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

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.

Use your HRMS dashboard to monitor these metrics, find out how to with our free HRMS dashboard design guide

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).

Turnover rates

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. 

Human capital

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.

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Dave Foxall

About the author…

Dave has worked as HR Manager for the Ministry of Justice for a number of years, he now writes on a broad range of topics including jazz music, and, of course, the HRMS software market.

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Dave Foxall

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