“What metrics should I include in my people dashboard?” This is a question that leaders often ask me.
It depends on what business problem you are trying to solve.
A business problem that I’ve been focused on this year is how to unlock value within organizations. What do I mean by “unlocking value”? I don’t mean cutting costs. And I don’t mean layoffs or reductions in force.
Unlocking value is about enabling our employees to thrive within the context of our business, matching their skills and ambitions with what our business needs to reach its goals.
Many organizations suffer from a sort of “value trap”. The processes and systems that we design to organize, manage (and hopefully enable) our people end up constraining and limiting them. We fall into classic product design pitfalls, designing for the short-term and not iterating as our environments change. As a result, our organizations suffer higher costs and lost productivity because we are trapping the potential value of our workforce. Unlocking value is about understanding, measuring, and removing the value traps so that our people can thrive, our organizations can perform, and our businesses can have their greatest impact.
“Hold on,” you might ask, “can a set of metrics really help us unlock this value?”
Consider this. People costs account for 50-70% of most companies’ operating expenses, yet this is among the least often (and most inconsistently) reported data by companies. At the same time, research shows that companies that make decisions based on quantifiable people metrics have demonstrably better talent outcomes (e.g. stronger leadership benches, higher employee performance, better quality of hire, stronger employee engagement) and outperform their industry peers with 6-8% higher gross margins.
Can the people metrics alone unlock value? No. No set of metrics or dashboard will do this by itself. But they are an invaluable guide to you and your organization, identifying the value traps so that you can remove the barriers for your teams.
We find that 10 people metrics are highly effective at unlocking value in an organization. Some metrics are designed to help employees and the business be more productive, removing organizational or structural value traps. Other metrics are designed to help reduce excess costs, lowering the costs of employee turnover by improving retention. We have structured the 10 metrics into a set of Leading (i.e. predictive) and Lagging (i.e. descriptive) indicators. I recommend using the leading indicators to watch for trends and inflection points. These metrics are your early-warning signs for value traps. Use the lagging indicators to measure your progress.
10 People Metrics to Unlock Value
If you’re not measuring these already, I’m including a sample definition that you can use for each of the 10 metrics. Below you can find a summary of the metric, example measure, and recommended source(s) for the data. Use these to get started!
Focus Time: In professional jobs, research shows that “focus time” – defined as 2+ hours per day of uninterrupted time that can be dedicated to a project or task – is directly related to productivity.
- Measure: “On a typical workday, I am able to dedicate 2 or more hours of uninterrupted time to a project or task.” (Strongly Agree / Agree / Neutral / Disagree / Strongly Disagree)
- Alternative Metrics: “I frequently experience interruptions (e.g. emails, phone calls, meetings, colleagues stopping by) while trying to concentrate on my work.” (negatively coded – Strongly Agree / Agree / Neutral / Disagree / Strongly Disagree)
- Source: Employee survey. Can also be measured via work activity / organizational network analysis
Psychological Safety: Psychological safety refers to the extent to which employees feel safe taking interpersonal risks such as speaking up, sharing ideas, and asking for help, without fear of negative consequences. Research shows a strong positive relationship between psychological safety and increased team and firm performance.
- Measure: “I feel safe expressing my thoughts and opinions at work.” (Strongly Agree / Agree / Neutral / Disagree / Strongly Disagree)
- Alternative Metrics: “In my workplace, mistakes are seen as opportunities for learning and growth rather than grounds for blame or punishment.” (Strongly Agree / Agree / Neutral / Disagree / Strongly Disagree)
- Source: Employee survey
Human Capital ROI: Human Capital ROI is a measure of workforce contribution, showing how effectively the investment in human capital is supporting your organization’s profitability. This measures the amount returned to the organization for every dollar spent on human capital. The larger the percentage return, the more effectively your investment in people is working.
- Measure:
- Alternative Metrics: Return on Human Capital Investment (Total Operating Profit / Total Cost of Workforce)
- Source: HR Management System, Payroll, Finance
Trust: The relationship between employee trust and retention is well-established in organizational research. When employees trust their organization and leaders, they are more likely to stay with the company for a longer duration.
- Measure: “I trust my company to do the right thing.” (Strongly Agree / Agree / Neutral / Disagree / Strongly Disagree)
- Alternative Metrics: “I feel that my company communicates decisions that affect employees in a transparent and timely manner.” (Strongly Agree / Agree / Neutral / Disagree / Strongly Disagree)
- Source: Employee survey
Belonging: The sense of belonging in the workplace refers to the feeling of being accepted, valued, included, and connected within the organization. Workers with high belonging are linked to a 56% increase in job performance, a 50% drop in turnover risk, and a 75% reduction in sick days.
- Measure: “I believe that my unique skills, background, and perspectives are valued and appreciated in the workplace.” (Strongly Agree / Agree / Neutral / Disagree / Strongly Disagree)
- Alternative Metrics: “I feel included in my team’s activities and decision-making process.” (Strongly Agree / Agree / Neutral / Disagree / Strongly Disagree)
- Source: Employee survey
Lateral Mobility Rate: The rate of internal transfers between locations and functions within an organization, excluding changes in level (e.g. promotions, demotions). Lateral moves are an effective mechanism for experiential development, building knowledge of the organization, and opening career pathways. Research also indicates that lateral movement improves employee retention, in some cases increasing the probability to stay by nearly 50%.
- Measure:
- Alternative Metrics: Transfer Rate (internal transfers / average headcount)
- Source: HR Management System
Profit / FTE: Profit per FTE (full-time equivalent employee) compares the profit generated by the company with the total number of employees in the workforce. This metric is commonly used to compare the productivity of organizations in the market.
- Measure:
- Alternative Metrics: Revenue / FTE (revenue / total number of employees)
- Source: HR Management System, Payroll, Finance
Employee Net Promoter Score (eNPS): Adapted from the Net Promoter Score (NPS) approach commonly used to measure customer experience, the Employee Net Promoter Score (eNPS) is a popular single-question approach to measure employee engagement. While employee engagement is a multi-dimensional concept that requires several questions to measure fully, the eNPS provides a quick and straightforward way to capture high-level sentiment without a longer survey instrument.
- Measure: “On a scale of 0 to 10, how likely are you to recommend our company as a place to work?” Employees are categorized into three groups: Promoters (score 9-10), Passives (score 7-8), and Detractors (score 0-6). eNPS is calculated by subtracting the percentage of Detractors from Promoters
- Alternative Metrics: Employee Engagement Index
- Source: Employee survey
Voluntary Turnover Rate: Employee turnover imposes incremental costs on the organization (e.g. separation, staffing, onboarding, training costs) and can be a serious obstacle to productivity, quality, and profitability. It is useful to focus on voluntary turnover (i.e. resignations) as these departures are unplanned and less predictable, and can have an acute impact on the business.
- Measure:
- Alternative Metrics: Regrettable Turnover Rate (regrettable terminations / average headcount); High-Performer Turnover (high-performer terminations / average headcount); Total Turnover (total terminations / average headcount)
- Source: HR Management System
Turnover Cost: Employee turnover imposes direct and indirect costs on the business as the organization needs to spend incremental time and resources to backfill positions. Examples of direct costs include separation costs, recruitment costs, selection costs, and training costs. Examples of indirect costs include lost productivity, overtime and/or temporary labor, incremental managerial time spent on exit and recruiting/onboarding activities, and disruption to customer relationships. This metric provides a conservative estimate of turnover cost based on the average salary in your organization. However, real turnover costs vary by level and position. On average, the turnover cost of an hourly employee is about $1,500 per employee while the cost of replacing an executive can be over 2x that employee’s annual salary.
- Measure:
- Alternative Metrics: Voluntary Terminations (count)
- Source: HR Management System, Payroll
With hundreds of people metrics available, it’s not feasible – nor advisable! – to measure everything. One of the biggest challenges for the modern HR leader is to identify the few metrics that matter for your people and your business. I recommend these 10 metrics as a concise way to begin unlocking value in your organization, identifying and removing the value traps that are holding your people and business back from achieving their full potential. We’ve found that these metrics are highly effective at helping companies create an environment where their employees and their business can thrive together. I hope they’re just as helpful for you and your organization!
If you are interested in learning more about human capital reporting, Jeff Higginsand Amy Armitage are doing phenomenal work on the topic. I also recommend leveraging ISO 30414 for standardized metric guidelines and definitions, and the ongoing work of ISO’s Human Resource Management Technical Committee (ISO/TC 260).
—– RJ Milnor is the Founder & CEO of People Analytics Partners, a marketplace that connects companies with experts in people analytics and workplace tech for fractional assignments. Prior to this, he led the global People Analytics and Workforce Planning functions at Uber, McKesson, and Chevron.
