Best HR Metrics for Human Capital Management

HR metrics for human capital management are now central to the business of any public company. Effective November 9, 2020, the Securities and Exchange Commission (SEC) introduced new disclosure requirements designed to provide stakeholders insight into human capital. The new requirements require public companies to disclose the number of employees and a description of human capital resources, along with any human capital measures or objectives. This is a new age of transparency for both investors and talent, and it is likely to drive a lot of conversations between HR or CHRO and company CEOs moving forward.

Best HR Metrics for Human Capital Management

While the new rules do not include a definition of “human capital” or a list of required measures to disclose, we do have the International Organization for Standardization’s (ISO) ISO 30414, human resource management guidelines for internal and external human capital reporting, which provides guidelines on core HR areas such as organizational culture, recruitment and turnover, productivity, health and safety, and leadership.

Here, we’ll review HR metric examples that HR leaders and teams will need to focus on moving forward as companies define SEC disclosure strategies.

Strategic HR Metrics Examples

Monthly Turnover Rate

– Monthly Turnover Rate = (number of separations during month / average number of employees during month) x 100).

Revenue Per Employee

– Revenue per Employee = total revenue / total number of employees. This is especially important when evaluating the cost of a lost employee due to voluntary or involuntary turnover.

Yield Ratio

– Yield Ratio = percentage of applicants for a recruitment source that make it to a determined stage of the application process.

Human Capital Cost

– Human Capital Cost = Pay + Benefits + Contingent Labor Cost / Full Time Equivalents.

HR to Staff Ratio

– HR to Staff Ratio = Employees / Human Resources Team Members. This ratio is important since during the recession HR departments have reduced in number dramatically. HR serves as the internal customer support staff just like call center customer service employees serve as external facing.

Human Capital Return on Investment

– Return on Investment = (total benefit – total costs) x 100.

Promotion Rate

– Promotion Rate = Promotions / Headcount.

Percentage Female at Management Level

– Percentage Female at Management Level = Female Management Level Employees/Management Level Headcount. This formula can also be used when evaluating executives at a female level and other diversity categories like veterans and race.

Employee Absence Rate

– Employee Absence Rate = number of days in month / (average number of employees during month x number of days). I have used this analysis to look at employee absence rates for different departments and managers. Sometimes the best way to determine if their is a culture or manager opportunity is through evaluating the percentage of absences by department or manager.

Worker’s Compensation Cost Per Employee

– Worker’s Compensation Cost Per Employee = total workers compensation cost for year / average number of employees.

Worker’s Compensation Incident Rate

– Worker’s Compensation Incident Rate = (number of injuries and/or illnesses per 100 full-time employees ∕ total hours worked by all employees during the calendar year) x 200,000.

Overtime per Individual Contributor Headcount

-Overtime per Individual Contributor Headcount = Overtime Hours/Individual Contributor Headcount.

Average Employee Age

– Average Employee Age = Total Age of Employees / Headcount. This is an important metric in my mind when looking at succession planning and forecasting staffing areas of opportunity as older workers begin to consider retirement. Also, an important metric when calculating benefits costs for your organization.

Time to Fill

– Time to Fill = Calculate your average time to fill by adding all time to fill measurements for each position you filled in a given period (e.g. a year) and then divide by the number of roles.

Acceptance Rate

– Acceptance Rate = The number of jobs offers your organization extends divided by the number of candidates who accept an offer.

Retention Rate

– Retention Rate = Divide the number of employees that remained in your organization over a given period by the number of total employees.

Retention Rate per Manager or Team

– Retention Rate per Manager or Team = The retention rate broken down by individual managers or teams.

Training Cost per Employee

– Training Cost per Employee = The total cost of your organization’s training courses and programs divided by the total number of employees.

Training Completion Rate

– Training Completion Rate = The number of employees who completed a given training divided by the total number of employees, then multiplied by 100 to get a percentage.

Cost of HR per Employee

– Cost of HR per Employee = The total amount your company spends on HR functions divided by the total number of employees.

Healthcare Cost per Employee

– Healthcare Cost per Employee = Total healthcare cost paid by your company over a benefits year divided by the number of employees participating in your healthcare plan.

Diversity Representation in Leadership

– Diversity Representation in Leadership = The number of diverse employees within leadership positions divided by the total number of leadership positions, multiplied by 100 to get a percentage.

Employee Engagement/Net Promoter Score (NPS)

– Employee Engagement/Net Promoter Score (NPS) = A survey asks employees: “How likely is it that you would recommend working at our company to a friend or colleague?” The question is answered on a scale from 0 to 10, with anyone answering 0 to 6 considered a detractor, 7 and 8 considered passive, and 9 to 10 respondents considered promoters.

Calculate your NPS by subtracting the percentage of detractors from promoters.

A negative score indicates that more employees said they would not recommend someone to work at your company, whereas a positive score indicates high levels of engagement, with more people recommending your company as an employer of choice.

Why HR and Human Capital Metrics Matter

Some people call leveraging metrics as part of your HR strategy an evidence-based HR practitioner. I like to think of it as a smart organizational business partner who specializes in workplace analytics to drive these type of business decisions. Part of being a well-rounded human resource professional who has the entire organization in mind when developing people strategy and other HR programs uses metrics, examples, analytics, and formulas to determine a program’s success, or as part of any type of analysis, SWOT included.

HR will be expected to develop a plan along with company leadership for metrics and disclosure strategies, and taking the lead on this now can prevent you from scrambling for information in coming months. These metrics can help give you a starting point to begin conversations with stakeholders about what HR metrics your company will need to track, monitor and disclose.

Are there any metrics you use on a regular basis that I may have missed? Leave a comment below, and let’s start a conversation on how you leverage HR metrics as part of your human resource and recruitment department.

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