How to Evaluate Key Business Decisions as a Hr Manager

Previously viewed as a subservient function following top leadership, human resource management now holds independent importance. Both organizations and the HR community acknowledge the pivotal role of human resource management in decision-making for current roles. In this article, Aniday will guide you on how to evaluate key business decisions as a HR manager. 

What is an HR manager?

HR managers strategically plan, coordinate, and oversee administrative functions in organizations. They manage recruitment processes, consult with top executives on strategic planning, and act as a bridge between management and employees.

The importance of HR business decisions 

Here are the reasons HR business decisions matter to your business outlook

Impacts all people processes

HR decision-making spans the employee lifecycle, impacting talent identification, recruitment, performance management, compensation, and exit processes. This comprehensive approach highlights HR's significance in shaping an employee's journey within the organization.

Influences every business process

Moreover, HR functions as a business partner, directly influencing all aspects of company operations. For instance, in acquiring new skills for a project, HR uses a Skills Matrix to guide decisions on internal development or external acquisition.

Aligns with organizational goals 

This alignment with organizational goals connects HR decisions to overall objectives, influencing individual performance goals and fostering a culture of achievement for market leadership through effective recognition policies.

What are HR metrics?

HR metrics comprise data points that enable the tracking of crucial human resource and recruitment activities, including employee performance, retention, compensation, engagement, cost-per-hire, time-to-hire, and others. These metrics empower companies to closely monitor the effectiveness of their programs and make necessary adjustments as required.

How to leverage HR metrics effectively? 

Begin by posing specific questions or hypotheses about your company's performance:

• Is the voluntary turnover rate higher than desired?

• What is the financial impact of this turnover?

• How efficient is the talent acquisition process?

• Are poor hires causing financial losses?

Utilize HR tools to collect and analyze data relevant to these questions. HR metrics offer insights into diverse aspects of your business, spanning turnover rates, forecasting future staffing needs, and identifying skill development requirements. This data-driven approach facilitates informed and strategic long-term business decision-making.

Which HR metrics hold the utmost significance?

In this section, we will dive deep into how to assess critical business decisions as an HR manager using HR metrics 

1. Headcount 

Headcount represents the total number of individuals employed by your organization at a specific point in time, encompassing permanent, temporary, contingent employees, and gig workers.

This metric aids in evaluating whether you have a sufficient workforce to achieve your objectives and allows for forecasting potential changes in numbers. It facilitates improved financial management and more precise cost estimations.

2. Turnover

Analyzing this metric helps uncover trends and reasons behind employees' decisions to leave.

Key metrics include:

• Predicted resignations: An estimate of the number of people expected to leave the company soon.

• Resignation trends: Identifying patterns in the number of resignations compared to previous quarters.

• Estimated replacement costs: Calculating the expenses associated with replacing departing employees.

• Resignation drivers: Understanding the reasons behind employees leaving the organization.

3. Diversity

In a business context, diversity encompasses differences related to race, gender, ethnicity, and age within the company. Diversity, equity, inclusion, and belonging (DEIB) are becoming organizational priorities, with room for improvement.

Key DEIB metrics to monitor include:

• Ethnicity

• Gender

• Location

• Industry

Greater diversity enhances an organization's ability to attract top talent. Analyzing the mean gender pay gap provides insights into pay equity within the business.

4. Total Workforce Cost

Understanding the Total Workforce Cost is crucial for maintaining competitiveness through efficient workforce planning. It extends beyond salaries:

• HR data: Headcount, salary, and benefits.

• Finance data: Workforce overheads.

• Market data.

Key metrics to monitor include:

• People: Covers recruitment, pay, onboarding, training, and retirement.

• Overhead: Examines the company's cost per employee.

• Facilities: Encompasses the cost of office spaces, equipment, and utilities.

5. Compensation

One of the leading factors driving job turnover is compensation, which extends beyond mere pay. It may involve the absence of growth opportunities or a sense of disrespect. Tracking this metric ensures that the pay scale aligns with market demand. Key metrics to monitor include:

• Salary

• Range minimum, midpoint, and maximum

• Range penetration

• Grade or band

Review the planned adjustments in direct compensation to ensure that your compensation strategy adequately recognizes and rewards top-performing individuals.

6. Employee Engagement

Employees are integral to any business, and the degree to which they connect with their employers, colleagues, and their work is measured through employee engagement metrics. This metric gauges how connected and involved employees are within an organization.

Key employee engagement metrics to monitor include:

• Voluntary turnover

• Absenteeism

• Employee performance

• Glassdoor reviews

• Net promoter score (NPS) in feedback surveys.

7. Talent Acquisition

Talent acquisition metrics serve as a preventive measure, tracing an individual's journey through the hiring process—from the job description to the offer and beyond. 

Key talent acquisition metrics include:

• Revenue per employee

• Quality of hire

• Performance turnover in key roles

• New hire failure rate

• Applications per role

• Diversity hires

8. Learning

Learning metrics monitor individual employees' career development, mitigating voluntary turnover and absenteeism while enhancing engagement and performance.

Essential learning metrics to monitor include:

• Skills needed for the future

• Trajectory of the current learning path

• Internal hires/promotions

• Baseline of skills present in the organization

9. Workforce Planning

The process of workforce planning involves determining the necessary quantity and types of employees required for a specific period. These metrics help identify disparities between the existing workforce and future needs. Key metrics to be aware of include:

• Absenteeism

• Attrition and turnover rates

• Time to proficiency for new hires

• Tenure, seniority, and experience levels

• Skills coverage

In Summary 

HR's role is pivotal in recruiting and retaining skilled workers, reducing costs, and ensuring productivity. Despite its importance, the department faces numerous challenges in fulfilling its multifaceted responsibilities in today's high-demand environment for skilled talent. Aniday hopes this article has provided you insightful information on how to evaluate key business decisions as a HR manager by utilizing HR metrics.