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3 HR Metrics SMBs Can’t Afford to Ignore

August 21, 2017

Recruiting and retaining top talent isn’t easy. Even after the hiring process ends, there are several metrics your Human Resources (HR) specialist(s) should keep tabs on to ensure top performers stick around long enough to deliver meaningful results for your company.

Here are 3 metrics highly effective HR organizations measure:

  1. Productivity Over Presence

Some HR organizations focus heavily on absenteeism. Maybe that’s because countless studies have shown that higher than average absentee rates—anything above about 2%—equate to lower productivity. And yes, in a general sense, increased absenteeism could be an early warning sign of employee engagement issues.

That said, organizations lose top talent by making the simple mistake of equating productivity to showing up for work.

Here’s where this breaks down …

Highly productive and efficient employees are significantly more productive than those just phoning it in. By simply lumping everyone together into one bucket that values attendance over productivity, organizations inadvertently cause top producers to disengage.

Tip: To identify and reward top workers, consider creating a Productivity Index that’s tied to an incentive program. This way, you’ll have line-of-sight to top producers, as well as the ability to reward their hard work and improve retention rates.

Ways to Measure Productivity:

  1. Turnover

Some turnover is expected, but if it exceeds 18%, you might want to find out why. As a caveat, if your company has less than 10 employees, take that percentage with a grain of salt. Losing a couple employees per year doesn’t necessarily mean you’re headed for trouble.

Tip: To measure annual voluntary employee turnover, take the number of employees who left your employment in the last 12 months, then subtract any layoffs/firings, and divide the remaining number by the average number of employees you had during that 12-month period. Here’s the equation:

Annual Voluntary Turnover = Voluntarily separated employees ÷ Average Number of Employees – Involuntary Separations

For example, let’s say your average number of employees was 130 last year, 15 left voluntarily, and 5 were let go. Here’s how to determine your turnover rate based on these figures:

130 – 5 = 125

15 ÷ 125 = 12%

In this case, the turnover percentage is below average and no cause for concern.

  1. Cost Per Hire & Early Turnover

It’s important to consider these two factors together. Here’s why: You might be able to achieve a relatively low cost per hire, but your early turnover rate—departure prior to one year of employment—could be costing your organization more than $40,000 in productivity each time a new hire exits your organization early.

Tip: To measure the cost of a new hires, divide recruiting costs by the total number of new employees.

Measure, Analyze, Act

Simply measuring productivity, turnover, and cost per hire, isn’t enough to improve your retention rates. You must also commit to reviewing and analyzing the findings to identify areas of improvement, and then create an action plan to address shortcomings.