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How Human Resources Metrics can help You Manage Your Business

Sound Telecom is a leading nationwide provider of telephone answering, call center and unified communication services.  It’s friendly, courteous, and professional staff represents your company the way you want it represented, with your messaging, your branding, and your mission.

Well, I’ve been thinking…again…about the hiring process, except that this time I’ve been focused on some simple metrics that I find helpful when analyzing certain aspects of business.

I thought I’d pass these on to you and am hopeful that you might list some that you find helpful in the comments section of this blog post.

These are pretty common calculations, yet somehow often ignored in the small business world, yet would help owners and managers immensely if they knew these numbers and could actually see how they impact their bottom line.

1.  Monthly Turnover Ratio (number of employee exits / average number of employees) x 100.  I find this helpful in departmental applications, finding that mixing statistics from different departments skews the measurements.  The only reason to include all departments is if you are looking for a company-wide average, but for me, it is more revealing to analyze each department separately.   Obviously, the higher the ratio the more time and money you’re spending on hiring and training new employees and we can calculate that cost at number 3 below.

2.  Revenue Per Employee = the total revenue divided by the total number of employees.  Again, you can apply this by department when looking at different products or services produced by different departments, knowing that when your sales go up and hiring then goes up, you can gain a perspective of how many hires it may take to produce increased revenue.  The trick here is to remember your efficiency process models, as often times if revenue goes up in an existing track, economies of scale may be able to be applied whereby the increase in product or service can be produced by the existing number of employees – ergo, no increased headcount.  This is actually a fun catalyst to test efficiency models and “what-if” scenarios.

3.  Cost Per Hire (External Costs of hiring + Internal Costs of hiring) / Total New Hires.  This is performed for a specific time frame and when faced with seasonal increases can serve to alert you to the hidden increased costs of hiring.  The fun part of this equation is experienced, for me, when you apply the value stream costing model to this process.  How many activities are involved that actually don’t aid the new employee’s transition into the culture and activity of the company?  If you can find and eliminate tasks or activities that don’t really contribute value to the process, you can cut costs.  In fact value stream costing can be applied to almost any activity within an organization to discover time and money savings, and is often applied to manufacturing and production but easily adaptable to other processes.

Well, those are my top three tips regarding metrics that your HR personnel or department can supply the management team for help in analyzing various costs relating to personnel.

What are some of yours?