Three HR metrics that show good ROI
In business, size may not be important (multinationals fail and boutique companies flourish, as well as the other way round) but measurement certainly is. If you want to know what progress you’re making, what your priorities are, and more specifically, whether that HRMS investment is worth it, then you’re going to need to track some metrics.
The question is, which ones. After all, the activity of gathering and analyzing metric data is a time-consuming investment in its own right. So which metrics give you results that you can actually act upon? Here are three HR metrics that should be worthwhile for any business to monitor ROI, no matter what size.
Absenteeism can be a problem for any business. You might recruit the best people in the world but if they’re not at work, so what? Apart from planned time off, an employee might be absent due to sickness, a family emergency, or for less ‘legitimate’ reasons, such as borderline illness, a ‘sickies’ that coincides with a major sporting event, even an interview for another job. Before you can devise an appropriate strategy, you need to know who is not ‘in the office’ and why.
Luckily, with HRMS time and attendance functionality, this data should be easily available. Furthermore, with no shortage of research calculating the cost of employee absence, benchmarking your current performance and then tracking measurable improvements is relatively straightforward.
For example, recent research from Circadian suggests that in the U.S., absenteeism costs $2,650 per year for salaried workers and $3,600 for shift workers.
(Incidentally, with an improvement strategy in mind, a study by Gallup showed that high levels of employee engagement show up to a 37% drop in absenteeism).
Worse than a valuable employee being absent is when they leave altogether. Again, given the cost of recruitment, it’s worth measuring the results of that investment and your rate of turnover is a key indicator. The calculation is simple, expressing the number of staff who left in a given period as a percentage of the total number employed in the same period.
As to what constitutes an acceptable turnover rate, that depends on your industry. For example, in the finance or government sectors, 5% would be seen as high whereas, in retail, that same 5% would be cause for celebration (dailypay.com offer some research-backed figures to serve as a starting point). When you consider that recruiting a new employee can cost you thousands of dollars, any reduction in turnover carries an immediate ROI.
This is the big one: measuring the return on your entire workforce. Just what is the value of your employees compared to what they cost you?
Simply calculate the cost of employing your staff, including salaries and remuneration, benefits packages, retirement contributions, etc. for a given period, then subtract that figure from your revenue in the same period; then divide by the staffing costs figure and you have a percentage that shows your return for every dollar you’ve invested in the workforce.
Ultimately, this baseline figure is a reflection of business viability. After all, if your staffing costs outweigh the benefit received, your business may well be on borrowed time.
Featured white papers
HRMS Software Pricing Guide
Get your comprehensive guide to the cost of HRMS software.Download
How to calculate HRMS ROI in 5 simple steps
Your guide to calculating the financial benefits of implementing HRMS in your organizationDownload
HRMS Software Vendor Directory
Put the most up-to-date HRMS vendor directory on your desk today! Over 60 vendors listed.Download
The unexpected areas of ROI for HRMS
The surprising ways HRMS can provide returns to your business
Why measuring HRMS ROI improves your HR department's functionality
The strategic HR benefits of measuring your HRMS ROI
Three ways HRMS helps with HR data management tasks
How to leverage your HRMS for better HR data management