The Most Ignored but Powerful HR Metrics
- Sabrina Baker
- 4 days ago
- 4 min read
Updated: 3 days ago
I have been talking for the past couple of weeks about how to get leadership in a small employer (1-500 employes) to take HR seriously. I’ve talked about talking in ROI, of course, but also in showing up confidently and with high degrees of credibility.
One of the largest opportunities I see in those managing HR in small employers is making data driven decisions and suggestions. Oftentimes, I will hear of HR pro’s suggesting programs or processes simply because they think it will make a difference. Yet they have no real data to support their findings. They suggest richer benefits or a new wellness initiative because they think it’s what employees want or they heard of another company doing it and thought it was cool. But it may not actually be as impactful as they think, and if it isn’t after launch, they lose that credibility with leaders that lends to future buy-in.
It is vital that small employer HR pros use data to support decisions and suggestions. They often get in the trap of thinking they are too small to measure anything and that simply isn’t the case. Small employers are not so small that metrics do not matter, but the type of metrics you focus on are different due to size.
Let’s break down 3 overlooked metrics that make a huge impact in a small environment.
Employee Engagement
Nothing ground breaking about measuring employee engagement, but it is the one I see measured the least especially in an under 50 environment. HR pros and leaders think they can “sense” the engagement of their team and therefore do not need to measure it.
It’s true that in a small environment, you can feel a difference between highly engaged and highly dissatisfied, but not every environment has those extremes. Knowing that even one employee who is not engaged in what they are doing can have a huge effect on overall productivity and morale and knowing that that lack of engagement may not always be obvious means that measuring engagement is necessary.
Engagement surveys are not the only way to measure this. If you have less than 20 employees, surveys are probably the worst way since there is no way for anonymity. In my business of 10 employees, we do skip level meetings which allow employees to share feedback with someone other than their leader. For other clients we do focus groups, monthly check-ins or, when we feel the environment is right for it, surveys.
An unexpected departure can be detrimental to a small organization. Measuring engagement to maintain a pulse on what is actually happening with employees is crucial.
Cost per Employee
Small employers are constantly balancing the Goldilocks rule of staffing. Overstaffing stresses the finances while understaffing stresses the employees and costs productivity. Larger orgs can handle a bloated workforce. They can pay extra in salaries that may not be needed because their cash flow and revenue is much higher (although I would argue this is why they have so many layoffs). Smaller organizations can not absorb that cost.
It’s important to track cost per employee to understand what every new employee is going to cost in total. Leaders, when they are growing a business, often think throwing people at a problem is the only solution, but it may not be. Being able to understand the cost per employee helps to compare other solutions, such as technology, to see what makes the most financial sense.
This isn’t about just keeping costs low, but being able to offer the best situation for current employees. If you bloat staffing and have a high payroll to revenue ratio, then you are likely able to only pay salaries and not add additional benefits or programs.
Benchmark cost per employee for your industry and company size and track by employee. Here is the formula we use:
(Total Employee Costs+Salaries+Benefits)/Total Employees
Total employee costs includes payroll, taxes, office space etc. Any cost associated with having employees.
Revenue per Employee
These last two metrics go hand in hand. Especially if you are in a service based business, revenue per employee is vital to helping track if employees are productive and efficient. And if they aren’t, this is often a workflow, process, access to what they need to do their job issue than it is an employee issue.
This is another one that should be benchmarked against industry and company size, but also set as a goal. Understanding the margin each employee is expected to produce, tracking and then investigating when they are below goal can help identify areas overall in the business that can be buttoned up.
This is a metric that needs to be realistic based on current company revenue, growth and capability. This isn’t something I suggest setting a huge stretch target against. It’s more about understanding what is ideal within our current state and measuring that.
The formula for this one is easy: Total Revenue/Total Employees
If you are in a service business, like ours, you may track this differently and by employee versus the revenue they bring in. For example, my teams work with different clients sets who all bring in different monthly revenue so I track by person rather than one overall number. But I didn’t always. Either way can be beneficial.
There are likely metrics specific to your small org that are important to measure. It’s important to measure what you can as early as you can and then scale as the business growns. Getting into the habit of measuring will give you historical trends that can really make a difference in how you make future decisions.
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