stay? The answer lies in your data.

People aren’t numbers, but numbers can help you understand what’s happening with your people. HR metrics are an invaluable tool in tracking the effectiveness of HR and better managing your people. But what are HR metrics? Why are they important? And what should you be measuring to maximize HR’s impact on your organization?

What are HR metrics?

First things first. Before we get too deep into the important HR metrics you need to be tracking (and examples of HR metrics!), let’s define what exactly HR metrics are. 

Human resources metrics help HR leaders understand the effectiveness of HR initiatives. They’re a form of people analytics that help HR teams understand HR's impact on the organization. And they’re a must for organizations taking a progressive approach to HR.

Or, another way to think about it: Just like accounting metrics track financial capital, HR metrics track human capital.

Common metrics used by HR professionals

Now that you understand what HR metrics are, let’s jump into some of the key HR metrics used by HR teams.

Some of the different categories of metrics HR professionals may use include recruitment and retention, employee engagement, learning and development, and HR functions. Let’s take a closer look at the various metrics within these categories.

Recruitment and retention

One of HR’s most important functions is attracting and retaining top talent. It makes sense, then, that some of the most important HR metrics revolve around recruitment and employee retention.

Recruitment metrics

Some common recruitment metrics include:

• Headcount. HR teams need to track the total number of employees — known as headcount. HR professionals typically track headcount across the organization. They may also track headcount within specific departments. 
• New hires. HR leaders want to know how much talent is coming into the organization — and at what rate. This metric helps HR teams measure the number of new hires that enter an organization and/or department in a given period of time. 
• Acceptance rate. This measures the percentage of people that accept an offer to work at the organization within a certain time period. 
• Cost per hire. This metric measures the average cost of bringing on a new employee. 

Retention metrics

Once HR has hired new talent, they want to keep them with the company — which is why they measure employee retention. Some common retention metrics include:

• Retention rate. Retention rate measures how many employees stayed with the organization during a period of time. 
• Total turnover rate. employee turnover is the opposite of the retention rate. It measures how many employees left the organization during a given period. 
• Voluntary turnover rate. Total turnover rate measures all employees that leave the organization — no matter what the reason was for their departure. Voluntary turnover rate measures employees that left the organization voluntarily. (For example, employees that left their job to work for a competing company.)

Employee engagement, experience, and performance

HR teams need to make sure their teams are engaged and productive. That’s why they track employee engagement, experience, and performance metrics, including:

• Employee performance. HR teams have different metrics and KPIs for measuring employee performance. For example, they might explore individual employee performance through manager feedback. Or they might evaluate employee performance on a larger scale using metrics like total revenue per employee.
• Employee experience. HR teams often use employee engagement surveys, feedback forms, and other assessment tools to measure employee experience. 
• Employee satisfaction and happiness. HR leaders also use the above tools to measure job satisfaction — and overall happiness — in their workforce.
• Absenteeism rate. Absenteeism leads to lost productivity and can be a sign of low employee engagement. HR teams track their absenteeism rate to minimize productivity and engagement issues.

Learning, development, and training

Organizational training efforts typically fall under the human resources management umbrella. Same thing for learning and development. As such, HR teams often use certain metrics to measure the effectiveness of those initiatives. For example, you might track the completion rate for onboarding programs to measure the program’s effectiveness.

HR functions

Some HR metrics are tied to the effectiveness (and the cost!) of HR itself, including:

• Total HR cost per employee. This metric measures the total amount the organization spends on HR costs for each employee.
• HR initiative participation rate. This measures the percentage of employees that participate in a given HR initiative. (For example, a corporate wellness program or a new employee development opportunity).
• HR initiative completion rate. This measures the percentage of employees that complete a given HR initiative in a certain time period. (For example, a three-month training program.)

The importance of HR metrics

Clearly, there are a huge variety of metrics HR teams can use to measure human capital. But why, exactly, are HR metrics so important?

HR metrics matter for a number of reasons, including:

1. HR metrics identify areas for improvement

You can’t fix a problem if you don’t know that it exists. HR metrics help HR teams identify areas where they can stand to improve. And once they identify those areas for improvement, they can develop a business strategy to make those improvements.

For example, let’s say you’re an HR leader measuring employee satisfaction — and you realize the majority of your employees aren’t happy in their roles. Low employee satisfaction isn’t just a problem for the employee. It’s a problem for the business—and can ultimately lead to issues with low retention and high turnover.

Without the employee satisfaction metric, you wouldn’t have known your team was struggling — and you would have lost great talent. But because you’ve measured employee satisfaction and realized it needs to be improved? You can roll out a people strategy to increase job satisfaction and engagement — which can help keep employees with your company.

Bottom line? HR metrics help you identify the areas where you need to improve — which arms you with the knowledge you need to fix those areas.

2. HR metrics can save costs

HR metrics are about more efficiently managing people. But when used correctly, they can also help companies more effectively manage costs.

For example, let’s say that you’re tracking your cost per hire — and you realize that your cost per hire is much higher than expected. (And much higher than your budget allows!) In that situation, you could review your recruitment process and find areas to eliminate costs. (For example, by streamlining your interview process.)

Or let’s say your organization recently required employees to come back to the office. And since then, you’ve realized that your absenteeism rate and turnover rate have increased. At the same time, your engagement metrics have decreased.

You could make a strong business case to your leadership team about why you might consider moving back to a remote or hybrid model. Not only would employees be happier, but it could save the company money in lost productivity and employee turnover.

The point is, HR metrics are important to an organization because they help manage human capital. But they’re also an important part of saving costs.

3. HR metrics can help your company retain top talent

In today’s hyper-competitive labor market, retaining top talent is more important than ever. And a great way to ensure top talent stays with your company? You guessed it — HR metrics.

HR metrics play a crucial role in keeping employees with your organization. This is especially true of HR metrics around employee engagement and experience.

For example, let's say employee satisfaction and engagement are key metrics for your HR team. And when those metrics are lower than you'd like, you take steps to improve them. This shows your employees you're invested in them. It creates a better employee experience for your team members — which increases the likelihood they’ll stay with your company.

Examples of HR metrics

As mentioned, there are a ton of different HR metrics. Here are some examples of additional metrics HR teams may use to measure their impact:

• Employee happiness
• Employee productivity
• Absenteeism rate per manager
• Retention rate by department
• Turnover rate by department
• Training adoption rate
• ROI of HR software
• HR software adoption/use rate
• Employee goal tracking
• Internal promotion rate
• Overtime expenses per employee
• Training expenses per employee
• Onboarding expenses per employee
• New hire turnover rate
• Performance and potential
• Training effectiveness
• Ratio of HR professionals to employees
• Demographics
• Time to hire
• Training cost per employee

The most important HR metrics to track

With so many HR metrics at their disposal, the big question for HR teams is which ones are the most important?

And the answer to that question? It depends. 

The “most important” HR metrics are going to depend on each organization’s goals and objectives. But that being said, there are some universal HR metrics that every organization should be tracking. BetterUp tracks several markers of well-being, development, belonging, and growth that are proven to have an impact on retention and employee satisfaction. This data allows us to improve employee experience and provide insights that make a difference for HR teams as well.

Pairing BetterUp’s People Analytics Dashboard (PAD) with thoughtfully chosen HR metrics can help you begin to get a clearer picture of what those “most important” metrics are. If you’re unsure where to begin, these four key areas can help you start understanding employee experience::

Employee turnover rate

Keeping top talent with your company is one of the most important functions of HR. As such, it’s important for every HR team to be tracking their employee turnover rate.

Tracking total turnover rate is important. It gives you a clear picture of the talent exiting your organization. But it’s also important to track why they’re leaving—which is why you’ll also want to track voluntary turnover rate.

Tracking both total turnover and voluntary turnover rates can give you deeper insight into how and why employees are leaving. For example, let’s say you just went through an organizational restructure. That will obviously impact your turnover rate. If your turnover rate is higher during that time, you know to attribute it to the lay-off.

But if your voluntary turnover rate is high, you know that employees are choosing to leave your organization. That means there’s something that needs to change in order to keep talent with the company. And you can take action accordingly. 

Employee engagement/satisfaction/happiness

Employee engagement, job satisfaction, and overall happiness play a huge role in reducing turnover. And so every HR team — regardless of the industry — should be tracking these metrics.

Knowing that your employees are — or aren’t — engaged with their work can give you key insights into how to adjust your HR strategy. For example, if your metrics tell you that your employees are all engaged, happy, and satisfied with their work? Your current strategy is working.

However, if your employees are disengaged, unhappy, or dissatisfied with their work? You run the risk of losing them — and need to identify how you can improve to get those metrics up.

Cost per hire

Many leadership teams are invested in HR and recruiting. But they also have to consider the bottom line — which is why HR should be tracking cost per hire.

Cost per hire gives clear data on the costs of the full-cycle recruitment process. That kind of data is important to leadership teams. It gives them a clear idea of how much the company is spending to hire new talent. They can then compare that data to revenue and employee productivity metrics to determine whether the cost makes sense. Or if HR needs to make efforts to bring costs down. 

Participation/completion rate for HR initiatives

Your HR initiatives can’t be successful if your team doesn’t participate in or complete them. That’s why tracking participating and completion rates for HR initiatives is so important.

Any time you roll out a new initiative, you need to track what percentage of your team participates in it. And, if relevant, how many complete it.

So, for example, let’s say you roll out a new wellness initiative that includes a weekly on-site yoga class. How many employees are showing up for that class? Or let’s say you launched a new onboarding program to support employees in their first 30 days on the job. What percentage of those employees finish all of the training modules by day 30?

Tracking participation and completion rates can help you track the impact of HR initiatives. From there, you can identify which are a success — and which may not be worth the time and effort of your HR team.

How to get the most out of your HR metrics

Need some more guidance on how to use HR metrics to your advantage? Here are a few steps you’ll want to take to ensure you make the most of your HR metrics:

1. Define your HR goals

Before you start tracking HR metrics, you need to identify what you’re going to track. And the best way to do that? Defining your HR goals.

Taking the time to get clear on your HR goals will give you key insights into what HR metrics are going to make the most impact. For example, if your top HR priority is creating a happy, engaged workforce? You’d want to track metrics like employee happiness, job satisfaction, and engagement. On the flip side, if your main goal is to lower HR costs, you’d want to look at a different set of metrics — like cost per hire and the ROI of your HR software. 

Make sure to take the time upfront to define your HR goals. Once you know your goals, you can figure out the best HR metrics to help you hit those goals.

2. Create a strategy

Once you know what you’re trying to accomplish with your HR metrics, it’s time to create your strategy. This includes:

• Your goals/KPIs
• How you’re going to track/measure each metric
• How long you’re going to track/measure each metric

Creating a plan will give you a blueprint for how to implement your HR metrics — and how to leverage them to accomplish your goals.

3. Use a variety of strategies to track success

There are a variety of ways to track or measure different HR metrics. And if you want to make the most out of your HR metrics strategy? You should use a variety of those strategies.

For example, let’s say you’re implementing HR metrics in hopes of improving your recruitment process. In that situation, looking at more quantitative metrics in your HR reporting like new hires, acceptance rate, and cost per hire is helpful. It will give you insights into the volume of new employees you’re bringing into the organization — and how much each of those employees costs.

But that doesn’t give you all the information you need to improve your recruitment and hiring practice. For example, your acceptance rate tells you how many people are accepting offers from your company. But it doesn’t tell you why.

That’s where more qualitative metrics, like surveys and interviews come in. For example, you might send a follow-up survey to ask interviewees why they declined the offer. Or you might interview new hires to find out what made your offer stand out — and why they ultimately accepted.

Taking a multi-faceted approach to HR metrics gives you a variety of data. You can then use that data to improve your strategy — and ultimately drive better results.

4. Use your metrics to improve your organization

HR metrics are helpful. But once you have that information on hand, if you really want to impact your organization? You have to use those HR metrics to make clear improvements.

Using the example above, let’s say you realize that your acceptance rate dropped when you made the shift from a remote to a hybrid work environment. So, you interview your new hires to find out why they accepted their offers. And it turns out, all of your new hires? They were looking to get back into the office. They either didn't enjoy working remotely or were already working in an office — and wanted to continue in-person work.

With those metrics, you can make the assumption that there’s a clear reason many would-be new hires are turning down offers. And it’s because they don’t want to be required to work in the office. (And the new hires who are accepting offers are doing so because they do want to work in the office.) In that situation, you might make the case to your leadership team to make in-person work optional. That would help you improve your acceptance rate — and get more talent in the door.

Or let’s say, after reviewing your HR metrics, you realize that only 50 percent of your employees have completed a recent training initiative. In that situation, you might interview employees to find out why they weren’t able to successfully complete the training. And then, using their feedback, take steps to make the training more accessible and manageable. (For example, giving them more time to complete the training or investing in a more effective platform.)

The point is, HR metrics give you information about what’s working and what’s not working from an HR perspective. And so, if you want to make the most out of your metrics? Leverage them to fix what’s not working and improve your organization.

Use HR metrics to take your HR initiatives — and your organization — to the next level

There are few teams within an organization that have more opportunities to make an impact than HR. But in order to make the most impact, you need the right information. HR metrics give you the information you need to better manage your human capital — and improve your organization in the process.