human capital metrics handbook user guide

8/10/2019 Human Capital Metrics Handbook User Guide

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Introduction

The Human Capital Metrics Handbook is intended to be a comprehensive measurement

guide to calculating and measuring the workforce and Human Resources (HR). This

handbook includes over 600 metrics which are broken down into nine separate metric

categories as shown in the table below.

The primary goal in designing this handbook, was to identify and include the mostvaluable, highestimpact metrics possible that can drive business results. As a result, 100

BestinClass and Critical metrics are included, many of which have never been published

or documented before.

A secondary goal with this handbook was to design a comprehensive work to provide

everything someone relatively new to the world of workforce and HR measurement would

need to establish and implement a complete set of standards for workforce measurement

and metrics. Therefore, as a part of this handbook, over 150 simple calculation and input

metrics have been listed and defined to provide all of the metrics, inputs and sources

necessary to successfully measure and calculate any of the metrics in this book.

Thishandbookgoesbeyondvaguedefinitionstoexplainclearlywhatgoesintoevery

metricandhowitiscalculated.

There are limited cases where an input or simple calculation metric included in a formula

is not separately defined and listed in this handbook. In those cases the input is either

unique for each organization and not easily explained, or it is obvious and, therefore, does

not require listing in this handbook. For a summary breakdown of the metrics included in

this handbook, see the summary metric statistics included on the next page.

MetricCategory MetricSource MetricValueRanking

PrimaryMetricCategory Total

AdvancedInput

CalculatedCalculation

Custom

Inter Bestin

Basic mediate HighCritical Class

CompensationandBenefits

Cost,RevenueandProfitOptimization

Engagement

HRandCOE

LeadershipandDevelopment

Measurement,StructureandHeadcount

MobilityandCareerDevelopment

ProductivityandPerformance

Recruitingand

Hiring

Training

TurnoverandRetention

126 45

17

2

25

22

49

13

35

3216

20

75

19

14

26

23

35

20

20

3714

22

5

4

2

1

1

7

1

3

1

1

1

4

1

2

1

1

1

1

2

29

25

1

10

6

34

17

2

37

21

37

18

12

2311

13

81

10

10

14

17

16

8

15

267

11

8

6

5

8

2

8

2

22

2

12

3

5

2

1

3

2

1

3

52

4

40

19

52

49

86

35

57

77

32

46

GrandTotal 619 276 305 24 14 73 225 215 75 31


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Methodology

The goal is to make TheHumanCapitalMetricsHandbookeasy to use and effective, while

delivering the maximum amount of insights to the user. This handbook is distinctly

different from other workforce metrics publications because of two key points. First, it

guides users to critical and best in class metrics. Second, it outlines how each metric can

be applied and combined with other metrics to maximize value delivery to the

organization.

Metrics are divided into two main groups: highervalue calculated metrics and lowervalue

input metrics. Calculated metrics are sectioned first by primary metric category, second by

subcategory and finally by level importance. Input metrics are also organized by

subcategory and are listed at the end of each primary metric category section.

Metrics in this handbook span all elements of the employee lifecycle and are grouped by

the following primary metric categories: 1) Cost, Revenue & Profit Optimization, 2)

Recruiting & Hiring, 3) Training, 4) Leadership & Development, 5) Engagement, 6)

Productivity & Performance, 7) Compensation & Benefits, 8) Human Resources & Center ofExcellence (COE), 9) Measurement, Structure & Headcount, 10) Mobility & Career

Development, 11) Turnover & Retention.

In using this handbook, there are two ways in which readers can easily navigate to a

particular metric or group of metrics that focus on a key theme or issue. If the particular

metric of interest is not known, the table of contents can be used to search for metrics by

primary metric category. Within each primary metric category, the metric subcategory

can be used to narrow the area of focus. Metrics in each subcategory are listed by level of

importance, or value potential to the organization. Alternatively, if the specific metric is

known, the reader can use the index to navigate directly to the metric.


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How

to

Use

the

Human

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SearchingforInsightOneMetricataTime

In order to use this guide as a tool to identify key performance indicators (KPI), one can

reference by category, index or subcategory classification in order to identify metrics in

any given HR or workforce area. Also, it is possible to search by the most valuable or

impactful critical or bestinclass metrics.

ImplementingaComprehensiveSetofMetricStandards

1. Gain organizational buyin and unify the organization

2. Enable use of category, index or subcategory classifications to identify metrics

3. Read and implement the definitions, set parameters for HR data source systems and

objective data entry for underlying HR transactions and data such as movements

and termination reasons

4. Communicate to stakeholders such information as definitions, then answer

questions and provide training to ensure understanding5. Provide regular reporting on selected metrics and audit certain metrics each

reporting cycle

The use of a standardized list of measurement metrics with clear definitions and formula

calculations is the single most important element in establishing a factbased, datadriven,

analytic culture and set of agreed upon standards for workforce measurement and

decision making. Use of this handbook specifically enables improvement of the following

in organizations:

Availabilityof

Data: Use of metrics requires identifying what data elements that the organization

has available to use to populate and calculate selected metrics. A first step for organizations is to

inventory data elements necessary to calculate workforce metrics from all relevant organization

data stores. Knowing which data elements are accessible and which are not is a starting point upon

which to build a workforce measurement and analytics competence.

ReliabilityofData: Applying and calculating standard metrics is a good method to use in

evaluating the integrity, accuracy and completeness of the data that exists and to continuously

improve the quality of workforce data by improving the discipline, rules and methods for capturing

HR transactions and relevant workforce data.

StandardizedUseandInterpretationofData: By applying standard measurements and data

definitions for metrics, organizations can spread standards upstream to source HR transactions,

standardizing transaction classification, codification and entry. In addition, standards can be

spread downstream as standardized reporting, measurement trending and benchmarking. Such

methods set a new standard language for interpretation and performance management as the

organization becomes educated and gains confidence in both the metrics and underlying data.


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*Level of complexity metrics classified as Inputs (seedefinitions)do not have Most Common Uses or Best Use application descriptions.

**See Definitions for more detailed metric explanation and more information on field titles and classification.

Importance:** Metric

ability to impact

Business & HR results

Levelof

Complexity:**

Rating of metric

complexity and

impact

Formula

:

** Data

and metrics used

to calculate stated

metric

MostCommonUses:

** Explanation of

typical or common

uses for metric

Workforce

Dimensions:**

Workforce data

elements used in

metric calculation

MetricDimensions:**

Metric data elements

used in metric calculation

BestUses:**

Explanation of

the best or

optimized uses

for metric

Description : **

Simple

explanation of

metric purpose,

construction &

highlights

MetricName: ** Human

Capital ROI Ratio

Category:** Overall

group classificationunder which metric is

listed

Measurement

Type: ** Lists

format or metric

composition type

SubCategory:** Secondary

group classification that metric

is listed under


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Metric

Classification

Field

Definitions

Each calculated metric consist of the following elements: Importance, Level of Complexity,

Measurement Type, Metric Formula, Metric Description, Workforce Dimensions, Metric

Dimensions, Common Use and Best Use. Input measures include Level of Complexity,

Measurement Type, Description and Workforce Dimensions as fields but do not include the

Importance, Metric Formula, Common Use or Best Use fields.

The following contains definitions for each metric element and classification elements used

in each field:

ImportanceMetric importance is the HCMI classification of each metrics potential to

provide actionable workforce information, create value and deliver insights that drive

decision making. The following are the various metric classification levels and definitions:

BestinClassmetrics are of such power and insight that they drive HR and business decisions.

In conjunction with Metric Best Use, these metrics can link to business results for sustained

competitive advantage.

Criticalmetrics are keys to effective workforce management. They provide information and

insight on workforce performance and HR effectiveness to support business decisions; however,

these metrics typically must be used with other metrics to drive high impact decisions.

Highvalueadd metrics are considered by most organizations to be highly important

measures to track and report. Such metrics may be used in constructing Critical or Best in

Class metrics.

Intermediatevalue metrics are straightforward metrics to calculate and track but provide no

real insight. These metrics act as simple measures of HR and workforce efficiencies as a lower

level of value add. They are best used when combined with or feeding into advanced metric

calculation.

Basicmetrics are the most simple to calculate and are best used to feed into and enable

calculation of more advanced metrics.

LevelofComplexityMetric complexity is defined as the level of difficulty involved in

preparation and calculation of a given metric. HCMI classifies each metric by five levels of

complexity listed and defined below:

Custommetrics are the most complex and are often index metrics comprised of several metrics

weighted by percentages adding to 100% as a means to assign importance to each metric in the

index. Measures are referred to as custom because of the need to adjust or customize the

component metrics, weights or cost elements by industry, geography and organizational factors.

AdvancedCalculationmetrics are highly complex to calculate, requiring deeper workforce and

HR data but also represent the highest level of value add for organizations to use in HR and

workforce decision making. Nearly all Advanced Calculation metrics are Best in Class or

Critical that go beyond information to deliver real insight into workforce performance.

Calculatedmetrics represent the majority of metrics in this guide and include all levels of

metric importance from Basic to Best in Class. Such metrics are moderately complex to


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calculate but reflect a wide range of organizational complexity based on data, systems and

analytic tools.

SimpleCalculation(orSimpleCalc) metrics are basic metrics gathered and used in HR and

workforce reporting. These are the metrics most organizations have in abundance but yield the

minimum value. The Best Use for such metrics is typically as components of more advanced

metrics.

Inputmetrics are basic elements or totals by time, cost, quality, or volume. Inputs are best used

as in constructing more advanced metrics.

MeasurementTypeclassifies metric type as well as the method in which it is calculated.

The measurement type classifications are listed below:

AverageMetricstypically divide some total HR or workforce input by another data measure in

order to calculate a total such as the total amount of Revenue per FTE.

IndexMetricsare metrics combined and weighted to measure highly complex workforce

concepts such as Quality of Hire, that are beyond a single metrics scope.

RatioMetricsarethe division or ratio of two other metrics for which the ratio itself provides a

level of insight that is well understood or benchmarked by industry and organization. An

example of a ratio metric is Manager Span of Control.

SurveyScoremetrics summarize feedback from surveys, often converted to a percentage of

100%, reflecting respondent perception of surveyed topics. Such metrics can be different

dimensions.

TotalCountmetrics represent a total count of some measure such as transactions, headcount or

other dimensions. Total Count metrics are typically also input metrics.

TotalDollarsmetrics are a total used for costbased metrics that accumulate totals for similar

HR or workforce transactions. Total Dollars metrics are typically also input metrics.

VarianceMetricsmeasure the difference or variance between two metrics or measures. Such

metrics can be used to identify differentials in productivity, performance and costs to quantify

issue impacts or costs. Variance Metrics are typically critical or bestinclass metrics.

DaysMetricsdenote metrics that focus on measuring time in the form of days for various HR

and workforce processes. This metric type is most commonly used to measure process

efficiency.

MetricFormulais a specific listing of any and all components used in calculation or

constructing a given metric. With few exceptions, all metric formula components listed are

also described and defined within this handbook. In certain cases, a limited number of

metrics may be calculated in different formulas all of which give the same result. The

reason for this is to list both the simplest and clearest formula for calculating a metric. In

instances where certain highlevel metrics have multiple definitions or are calculated


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differently, the metric is split out into multiple metrics giving each metric its own name

and clearly defining the difference between similarly named or calculated metrics.

MetricDescriptionis a contextual description of the metric outlining what the metric is

for and why it is important. Metric description may also contain more detailed

explanations of formula components and construction, exceptions, exclusions, as well as

relevant examples.

WorkforceDimensionsis a set of measurement dimensions that specifically identify how

a given metric uses or is calculated or analyzed by Employee Headcount, Employee FTE,

Workforce Headcount or Workforce FTE. It may also be that this particular dimension is

not applicable to the given metric (N/A). The different types of workforce dimensions

used to classify metrics for headcount purposes are defined below:

EmployeeHeadcountas a dimension is used when metrics are analyzed by employee

headcount which can be measured or analyzed between average headcount, the average of

employee headcount over specific period(s) of time, end of period employee headcount, or the

total headcount of employees at a single point in time. This metric counts all employees

regardless of hours worked equally as 1.

EmployeeFTE(FullTimeEquivalent)is similar to the Employee Headcount dimension as it is

used when metrics are analyzed by employee headcount between average headcount, or end

ofperiod headcount. However, employees are calculated on a fulltime equivalent basis, meaning

part time employees are calculated as fractional percentages (i.e., 0.5) rather than a full

headcount of 1. Such a calculation method is considered more accurate than the Employee

Headcount workforce dimension.

WorkforceHeadcountas a dimension is used when metrics are analyzed by workforce

headcount which can be measured or analyzed between average headcount, the average of

workforce headcount over specific period(s) of time, endofperiod workforce headcount, or the

total headcount of the workforce at a single point in time. This metric counts the entire

workforce regardless of hours worked equally. Workforce is defined as employees plus

contingent (i.e., contract and temporary) workers.

WorkforceFTEis similar to the Workforce Headcount dimension as it is used when metrics are

analyzed by workforce headcount between average headcount or endofperiod headcount.

However, the workforce is calculated on a fulltime equivalent basis meaning parttime workers

are calculated as fractional percentages (i.e., 0.5) rather than a full headcount of 1. Such a

calculation method is considered more accurate than the Workforce Headcount dimension.

NotApplicable

or N/A

means the specific metric is not measured or calculated using either

employee or workforce headcount.

MetricDimensionsincludes a list of the various dimensions by which different metrics

can be subclassified, analyzed, grouped and categorized in order to provide deeper

analysis and measurement capabilities. While additional metric dimensions not included

in this list may be applied in certain cases, the most common metric dimensions for

analysis are included and explained in the list on the following page.


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DivisionorBusinessUnitis the classification of business units or divisions within an

organization, typically larger organizations. This dimension is useful to segment metric

calculation and analysis across clearly identified groups in order to find variances and

performance outliers.

HRSpecialtyAreaorFunctionincludes the various HR specialty groups including but not

limited to recruiting, compensation, employee relations, training and development, payroll, HR

information systems (HRIS), talent management and others. Such groups are valuable to use infurther analyzing HRspecific metrics but typically less useful in measuring broadbased

workforce performance.

WorkforceCategoryis a highlevel grouping similar job or positions. In some countries this is

similar to the use of government workforce reporting categories also known as equal

employment opportunity (EEO) categories with group jobs and careers broadly placed into 9

20 different categories.

JobFunctionis a dimension used to categorize and analyze metrics across the specific

functional areas of an organization. Examples include Finance, Legal, Sales, Marketing,

Operations, Manufacturing, HR, IT, Research and Development, Administration and others.

CriticalJobGroups/rolesis unique for every organization. This dimension segments and

separately analyzes a specified subset of the workforce. Examples of critical job roles can

include sales people, engineers, nurses and pilots as positions without whom, the business could

not function.

Revenue /NonRevenueGeneratingPositionsis similar to Critical Job Groups as it specifies

a subsegment in the total workforce for calculation of key metrics and analysis. This dimension

is based on jobs which directly generate revenue or not.

CustomerFacing

Positionsis similar to Revenue / NonRevenueGenerating Positions as it

specifies a subsegment in the total workforce for calculation of key metrics and analysis. This

dimension is based on jobs which directly interface or interact with external customers outside

the organization.

Management/NonManagementdimension splits positions as management or

nonmanagement.

PerformanceCategorydimension separates employees or the workforce based on

performance ratings, classifying them into separate cohorts. The most important group within

this dimension is the highperformer group within the workforce for focused analysis.

ProductivityCategorythis dimension separates the workforce based on productivity metrics

into separate cohorts. Typically revenuegenerating, customerfacing or producttouching

groups in an organization are more easily measured for this dimension.

TurnoverQuartileis a dimension that creates statistical groups of employees who have left the

organization. The quartile function breaks groups into four statistical cohorts for analysis.


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TenureCategorybreaks employee or workforce tenure down into natural cohorts for

improved analysis and metrics measurement. This dimension is critical to analyze turnover

trends.

AgeCategorybreaks down employee ages into cohorts for enhanced analysis and metrics

measurement. This is a critical dimension to use in analyzing aging workforce issues.

Gendersplits employee or workforce gender into separate cohorts for further analysis andmetrics measurement. This dimension is critical to analyze equality trends.

Union/NonUniondimension splits positions as union or nonunion for measurement and

analysis.

Executivedimension splits positions as executive or not executive for measurement and

analysis.

MostCommonUse(s)represents the ways in which a metric is most often used in

organizations today. With very few exceptions, workforce and HR metrics are most

commonly used as lagging (or historical) indicators as organizations typically lack theknowledge, confidence and reliability of measurement processes to trust using their HR

reporting measures and data to predict anything reliably.

BestUse(s)in conjunction with additional data dimensions can be used to obtain greater

insight and a higher level of reliability or correlation that in turn can be used to predict

future trends and outcomes with a higher degree of reliability. The Best Use also involves

subclassifying broadbased information into specialized data segments that represent

significant value to the organization.

A good example metric is Turnover Rate. Such a metric is relatively easy for the

organization to calculate but offers limited insight and likely contains many subplots or

stories within the data, each of which may require different actions or interventions to

address and many of which may not truly be critical in importance and value to the

organization.

A more valuable turnover metric would be Voluntary Turnover Rate, which attempts to

measure unplanned turnover that is not desired by the organization. With varying levels

of accuracy, such a metric can offer a better level of insight to the organization, but still

falls short of truly optimal use for the metric.

Calculating a subpopulation or cohort within voluntary turnover such as voluntaryturnover of high performers or of the most critical job roles in the organization opens up a

whole new level of value to the organization.

For example, even in organizations with low total and voluntary turnover, a voluntary

turnover rate of high performers that is above the overall average would suggest that the

organization is bleeding its best talent. In other words, the average and lesser performers

may be staying while more stars or high performers leave. Such a finding, when confirmed


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as a trend, provides both the level of accuracy and specificity needed for organizations to

predict future impact and quantify workforce changes or interventions to correct negative

trends or invest in implementing positive trends.

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