APQC finds that there are five HR measures that every organization should benchmark: HR cost per $1,000 revenue, HR cost per employee, number of employees per HR FTE, number of HR FTEs per $1 billion revenue, and number of HR administration FTEs per $1 billion revenue.
Top Five HR Measures to Benchmark
Business leaders often ask APQC: Which HR measures should we benchmark? APQC recommends making the following five HR measures a central part of any HR function benchmarking effort. Together, these measures assess HR cost effectiveness, HR staff productivity, and overall efficiency of the HR function.
- HR cost per $1,000 revenue is the total cost to perform the HR function per year normalized by revenue for that same period—a measure of HR cost effectiveness.
- HR cost per employee is the total cost to perform the HR function per business entity employee—another measure of HR cost effectiveness.
- Number of employees per HR FTE is the number of business entity employees per HR full-time equivalent (FTE) employee—a measure of HR staff productivity.
- Number of HR FTEs per $1 billion revenue is the number of full-time equivalent employees (FTEs) that perform the HR function per $1 billion revenue—a measure of overall HR function efficiency.
- Number of HR administration FTEs per $1 billion revenue is the number of full-time equivalent employees (FTEs) who perform HR administration activities per $1 billion revenue—a measure of the efficiency of HR administration.
Whether your organization is searching for HR efficiency gains and cost reductions or looking to scale HR for business growth---these five HR measures are key. They provide a high-level picture of the health of your HR function in light of current and evolving business needs. Benchmark these measures internally (across business units) and externally (against peers) to identify HR performance gaps and improvement opportunities.
Beyond the Top Five: Additional HR Measures to Track
For an even more holistic snapshot of HR’s performance, pair these five HR measures with an HR cycle-time measure (such as HR inquiry response time) and an HR outcome measure (such as HR customer satisfaction score). For a more nuanced picture of HR performance, add measures that assess the performance of specific HR process groups. For example, you might track cost, productivity, efficiency, cycle-time and outcome measures for the recruit, source, and select employees process group.
Each month, APQC features a metric (cost, productivity, efficiency, cycle time, etc.) from our Open Standards Benchmarking® human capital management research. Our Metrics of the Month collection curates our latest showcased metrics to help your organization improve the performance of its HR function and HR processes.
Explore APQC’s Human Capital Metrics of the Month collection
Lower HR Metrics Aren’t Always Better
When interpreting these and other HR metrics, be sure not assume that lower HR metrics are the end goal because this is not always the case.
There isn’t a one-size-fits-all answer to the question: Is higher or lower better for HR performance metrics. For HR cost and HR cycle-time metrics, lower is generally considered “better.” For HR productivity metrics higher is usually preferable. HR efficiency metrics are context specific.
Dig deeper into which metrics should be higher and the gray area metrics in APQC’s Interpreting HR Performance Metrics: Is Higher or Lower Better?