One of the key strategies to successfully scale a #start-up is to use metrics from day one. Whether you are an early-stage founder or have just had Series C funding, measuring the performance of your start-up at every stage is important. Metrics help us define goals, track progress, identify problem areas, and make data-driven decisions. Without using metrics, it is impossible to know when and how to pivot your business strategy toward the fast-changing context of start-ups. In the early stages of the company, founders make many decisions based on intuition. This may work for a while, however, as soon as you start scaling up, things can go wrong. If you are not measuring the results of your actions, you will not know what’s going on wrong.
While it is critical to measure key performance indicators such as financial growth, revenue, and costs, as a start-up founder you also need to define and measure HR metrics. Here are a few important #HRmetrics that you should be measuring regularly:
- Cost and time to hire: It is very important for you to measure and assess the time and costs involved per hire. This gives you a sense of how much money and time is spent on getting a candidate on board. This cost does not only include recruiting costs but also advertising, relocation costs, etc. Similarly, measuring the time that it takes from a prospective employee to engage in the recruiting process to the date they accept your offer is another essential metric. The time to hire metric helps you evaluate the efficiency of the recruiting process.
- Quality of hire: Measuring and analyzing the quality of hire is another key metric that is especially relevant for start-ups. As a founder, you should be able to understand the value that each employee is bringing to the company. Quality of hire is measured based on performance indicators as defined by the objectives of the organization. As a founder, it is important that you take time and define the performance indicators to understand the quality of people who have been hired. These performance indicators should also be reviewed from time to time.
- Employee growth rate: As the start-up grows, you will need to understand the employee growth rate as well. It is simply the change in the number of employees from one time period to another. This metric will give you an idea about the shrinkage or growth of employees in the company. Analysing the trends can help you understand whether the growth of your company is in line with your vision.
- Compensation ratios: Considering the fast-changing context of start-ups, understanding #salarybenchmarks and industry standards is very important. Keeping your key talent engaged and motivated means that they are paid well and at par with the industry. Collecting data about compensation ranges across the industry is important to become an employer of choice. Understanding fixed and variable pay ratios will help you bring balance to compensation packages for your employees.
- Turnover rate: Measuring employee turnover ratios is also important. Assessing how many people have resigned or have been let go in a particular time period is an essential metric. While some degree of turnover is healthy, as a founder you would want to know if turnover rates are particularly high for a given period of time. This will help you identify key problem areas and develop appropriate strategies.
- Diversity ratios: Companies around the world are pushing to include #diverse groups of employees. Including people from varied cultural, racial, and gender backgrounds has proven to add value to organizations. As the start-up scales, you would need data to understand current diversity ratios in your organization. This information can help you develop action plans to become an inclusive organization. Understanding the significance of measuring HR metrics is the first step toward building a strong and successful company. It is also critical to understand that gauging HR metrics is one part of the process. How you use the data collected on these HR metrics is also equally important.
