HR KPIs are essential for firms looking to enhance their people management. Because if you don’t define what ‘good performance’ looks like, how can you measure it and know if you’re doing a great job? To summarize, unambiguous performance indicators are required to quantify success.
In this article, we will look at KPIs in HR. We will talk about HR KPIs and how to utilize them, present some examples for your HR department and business, and share some of the best practices for implementing and tracking HR KPIs.
What are KPIs for human resources?
Human Resources key performance indicators (HR KPIs) are strategic HR measurements that measure how well HR supports the organization’s overall goals. An HR KPI assesses how well (or not) HR contributes to and implements the organization’s HR strategy.
HR KPIs highlight how HR performance relates to the company’s objectives since HR strategy is designed to complement the organization’s overall strategy. They are often associated with results that support company performance and are frequently developed from frameworks such as the Balanced Scorecard. To achieve a certain business goal, HR may monitor several KPIs, each reflecting a smaller, more actionable target.
Ideally, all KPIs should be coordinated to progress the HR strategy. However, disagreements might emerge. For example, if you have to decrease expenditures in your learning and development budget while simultaneously attempting to drive innovation, this presents a strategic problem. In these instances, HR must strike a balance between opposing agendas, such as fostering innovation with limited resources.
5 Examples of HR KPIs
Each organization’s KPIs are unique. Every organization is unique, and its key performance indicators should reflect that.
Many internet publications give tens or even hundreds of HR KPI examples. The majority of them, however, are simple HR indicators that can provide important insights into HR operations but do not directly contribute to the organization’s strategy.
Here’s a list of five essential HR metrics examples:
1. Turnover rate
Given that excessive turnover may be quite expensive, turnover is a popular statistic and a crucial KPI. However, it is far more difficult to calculate staff turnover than it may appear.
2. Absence rate
The number of working days that an employee missed is usually divided by the total number of working days to get the absence or absenteeism rate in the company. High absenteeism rates can be an indication of deeper problems like burnout, low morale, or inefficiencies in the workplace, all of which have an effect on output and the organization’s capacity to achieve its objectives.
3. Employee satisfaction index
Stay and leave interviews, as well as surveys on attitude, engagement, and pulse, can all be used to gauge employee satisfaction. It should come as no surprise that one of the main causes of employee turnover is discontent.
4. Accidents at Work
The industrial and construction sectors can benefit from this KPI. It makes it simple to keep track of accidents at work and record details about their severity and the number of missed work days they result in.
Accidents at work cost the firm money and may be a sign of serious or dangerous safety issues. They will be harmful to the organization and its personnel if they occur frequently. In order to assess the gravity of the problem and assist in lowering workplace accident rates, this KPI can even show the frequency rate of these incidents.
5. Training ROI (Return on Investment)
As the name implies, training ROI compares the expenses of training against the benefits (such greater productivity) to determine how much money a business makes from its investment in training initiatives. Training ROI is calculated by deducting the entire cost of training from the net benefits received, and then dividing the result by the total cost of training.
Characteristics of good HR KPIs
As previously said, effective HR KPIs are specific to the company and its objectives. Let’s look at a framework for creating and establishing KPIs that will enable you to monitor your progress toward these objectives.
Eckerson’s KPI model
Wayne W. Eckerson outlined a number of qualities of “good” KPIs in a 2009 research paper. These can also be used while developing KPIs in HR:
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Sparse: You ought to concentrate on a small number of HR KPIs. After all, there’s a reason they’re called key performance indicators. Leave the others out and concentrate on the ones that are most important to your company. The fewer, the better, is still the general rule.
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Drillable: Drilling in-depth should be possible. Why aren’t we reaching our goal for hiring costs? Which demographics are the most expensive to hire? You may more readily forecast your future performance and identify areas for improvement by going deeper.
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Easy: The KPI must be understood by users, especially those who are not affiliated with the HR department. It is difficult to concentrate and communicate if it is not straightforward.
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Actionable: Since they have the power to affect these, HR exclusively concentrates on KPIs associated with HR outcomes. Revenue and sales performance are not HR’s responsibility. Concentrate only on the KPIs that you have control over.
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Owner: Consistent with the aforementioned traits, KPIs require an owner. If the goal is achieved, the owner is rewarded; if not, they are held responsible. A senior member of the management team, such as a manager or department head, usually owns an HR KPI.
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Correlated: The intended result and the KPI should be connected. The HR KPIs must be connected to these business results when discussing business aims. KPIs should be directly linked to goals, goals to objectives, and objectives to strategy, according to Griffin (2004).
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Aligned: Earlier, we talked briefly about how HR KPIs align. KPIs shouldn’t be used against one another.
HR KPI template
A great tool for tracking important HR performance indicators is an HR KPI template. It makes it possible for HR departments to:
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Match the company’s objectives with its HR initiatives and operations.
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Track these efforts’ progress over time.
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Aim for ongoing development.
HR KPI best practices
For instance, let’s look at some best practices for setting up and monitoring HR KPIs:
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Establish KPIs in accordance with corporate objectives: As this essay has made clear, you must establish KPIs that are closely related to the strategic goals of the company, emphasizing results that propel commercial success. For instance, a business looking to increase productivity would monitor key performance indicators (KPIs) like task completion rate or new workers’ time to proficiency.
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Make use of KPI dashboards and people analytics: To get useful insights, link data elements like hiring expenses, employee happiness, and demographics using analytics tools like Excel or your HRIS analytics capabilities. Make an HR dashboard using your key performance indicators (KPIs) to monitor and give a convenient summary.
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Empower your HR staff: Give your HR staff the resources, instruction, and power they need to efficiently monitor, evaluate, and respond to KPI data. This entails making investments in people analytics tools, cultivating a culture that is driven by data, and promoting proactive, insight-based decision-making.
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Obtain executive sponsorship: Persuade organizational executives to back HR initiatives by showing how they help the company accomplish important goals and boost productivity. Make sure the leadership is aware of the need of matching quantifiable results with HR objectives.
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Monitor performance over time: Examine your performance on KPIs and other HR indicators on a regular basis to spot trends and modify your approach as necessary.
Conclusion
HR KPIs are a good approach for HR to contribute to the broader corporate strategy, since they provide quantitative benchmarks for determining how HR contributes to business performance. They not only measure success, but also provide a clear relationship between HR operations and the company’s overall goals, such as increasing productivity, boosting employee happiness, or lowering expenses.
Setting them, however, necessitates a detailed grasp of the company’s strategy and objectives. This implies that HR must work closely with leadership to identify critical business drivers and establish how to support them.
