June 25, 2021

The Modern Finance Leader’s Quick Guide to Key HR Metrics

Carolyn Kick

Finance folks are exceptional organizational leaders when it comes to getting into the figures and producing annual reports, financial statements, and other numbers-based papers that let an organization know where it stands and where it is going. However, Finance and Human Resources often appear at odds within growing companies. Often, CFOs do not fully understand the role of Human Resources and their KPIs, and HR often does not seem to produce the solid statistics Finance can use to make strategic decisions. However, this situation does not have to be an endless struggle with no resolution in sight. There are certain metrics Human Resources produces that Finance teams will indeed find very helpful, especially in fast-growing venture-backed organizations.

Let’s explore a few key HR metrics modern finance leaders should be aware of in order to bridge the gap between Finance and HR:

  1. Labor Costs
  2. Department-Specific Key Performance Indicators (KPIs)
  3. Employee Engagement
  4. Time and Cost per Hire
  5. Turnover Rate

Metric 1: Labor Costs

Labor costs range from hourly wages to executive salary totals. These costs impact profitability and expose how employee seniority affects the bottom line (long-term employees are ordinarily the highest-paid.). Comparisons between a department’s profitability and its labor costs can assess the positive impact that group has or if it is an expensive burden that needs some adjustments.

Metric 2: Department-Specific Key Performance Indicators (KPIs)

KPIs center on the performance of a department and how successful it is in reaching stated goals. The metrics are great for both short- and long-term planning, allowing Finance to benchmark the optimal performance of a department and determine current performance against those standards.

Metric 3: Employee Engagement

Employees who are satisfied with their working conditions produce at higher levels. Human Resources is familiar with measuring employee engagement and can produce survey information, employee benefits utilization, and other meaningful measures of the existing employee culture.

Metric 4: Time and Cost per Hire

Hiring is a primary HR duty, and this department is aware of the time and cost of hiring, orienting, and retaining good staff. This HR data will allow Finance to create cost-per-hire and time-to-hire models, helping Finance to better plan for personnel growth that meets organizational needs while keeping costs controlled.

Metric 5: Turnover Rate

Retention of good employees is critical for a positive bottom line. Thus, identifying turnover trends, particularly the seasons when turnover rates are high, helps Finance make better estimates of costs during the year.

Human Resources and Finance do not have to be at opposite sides of the room. HR has a treasure trove of statistics that Finance can mine for planning information. The data will give a clearer picture of the actual costs of doing business and how to optimize the entire organization’s performance.

About the Author

This article was produced by KPI Sense partner Launchways. Launchways provides growing businesses with strategic solutions for Human Resources, Employee Benefits, and Business Insurance. Learn more about Launchways at www.launchways.com.

Want to learn more?

Launchways and KPI Sense have partnered to produce an informative webinar:

How to Be a Strategic CFO in 2021 and Beyond

Get Started Today

Get Started