16 HR Metrics for IT
In November 2023, I was having a presentation about people analytics during a conference organized by Andrzej Sobczak. At the end of my keynote, Andrzej asked if I could recommend particular HR metrics to track in an IT company. This is never an easy question as there are dozens of metrics, hundreds of variants, and what we should track is strongly connected to the company specifics, its goals, strategy, culture, and challenges.
It wasn’t easy to answer that question on the fly. However, after some time I realized that I could share some ideas of metrics to track in hypothetical IT company. So, here we go.
Strategic Fit
Initially, I planned to name 10 HR metrics for IT. However, when I started to write this article, and I put down the metrics which in my opinion are typically applicable to an IT company, I ended with 16. Let’s keep it that way but be cautious. The fact that I named 16 metrics doesn’t imply that an IT company has to track all of them. The metrics I share are only a proposal. In every company, people analytics professionals together with HR professionals should identify important ones and focus on them. Each and every organization is different and face different challenges. Hence, the selection of metrics will vary.
A rule of thumb is that in the beginning you can start with tracking 5 key indicators, and 5 additional indicators. You decide about your setup.
In one of his articles, Patrick Coolen described that you should consider people analytics components like strategic fit, organizational fit, internal fit, and environmental fit. It is good food for thought not only when establishing advanced people analytics practice, but also when you start with basic HR metrics.
The indicators you track should be aligned with your organization strategic goals. Make sure your people analytics initiatives, including setting these HR dashboards for IT, are serving the strategic opportunities and challenges of your organization. Showing business acumen and understanding of stakeholders with help gain trust and sit at the table for your indicators.
When designing your metrics make sure you work closely with other HR practices like recruitment, leadership development, talent management, diversity & inclusion, and performance management. Identify what problems and challenges you can address together and design HR indicators to track them and measure results of HR initiatives.
The more you will align your metrics with organizational structures, work, or technology, the more value you will bring. Maybe it’s not worth to chase opportunities which requires data which you currently don’t collect? Choose wisely. You should aim to help your stakeholders in decision making by revealing insights, but make sure ROI is there. The cost of producing data may be significant. Especially in the beginning, it is good idea to start with high impact and low effort metrics.
You will have ethical and privacy standards to work with. Additionally, EU, Federal, or country regulators may imply requirements for specific insights. Maybe it could be good idea to walk the talk, and measure what is material from the sustainability perspective? Eventually, you can excel in something only if you measure it.
Now, you know how to decide about what metrics to choose. Below, is the example list of indicators you can consider choosing from.
Metrics
Headcount
Why? Headcount should be your priority zero metric, the one you start with, as it tells you if you have enough people to accomplish your goals.
How? Decide, who you include in the calculation except of your permanent and temporary workers. Are contingent workers and gig workers included too? It’s your choice but make thoughtful and reasonable decision. Tracking this indicator is crucial as typically majority of organization’s budget goes towards its people cost.
What? Calculate the total number of people who are working for the company. Be careful, it’s more tricky than it sounds.
Turnover
Why? When employee leaves the organization a costly process of finding the replacement is triggered. Plus, you need some healthy turnover level for your organization to bloom.
How? Turnover is the number of employees who leave a company over a certain period of time. The metric includes both voluntary and involuntary leaves. Watch out for a phenomenon of turnover contagion.
What? The basic formula is:
Number of separations during the time period / average actual number of employees during the time period * 100
But there are some good arguments to use in the denominator a “total number of employees at the start of the period”. I’m in favour of that one.
Number of separations during the time period / total number of employees at the start of the period * 100
Retention
Why? You want to keep your employees and you want to be an employer who attract loyal employees. Retention is one of the most confusing indicators, as it is not opposite to turnover, nor is calculated as 1 – turnover!
How? Degree to which an organization is retaining its employees. It answers the question how many employees stayed in the company since the start of the period.
What? How many people voluntarily stayed at the company.
number of employees in the selected group employed at the designated time/ number of employees in that selected group originally
Diversity
Why? Research indicates that diverse workforces are outperforming their less diverse counterparts.
How? Report and analyse gender, race, ethnicity, age, and other factors.
What? Common diversity metric is gender: how many male, female, non-binary, two-spirited, or other more detailed designations. Aggregate and show proportions.
Compa-ratio
Why? You want to attract and retain qualified workers. Compensation consistently ranks in the top five reasons why employees join or leave an organization.
How? Avoid paying too low, blocking advancements, or creating feeling of disrespect. Also, compensation equitably based on age, gender, ethnicity, or other factors is critical for compliance and sustainability for real!
What? A compa-ratio divides an individual's pay rate by the midpoint of a predetermined salary range. How close a person’s salary is to the midpoint is the “compa-ratio.”
Span of control
Why? Optimizing spans of control increases the ability for people in your organization to take action and make decisions on their own.
How? By optimizing spans of control your organization becomes one that can work together more effectively while reducing costs.
What? Span of control measures the number of direct reports for each manager.
Employee engagement
Why? It’s cliché, but high employee engagement correlates with high productivity.
How? Employee engagement metric show employees’ level of connection and involvement with the organization and tell how they feel about the company.
What? Employee Net Promoter Score. This is a numerical value on a scale of 1-10 measuring employee sentiment towards their employer.
The positive and negative scores are derived from the question "how likely are you to recommend our organization as a place to work?" The answer scale is 1 out of 10. People scoring 9 or 10 are promoters. People scoring between 0-6 are detractors. The rest are considered passive. Calculate the percentage difference between promoters and detractors to get eNPS metric.
Quality of hire
Why? Measuring results of hire can improve the efficiency of the hiring process, ensure you maintain adequate staffing levels, and help your organization meet diversity and inclusion goals.
How? The improvement in the performance of new hires.
What? Quality of hire is a weighted average of particular pre-defined variables. It can be calculated as follows:
Quality of Hire = (Variable 1 * weight + Variable 2 * weight + Variable 3 * weight + … + Variable n * weight) / sum of weights
Consider pre-hire variables (for example: time to fill, cost of recruitment), and post-hire variables (for example: performance, retention, time to productivity).
New hire failure rate
Why? The metric tracks whether selected candidates are good fit for the job.
How? Enables insights about the hire and onboarding processes.
What? Number of new hires who fail to make it to the 90 day mark through quitting or being terminated, expressed as a percentage of all new hires.
Revenue per employee
Why? Measures efficiency and productive use of human capital thanks to associating it with the firm’s revenue output. If the revenue‐per‐FTE ratio increases, it might indicate that more output is being produced per FTE.
How? The amount of revenue an employee generates.
What? Revenue / number of FTEs.
Average time to productivity
Why? The time needed for a new employee to become productive is important strategic indicator and can feed many other metrics (for example turnover cost, quality of hire).
How? The amount of time it takes for a new employee to become productive.
What? A bit non-standard and sensitive data that requires structure process to collect data. Beware of potential bias!
Tenure
Why? Experience and loyal employees are powertrain thriving firms.
How? Tenure often is reflected in unique experience and skills an employee may have learned during stay in the company.
What? Tenure refer to how long an employee has been within a company.
Succession coverage ratio
Why? Succession planning allows you to minimize the risk of critical skills gaps emerging when someone leaves the organization.
How? Identify what positions are at risk of becoming vacant due to retirement and turnover, and considering how you will address potential skills gaps.
What? The percentage of employees that are in positions requiring a successor and have at least one successor candidate flagged as “ready now.”
High performer resignation rate
Why? Check if specific managers or departments are losing more high performers than others.
How? Managing people relies on relationships and building the levels of trust and communication that make the difference between average and great performance. Identify who is at risk of losing key performers.
What? Combine performance metrics with turnover, or retention.
Rehire rate
Why? Returning employees can have a positive impact on your company culture as your current employees see people voluntarily rejoin the team.
How? Rehiring employees can save your company in training time and costs. Also, they will likely have an internal network they’re familiar with.
What? The percentage of new hires that are former employees.
Average training spend
Why? Reveals your investment is skills and competencies development. Life-long learning is related to sustainability goals, but also has vital role in creating employee engagement and job satisfaction.
How? The monetary investment in training at an individual level.
What? Training spend / Number of workers participating in training.
I will stop here. There are much more metrics the IT company could track. Depending on the particular need, every firm will select different key indicators that will reveal insights. Above list is just a tip of an iceberg, but also a good start. Start measuring, remove blind spots, and continue developing your people analytics practice.
Inspiring Quote
“It’s our choices, Harry, that shows what we truly are, far more than our abilities.” – J.K. Rowling
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