In today’s human capital-intensive economy, employee engagement can be considered an indicator of management success. Furthermore, employee engagement is also highly correlated with profitability as highly engaged employees tend to be more productive, retain longer, and are more willing to go beyond their job to add value to the organizations in which they work.
Employee engagement metrics play an important role because they give Human Resources (HR) teams the ability to spot issues early on as well as the time and insights to react before they impact business performance.
Before you decide on the specific employee engagement metrics you want to add to your report, you have to determine which ones are important and relevant to your company. Here are the six most common (and most important) employee engagement Key Performance Indicators (KPIs) picked from our online library of over 620 HR metrics.
Definitions, formulas, and examples of how to use these metrics are also included to help illustrate their potential.
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How Workforce Analytics Can Help Improve Employee Engagement
Until recently, most talent management decisions were mostly based on general observations and surveys. While this method could work in some situations, it is not an effective way to manage the workforce. Management also doesn’t have a way to measure the impact of employee engagement on business performance.
With the help of workforce analytics, employee engagement rates can now be measured and tracked in real-time. The best teams can also combine engagement data with other sources of data to evaluate the performance of employee programs, discover trends, and prescribe interventions with confidence.
Modern workforce analytics solutions like SOLVE™ streamline the complex process of turning raw engagement data into automated reports and ad hoc analyses that are ready for consumption. Furthermore, pre-built analytics modules can help HR teams shorten their analytics journey and make an impact on business results.
The benefits of using analytics in employee engagement are numerous, but below are some of the most tangible ones:
Tracking and trending employee engagement score
Find out if there is a linkage between other talent management areas with the employee engagement rate
Discover what HR elements drive employee engagement rate
Measure the impact of a highly engaged workforce on business results and performance
Discover who’s more likely to be an engaged employee and why
#1 Satisfaction Score with Compensation vs. Market
What is Satisfaction Score with Compensation vs. Market?
Satisfaction Score with Compensation vs. Market measures the average employee satisfaction with their compensation compared to the current market rate.
This score is important because it has a direct link to employee turnover and retention rate. A higher satisfaction score means it is less likely that an employee would leave because they receive a better offer elsewhere. On the other hand, a persistent low score could increase the chance that an employee will leave for another job.
Definition: Measure of employee satisfaction with compensation compared to labor market compensation opportunities outside the organization.
How to Measure and Track Satisfaction Score with Compensation vs. Market
You can get this satisfaction score by surveying employees directly. Often, HR teams use rating scales questions to gauge how satisfied their employees are with their compensation package. These questions are usually included along with others in the company’s quarterly or annual engagement surveys or as part of a separate survey.
Additionally, HR teams can get additional insights on the compensation gap by calculating the actual differences between offered salary and labor market opportunities by purchasing salary benchmark data.
Formula: Satisfaction Score with Compensation vs. Market = Employee survey respondents satisfied with leadership / total survey respondents
How to Optimize Satisfaction Score with Compensation vs. Market
Below are a few options on what you can do to improve Satisfaction Score with Compensation vs. Market:
A reasonable gap between your compensation vs. market – Companies that don’t always match the market rate to retain talent do not mean employees will leave. There are several other factors that influence employee retention rate including but not limited to working conditions, training, lateral mobility (transfers), and career path opportunities for promotion.
Have a clear compensation strategy - HR can optimize their labor cost and productivity by choosing to pay above market rate for critical and core job roles while paying a little less than the market rate for non-critical and non-core positions.
Develop a clear career path for employees - Employees appreciate when they see a clear path for salary increase and/or promotion as well as cross-training via transfers and lateral mobility. This could help drive up the retention rate.
#2 Employee Net Promoter Score or Rate
What is Employee Net Promoter Score?
Employee Net Promoter Score is an indication of how likely your employees will recommend their workplace to their friends and family. This metric is important because it’s an excellent predictive indicator for the number of referrals your company will get and possibly the quality of cultural fit that the organization can expect.
Our case study showed that referrals are much more likely to be high performers, cost less to recruit, and are much more likely to stay. Here is a real case study on using Employee Net Promoter Score to measure the impact of employee engagement on business results.
Definition: Measure of employee satisfaction and commitment both internally and externally to the organization, expressed as a percentage or score and linked to employee engagement or similar survey results.
How to Measure Employee Net Promoter Score
Employee Net Promoter Score can be measured by asking employees how likely they’d be to recommend their employer to their family and friends. We recommend using a 0-10 rating scale to make it easier to calculate the final score. Only those who score nine or ten would be considered a promoter.
Formula: Employee Net Promoter Score or Rate = Total employees scored at 90th percentile or higher / total survey respondents.
How to Improve Net Promoter Score
Provide hybrid work arrangement – 94% of surveyed employees say they would benefit from work flexibility. Being able to offer such an arrangement as an option will make it more likely that an employee will refer their workplace to their network.
Start a referral bonus program – When done right, a referral bonus program can help boost the number of referrals significantly.
Improve employee satisfaction and engagement – A highly engaged and satisfied employee is much more likely to refer their workplace to their network.
#3 New Hire Engagement Rate
What is New Hire Engagement Rate?
New Hire Engagement Rate tracks the average employee sentiment of all new hires. On average, up to 20% of all new hires end up leaving the organization within the first 45 days. This represents a significant loss in both time and investment, making it a priority for HR to closely monitor the engagement level of their new hires.
Definition: Measure of new hire employee overall job or positions satisfaction expressed as a score or percentage.
How to Calculate New Hire Engagement Rate
New Hire Engagement Rate can be calculated by averaging the engagement score of individual new hires. This score is usually collected through new hire surveys that are distributed within their first 30, 60, or 90 days.
Formula: New Hire Engagement Rate = Employee survey results for either individual questions or aggregate results (New Hire Engagement Rating) / total survey respondents.
How to Improve New Hire Engagement Rate
Customize onboarding programs for remote, hybrid, and in-person settings – Ensure that the onboard programs are optimized for maximum engagement and time-to-fill productivity.
Foster communication – While 89% of people believe that effective communication is extremely important, only 17% of people believe their own business' communication is excellent. Companies need to go above and beyond to foster communications between team members and departments.
Find employees who are a better cultural fit for the job and your company – Improvements in quality and fit of new hires, even with some tradeoff in time-to-fill, can pay off significantly in overall retention rate and recruiting costs.
#4 Employee Satisfaction with Leadership
What is Employee Satisfaction with Leadership?
Satisfaction with Leadership (also known as leadership trust) measures the employee satisfaction or trust in leadership or management, based on employee engagement or similar surveys and expressed as a score or percentage. It is not uncommon for employees to have significantly different responses depending upon whether the definition of leadership is overall leadership or whether it is their direct manager(s). Employees who believe in and score their leadership or management highly in engagement and related surveys are more likely to be highly engaged overall, to stay (retain) longer with the company, and to willingly give the additional discretionary effort that goes above and outside of the stated job requirements.
Companies of all sizes will tell you that finding quality talent that is highly engaged is critical to their business operations, productivity, customer satisfaction, and more. The average cost per hire for each recruit is $4,425 while the cost for each executive position is nearly $15,000. For these reasons, companies need to pay close attention to employee satisfaction with leadership at all levels and in all areas of the organization.
Definition: Measure of employee satisfaction with leadership or management, based on employee engagement or similar surveys and expressed as a score or percentage.
How to Measure Employee Satisfaction with Leadership
Satisfaction with Leadership is best used or optimized as a leading or predictive indicator in combination with metrics such as engagement, retention, and performance. This helps organizations identify managers that develop and retain talent across the organization.
Formula: Employee Satisfaction with Leadership = Employee survey respondents satisfied with leadership / total survey respondents.
How to Improve Employee Satisfaction with Leadership:
Below are a few options on what you can do to improve Employee Satisfaction with a Leadership score:
Optimize recruiting pipeline to find talent with the better fit – Talent with better fit will be much more likely to stay engaged and satisfied.
Segment the workforce – When measurement dimensions such as workforce category, critical job groups, business unit, tenure, and performance category are added, satisfaction with leadership can be used to identify best practices and key areas for improvement at the organization.
Measure and monitor manager span of control and organizational layers – Managers who are over-stretched and are not able to closely work with and monitor their direct reports have higher rates of turnover, lower overall employee engagement, and lower trust in leadership.
#5 Retention Probability Score
What is Retention Probability Score?
Retention Probability Score measures the probability of the company retaining the employees. HR professionals can drill down this score or combine it with other metrics to enhance the accuracy and predictability of the retention probability score. For instance, filtering Retention Probability Score by business line, geographical location, or supervisor ID can help reveal valuable information that can be used to further improve the talent management process of such location and supervisor. HR can also combine this score with leadership quality metrics to show the impact of managers on employee retention.
Definition: Measure of employee satisfaction and commitment expressed as a retention probability score in the form of a percentage and linked to employee engagement or similar survey results.
How to Calculate Retention Probability Score
Retention Probability Score is the average retention probability calculated from the results of employee engagement surveys. There are several ways a company can calculate its employee retention probability. The most basic method is to rely on supervisor survey results. This is simple to carry out, but the results heavily depend on individual managers’ observation skills. Advanced companies use statistics to find patterns in data, identify factors that influence retention decisions, and use them to forecast retention scores. Recently, more vendors are using machine learning and Artificial Intelligence to help identify employees with high flight risk and provide a probability score for each employee.
Formula: Retention Probability Score = employee engagement survey retention probability / total survey respondents
How to Improve Retention Probability Score
Start a high-impact mentorship program – Make sure that new employees are receiving the right training and coaching to give them the best chance of success.
Attract and retain the right talent – Talents with the right fit tend to stay longer, are less likely to leave, and are more likely to become high performers.
Provide ongoing training and clear paths to advancement – New employees appreciate when the companies show that they are willing to invest in their employees.
#6 Recruiting Process Satisfaction
What is Recruiting Process Satisfaction?
Recruiting Process Satisfaction measures how satisfied hiring managers are with the overall recruiting process. In most cases, hiring managers are the ones standing to gain or lose the most from a new hire. This makes hiring managers the main clients of the recruiting team. Tracking their satisfaction score with the recruiting process can help show the effectiveness and efficiency of the recruiting team at finding the right talent.
Definition: A measure or survey score representing the overall satisfaction of hiring managers or supervisors with the new hire recruiting process. The measure may be expressed as a score or percentage.
How to Measure Supervisor New Hire Satisfaction Rating
Supervisor New Hire Satisfaction Rating can be found in the supervisor’s new hire survey results.
Formula: Recruiting Process Satisfaction = Supervisor new hire survey results, either for individual questions or aggregate index (New Hire Satisfaction Rating) / total survey respondents
How to Improve Supervisor New Hire Satisfaction Rating
Below are a few options on what you can do to improve Supervisor New Hire Satisfaction Rating:
Promote leadership development programs – Make it a requirement that new managers have to take a leadership development course.
Leadership coaching – Leadership is a skill and can’t be learned overnight. Make sure that your team has a long-term strategy in training your managers’ leadership skills.
Optimize onboarding program – Create a custom onboarding process for managers and supervisors to help them get ready for the new job.
Make Employee Engagement Metrics part of Your Talent Management Process
The performance of your workforce is heavily dependent on your employee engagement. That’s why HR executives must create a robust data-driven practice to help companies closely monitor engagement levels and intervene when appropriate. The traditional approach to HR analytics requires significant investments in tools and people. An out-of-the-box solution like SOLVE™ can help companies provide employee engagement reports and easy-to-use analytics tools directly on the hand of the manager.
Explore SOLVE™ Workforce Intelligence Solution today or see it in action.
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