How to develop your own HRMS

An HR manager is strategic in outlook, self-assured, keen to set the agenda, highly numerate and with a remarkably high ability to make quick, well-considered decisions. Translation: a walking HRMS. This is the profile of an HR leader according to a Profiles XT (PXT) psychometric survey commissioned by Human Resources Magazine.

With the large quantity of data available now and the ongoing talent war, as it’s been called, one person cannot be expected to excel in all those qualities.

An HR manager needs to have a clear understanding of their employer’s business objectives and be able to devise and implement policies which select, develop and retain the right workforce needed to meet these objectives.

To get to this strategic level of operating, you need an HRMS that can collect, process and aggregate data for you to interpret.

With the myriad of tools available out there you can access immense quantities of data, in all shapes and sizes. But what do you do with that information? How do you employ it so that you develop, advise on and implement policies relating to the effective use of personnel to enhance company performance and achieve your strategic objectives?

To aid you in organizing this data and correlating your business objectives, we’ll help you design a simple version of your own HRMS.

What we’re going to do is set specific KPIs for your main areas of focus and link them with your company’s business objectives. What you’ll need to do is aggregate these KPIs at company level and correlate them on a department/team level. Sounds simple enough right?

Let’s get started!

1. Employee engagement

Main KPIs:

1. Retention Rate

2. Voluntary Attrition Rate

3. Happiness Index

4. Tenure (years)

The voluntary attrition rate refers to the percentage of employees who leave an organization over a set period, often on a year-on-year basis.

Your Retention rate measures the extent to which your company retains employees and it’s calculated as the proportion of employees with a specified length of service (typically one year or more) expressed as a percentage of overall workforce numbers. You can measure it using this formula:

Number of staff with service of one year or more x 100
Total number of employees in post one year ago

Correlate the Attrition and Retention rates with variations in your Happiness Index. Design your employee engagement strategy by predicting the effects of certain engagement drivers, which have proved to have a measurable impact on your retention. Use this formula to calculate your Attrition rate.

(Number of resignations x 100) / (Total number of employees + New hires)

Measure your Happiness Index by collecting employee moods and the reasons behind them. Tracking the evolution of how they feel at work and what drives their happiness will give you an invaluable starting point to develop the right engagement strategy.

As an example, you should look at the Retention rate vs. the Happiness Index, to see how they interact over time. Adding the two metrics in a comparison chart can quickly show you how the two KPIs relate.

Remember that correlating this type of data is best done over a larger period of time. So it’s good to start now!

Workplace happiness has critical impact on talent retention and vice-versa. It’s best that you collect at least 6 months of data to get an accurate reading of how the two KPIs influence one another.

Compare your tenure data with the evolution in your Happiness Index over time, to understand its effects in engaging employees.

2. Employee Compensation

Main KPIs:

1. Cost rise rate (% of yearly salary increase)

2. Happiness Index

Compensation is the second most important retention factor for employees, according to the 2013 Emergent Workforce Study.

Relate your cost rise percentage with positive or negative variations in your Happiness Index, on a monthly or yearly basis (or both, if you prefer working with milestones, to see a clear evolution).

Analyze the main engagement drivers in your company, to get a better reading on how engagement affects employee perception on pay, benefits, rewards, etc.

3. Operations & Sales

Main KPIs:

1. Employee Happiness Index

2. Customer Satisfaction Index

3. Sales Growth

3.1 Returning customers

3.2 New customers

Following the service-profit chain theory, you need to monitor the relationships between profitability, customer satisfaction, employee happiness and productivity. In 2013, US companies with increasing sales had 70.3 % of employees engaged, while those with decreasing sales had only 59.5% of employees engaged, according to Quantum Workplace’s 2014 Employee Engagement Trends Report.


  • Profit and growth are stimulated primarily by customer loyalty;
  • Loyalty is a direct result of customer satisfaction;
  • Satisfaction is largely influenced by the value of services provided to customers;
  • Value is created by satisfied, loyal, and productive employees;
  • Employee satisfaction, in turn, results primarily from high-quality support services and policies that enable employees to deliver results to customers. (Harvard Business Review)

You can monitor every Employee’s Happiness Index using Hppy.

Connect the Employee Happiness Index with your Customer Satisfaction Index and with the percentage of Sales (referring to returning customers) to see if and how the Employee Happiness impacts your Sales processes.

4. Executive Management

Main KPIs:

1. Employee Happiness Index

2. Net profit

3. Share value

“There is one key to profitability and stability during either a boom or bust economy: employee morale.”

—Herb Kelleher, founder of Southwest Airlines

In the book, The Enthusiastic Employee: How Companies Profit by Giving Workers What They Want, author David Sirota and colleagues draw on 30 years of research to conclude that happy employees consistently outperform their less happy colleagues, increasing a company’s profitability.

In US companies where profits increased in 2013, 70.3% employees were engaged, compared to 62.4% of employees at organizations where profits decreased. (Quantum Workplace)

Correlate your Employee Happiness Index with your Net profit to analyze and predict how employee happiness affects company profitability.

Relate the Employee Happiness Index with your Share value to see if and how employee happiness affects company value and financial performance.


HR managers now have access to enormous amounts of data about people: turnover, engagement, hours of training, compensation, job mobility, performance ratings and nearly 100 other items.  But if that valuable data is quietly stored in multiple HR tools, you won’t be able to improve a thing.

You need an HRMS that can show you how that data comes together to help you perform a predictive and statistical analysis that can maximize performance.

According to Deloitte University Press, while organizations invest more than $14 billion in HR software, less than 4 percent can perform predictive analysis on their people and only 14 percent perform statistical analysis at all.

It’s time to put that data to work using a set of KPIs and connecting them to get an actionable picture of what you can improve.

Image credit: r2hox under C.C.2.0