Table of Contents

In this blog we will talk all things workforce planning, including:

• What is workforce planning?
• Why HR metrics matter in workforce planning
• The top 10 HR metrics that you need to track
• How to use HR metrics to take your organization to the next level
• Wrap up

What is workforce planning?

Workforce planning is like setting up a game plan for a company's team. Just like a sports coach needs to know how many players are available, how well they're playing, and how happy they are, a company needs to understand its employees as part of its human resource management function.

HR professionals use key HR metrics, like employee satisfaction and performance, to figure out how the team is doing. They also look at things like the gender pay difference and employee engagement to see if everyone is treated fairly and is excited about their job.

Recruitment processes, like how many new employees to hire, are decided based on these important HR metrics. If they notice a lot of employees leaving (that's turnover), they try to understand why by engaging with staff and assessing HR metrics to fix any problems.

A key part of planning any workforce is to use HR analytics and HR software to collect and analyze data points. This helps them see what's working and what's not, and they can make changes to keep the team productive and happy.

So, workforce planning is like being the coach of a company's team, using data and HR metrics to make sure everyone is performing well, staying happy, and helping the company succeed.

Why HR metrics matter in workforce planning

HR metrics are important in workforce planning because they are like the scoreboard for a company's team. Just like in sports, where you need to keep track of points and stats to win games, in business, workforce planning metrics are used in a way to ultimately help the company be successful.

These metrics, such as employee performance, and engagement, act as key performance indicators. They tell HR how well the team is doing and where there might be issues. For example, if employee retention is low, it's a sign that something might be wrong, and action is needed to improve employee retention across the organization.

HR metrics also help in understanding the cost of HR functions, like recruitment and training. By tracking data points and analyzing them over a given period, HR teams can make more informed decisions about where to invest resources.

In essence, these metrics matter in workforce planning because they provide the data needed to manage the team effectively, make smart decisions, and ensure a productive and happy workforce, just like a sports team needs to keep an eye on the score to win games.

Next, let's look at the top 10 HR metrics, including the key data points required from your human resources colleagues (HR data).

The top 10 HR metrics that you need to track

1. Employee growth rate

In the world of business, particularly in HR and workforce planning, the growth rate of employees is a metric that tells you how much your company has increased in terms of the number of employees.

To calculate the growth rate, you typically compare the number of employees at the start of a specific time period to the number of employees at the end of that same period. The formula usually looks like this:

Growth Rate of Employees = ((Employees at the End - Employees at the Start) / Employees at the Start) x 100

Let's break it down further:

1. Employees at the End is how many team members you have when you're done counting at the end of a certain time frame (e.g., a financial year).
2. Employees at the Start is how many you had when you began counting at the start of that same time frame.
3. You subtract the number of employees at the start from the number at the end to see how much your team has grown.
4. Then, you divide that difference by the number of employees at the start to get a percentage increase.
5. Finally, you multiply that percentage by 100 to express it as a percentage growth rate.

So, if your growth rate of employees is, for example, 10%, it means your company has added 10% more employees compared to the starting number within the chosen period.

This key HR metric helps companies track their workforce expansion and is useful for HR professionals and managers to plan for recruitment, training, and other HR initiatives to support the growing team effectively.

2. Employee turnover rate

The employee turnover rate (a.k.a. churn) is like counting how many players leave your team during a game. In the world of HR and workforce planning, this is an important metric. It's one of the key HR metrics used to measure the rate at which employees are leaving the company within a specific time period.

To calculate the churn rate, you'd use the following formula:

Employee Turnover Rate = ((Employees Who Left During a Given Period / Average Employees During the Same Period) x 100

Here's how it works:

1. Employees Who Left During a Given Period represents how many employees decided to leave or were separated from the company during the designated time frame.
2. The Average Employees During the Same Period is the average headcount of employees throughout that same timeframe.
3. You divide the number of employees who left by the average number of employees and multiply it by 100 to get a percentage.

For example, if your churn rate is 10%, it means that 10% of your workforce left the company within the chosen period. This metric is crucial for HR because it helps them understand how many employees are exiting the organization, which can be costly and disruptive.

By keeping an eye on the churn rate and analyzing it alongside other HR metrics like employee performance and satisfaction, HR teams can develop strategies to improve retention and reduce the negative impact of high turnover (especially if it is mostly voluntary turnover).

3. Employees by function

Employees by function refers to assessing the headcount efficiency within each function, which is like assessing the performance of a group of similar roles within a sports team (e.g., all of the defenders in a soccer team).

To calculate this, you'd split the number of employees in the organization by function and then compare them to external benchmarks.

Here's two common benchmark metrics used to assess employees by function:

1. Revenue per Function Employee: This metric is more commonly used to measure the efficiency of commercial functions in a organization (e.g., Sales, Marketing, Customer Support). To calculate this measure you need the latest Annual Revenue of the organization and the number of employees in the function that you want to assess. Then it is a simple ratio of Annual Revenue / Function Employees for each function.
2. Function Employees as % of Total Employees: This metric is typically used to measure the efficiency of all other functions in an organization. To calculate this measure you need the total number of employees and employees split by function. Then it is a simple ratio of Function Employees / Total Number of Employees for each function.

Once you have calculated these metrics for your organization, then the next step is to source external benchmarks to compare your metrics to. By comparing your organizational metrics to external benchmarks you will be able to identify functions that may appear to be less efficient than others. This can be very useful to help HR and Finance teams with any headcount reduction planning.

Need employees by function benchmarks? Search here

4. Employee satisfaction

Employee satisfaction, assessed through surveys, is like taking a team's pulse to see how happy and content they are. In the realm of HR and workforce planning, it's one of the key HR metrics that is used to gauge the overall happiness and well-being of employees within an organization. It's also common for employee satisfaction to also be reflected in the employee retention rate.

To measure the satisfaction of employees HR teams typically conduct surveys or questionnaires that employees can complete anonymously. Here's how it works:

1. Employee Engagement Survey: This is a structured questionnaire given to employees to assess their level of contentment and happiness with various aspects of their job and the organization.
2. Survey Responses: Employees provide their feedback through the survey, rating their satisfaction on different factors such as job satisfaction, work environment, compensation, and benefits.
3. Survey Period: These surveys are typically conducted periodically, such as annually or quarterly, to track changes over time.
4. Satisfaction Score: HR teams analyze the survey responses to calculate an overall satisfaction score, often using a scale or scoring system (e.g., employee net promoter score).

For instance, a score of 85 on a scale of 100 indicates a relatively high level of satisfaction within the workforce. The typical HR professional will consider this score, along with other key HR metrics, to gain insights into the overall health of the organization.

Employee satisfaction surveys are essential for HR professionals because they provide valuable feedback on the workplace environment and employee experience. These surveys help identify areas of improvement, track trends over time, and inform HR initiatives to enhance employee well-being and engagement, ultimately contributing to a more productive and content workforce.

5. New hires per Recruiter

This metric is used to assess the efficiency of the recruitment function by measuring how many new hires (or hiring processes) one Recruiter can manage in a fixed time period (typically a year).

To calculate New hires per Recruiter you'd use this formula:

New hires per Recruiter = (Total Number of New Hires / Total Number of Recruiters)

By using this metric, you can gain insights into how efficient your recruitment process is and how many recruiters you may need going forward. For instance, if you have one recruiter for every ten new hires, it suggests an efficient and streamlined hiring process. However, if the ratio is less favorable, like one recruiter for every two new hires, it might indicate that the recruitment process is resource-intensive and potentially in need of optimization.

New hires per recruiter is an important metric in HR because it helps them assess the allocation of recruiters and identify areas where adjustments may be needed to make the hiring process more efficient and cost-effective, which can ultimately impact the company's bottom line.

6. Cost per Hire

Cost per hire is like calculating how much it costs to bring a new player onto your sports team. In HR and workforce planning, this metric is used to measure the total expenses incurred during the recruitment and hiring process for each new employee.

To calculate Cost per hire, you'd use this formula:

Cost per Hire = (Total Recruitment Costs / Number of New Hires)

Here's an overview of the the individual components:

1. Total Recruitment Costs: This includes all the expenses associated with finding, attracting, and hiring new employees. It encompasses items like job advertising, recruiter salaries, applicant tracking system (ATS) expenses, interview costs, and any other recruitment-related expenditures.
2. Number of New Hires: This represents the total number of employees successfully hired during a specific period.

By using this metric, you can assess how much it costs the company to bring in new talent. For instance, if the cost per hire is $5,000, it means that, on average, the company spends $5,000 for each new employee it brings on board.

Cost per hire is a crucial metric for HR because it provides insights into the financial efficiency of the recruitment process. Tracking this metric allows HR teams to evaluate recruitment strategies, identify cost-saving opportunities, and make informed decisions about how to allocate recruitment budgets effectively while aiming to keep expenses in check.

7. Gender pay gap

The gap in gender pay is like comparing the earnings of players on a sports team, but in the world of business and HR, it refers to the difference in average pay between men and women within an organization.

To calculate this you'd use this formula:

Gender Pay Gap = ((Average Male Earnings - Average Female Earnings) / Average Male Earnings) x 100

For example, if the metric is 15%, it means that, on average, women within the organization earn 15% less than their male counterparts. This metric is essential for organizations because it helps identify potential disparities in pay based on gender, which could indicate issues with pay equity and fairness.

Tracking this metric is crucial for promoting equal pay practices, ensuring compliance with labor laws, and fostering a workplace that values diversity and inclusion. It also helps organizations take action to rectify any gender-based pay disparities and work towards a more equitable and fair compensation structure.

8. Gender diversity ratio

The gender diversity ratio is like looking at the mix of players on a sports team but in the context of business and HR, it refers to the representation of different genders within an organization.

To calculate the gender diversity ratio, you'd compare the number of employees of each gender within the organization. The formula is:

Gender Diversity Ratio = (Employees of a Specific Gender / Total Employees) x 100

Here is an overview of the key parts to the ratio:

1. Number of Employees of a Specific Gender: This represents the count of employees who identify as a specific gender, such as male or female.
2. Total Employees: This is the overall headcount of employees within the organization.
3. The ratio is calculated for each gender group, and the result is multiplied by 100 to express it as a percentage.

For example, if the gender diversity ratio for women in an organization is 40%, it means that women make up 40% of the total workforce.

The gender diversity ratio is a significant HR metric because it provides insights into the organization's inclusivity and efforts to create a balanced and diverse workplace. HR professionals and organizations track this metric to measure progress toward gender diversity goals, enhance inclusivity, and ensure equal opportunities for all employees, regardless of their gender. It plays a vital role in fostering a workplace that values diversity, promotes equity, and reflects the broader community's makeup.

9. Employees by location

Employees by location is used to identify offshoring opportunities within your organization. As we know the world is broken up in to roughly 200 countries, which have a different cost of living in each. For an organization it can be helpful to know whether employees could be located in lower cost countries without impacting employee performance.

To measure this organizations can use a benchmarking tool like CompanySights that have external benchmarks for employee locations split by high and low cost countries.  

10. Average compensation per role

Lastly, compensation is an important part of attracting high quality talent to your organization (or sports team)! Calculating the compensation that you offer your staff and comparing this to similar organizations can help you understand whether you are below, in line, or above market. Employers that are in the dark on their compensation may be wasting money on recruitment processes or only be able to attract sub-par talent.

How to use HR metrics to take your organization to the next level

Using HR metrics effectively can be a game-changer for your organization, helping you take it to the next level by making informed decisions, optimizing processes, and maximizing the potential of your workforce. Here's a step-by-step guide on how to do it:

Identify Key HR Metrics

Start by identifying the most relevant HR metrics for your organization. These could include the churn rate, recruitment cost, gender diversity ratio, and more. Choose metrics that align with your strategic goals and areas where improvement is needed.

Gather Data

Collect data related to the selected HR metrics. Invest in HR analytics tools and HR software to streamline data collection and analysis. Ensure data accuracy and consistency to make reliable decisions.

Set Benchmarks

Establish benchmarks or target values for each HR metric based on industry standards or your organization's historical data. Benchmarks provide a reference point for performance evaluation. Using a tool like CompanySights for employee by function or location benchmarks can be a real time saver here.

Regularly Monitor Metrics

Continuously monitor the chosen HR metrics. Track them over time to identify trends and patterns. Regular monitoring enables you to spot issues early and make timely adjustments.

Analyze Data

Dive deep into the data to gain insights. Look for correlations and causal relationships between different HR metrics. For example, analyze how employee satisfaction relates to turnover rates or how recruitment costs impact overall expenses. This also includes comparing your organizational data to external benchmarks that have been collated.

Take Action

Use the insights gained from HR metrics to drive HR initiatives and organizational strategies. For example:

• If turnover rates are high, analyze exit interview data to identify reasons for employee departures and take steps to address those issues.
• If employee satisfaction is low, implement employee engagement programs or training initiatives.
• If recruitment costs are excessive, refine your recruitment function to reduce expenses.

Monitor Impact

After implementing changes or initiatives, track the impact on HR metrics. Has turnover decreased? Is employee performance improving? Continuously assess whether your actions are having the desired effect.

Communicate Findings

Share HR metric findings and progress with key stakeholders, including senior leadership and managers. Transparency and communication help build support for HR initiatives and foster a data-driven culture within the organization.

Iterate and Improve

HR metrics are not static; they should evolve as your organization grows and changes. Regularly review and refine your set of metrics to ensure they remain relevant and aligned with your organizational goals.

Integrate with Strategic Planning

Incorporate HR metrics into your overall strategic planning process. Align HR goals with the broader business objectives to ensure that HR initiatives contribute directly to organizational success.

Invest in Training

Ensure that HR professionals and managers have the necessary skills to work with HR metrics effectively. Training programs can help them understand the metrics, interpret data, and take appropriate actions.

Stay Compliant

Be aware of legal and ethical considerations when using HR metrics, especially those related to employee privacy and non-discrimination. Ensure compliance with relevant labor laws and regulations.

Incorporating HR metrics into your organization's decision-making process can lead to increased productivity, reduced costs, and better overall performance. By continually monitoring, analyzing, and acting on HR metrics, you can propel your organization to the next level of success and competitiveness.

Wrap up

HR metrics are critical to successful workforce planning and implementation. In this blog we have outlined the top 10 HR metrics that HR teams should use to track employee performance and plan any human resources initiatives.

Hopefully it is clear how important tracking HR metrics are to an agile and growing organization. So, what are you waiting for? Start tracking HR metrics in your organization today!