HR KPIs are indispensable for organizations that want to improve at managing their people. Because if you don’t define what ‘good performance’ looks like, how can you measure it, and how will you know if you’re doing an excellent job? In other words, to measure success, you need clear performance indicators.
In this article, we dive into the details of KPIs in HR. We will discuss what HR KPIs are and how you can use them, provide a framework for setting them up for your HR department and organization, and share a handy HR KPI template. Let’s dive in.
Contents
What are HR KPIs?
How does HR use KPIs to support organizational needs?
HR KPI examples
HR KPIs vs metrics
Characteristics of good HR KPIs
Leading vs. lagging KPIs
HR KPIs case study
HR KPI template
HR KPI best practices
FAQ
What are HR KPIs?
Human Resources key performance indicators (HR KPIs) are strategic HR metrics used to assess how effectively HR supports the organization’s overall goals. An HR KPI measures how successful (or not) HR contributes to and achieves the organization’s HR strategy.
Since HR strategy is built to support the organization’s broader strategy, HR KPIs reflect how HR performance ties into the company’s objectives. They are typically linked to outcomes that drive business success and are often derived from frameworks like the Balanced Scorecard. To achieve a specific business goal, HR may track multiple KPIs, each representing a smaller, actionable target.
Ideally, all KPIs should work together to advance the HR strategy. However, conflicts can arise. For example, if you have to cut costs in your learning and development budget while also trying to stimulate innovation, it creates a strategic challenge. In such cases, HR must balance competing priorities, such as encouraging innovation with fewer resources.
A practical example
Dodgers is an organization trying to innovate in a highly competitive landscape. For this reason, the board of directors decided to cut costs everywhere except in the product innovation department. The question is, how does this goal translate into HR KPIs?
The entire organization, including HR, needs to save money. This reduction could, for example, apply to recruitment costs. They are currently at $500,000 and must be reduced to $400,000.
In this case, ‘Recruitment cost in Dollars’ is the KPI. Its current score is $500,000, and the target for this KPI is $400,000.
A second HR KPI could be ‘innovative behavior’ measured in the organization’s annual employee engagement survey. Its current score on a 10-point scale is 6.2, and the target for this KPI is 7.5 or higher. Achieving this will be quite the challenge.
How does HR use KPIs to support organizational needs?
HR KPIs provide valuable insights that help improve decision-making, monitor workforce performance, and plan for future talent needs in multiple ways, such as:
- Aligning HR activities with business goals: HR uses KPIs to ensure that its strategies, like hiring or employee development, contribute directly to broader company objectives.
- Data-driven decision-making: By analyzing KPI progress, for instance, by using an HR dashboard, HR teams can make informed, data-based decisions and choices about policies, resource allocation, and workforce strategies.
- Tracking workforce performance: KPIs like employee productivity or goal attainment help ensure that teams are effectively meeting their business targets.
- Monitoring employee engagement: Metrics such as engagement survey scores or turnover rates signal morale and satisfaction, which impact retention and organizational performance.
- Supporting workforce planning: HR uses data and metrics to anticipate and address current and future staffing and talent needs, ensuring the organization has the right people in the right roles.
HR KPI examples
The KPIs used in an organization are unique. Every organization is different – and its KPIs should reflect that uniqueness.
Many resources you’ll find online list tens, sometimes even close to a hundred HR KPI examples. Most of these, however, are simple HR metrics that can offer useful insights into HR operations but they won’t directly contribute to the organization’s strategy.
Here is a list of 20 key HR metrics examples that will:
Absence rate
The absence or absenteeism rate in the organization is typically calculated by dividing the number of working days in which the employee was absent by their total number of working days. High absence rates may signal underlying issues like low morale, burnout, or workplace inefficiencies, all of which impact productivity and the organization’s ability to meet its goals.
Absence cost
The total cost of absence is calculated by including employee pay, the cost of managing absence, and replacement cost.
This KPI is especially relevant for European countries with strong labor unions and robust employee protections because these factors often lead to higher costs associated with employee absence. These protections might include guaranteed paid sick leave, extended leave policies, or legal requirements for employers to cover wages during absence, all of which increase the financial burden on organizations.
Benefits satisfaction
Satisfaction with different types of employee benefits is usually measured through an engagement survey but can also be gauged in stay interviews. The insights from these surveys can help reduce employee turnover.
Employee productivity rate (EPR)
Although this metric is hard to calculate, it measures the productivity of a company’s workforce over a certain period. It can help managers understand whether they need to hire more (or fewer) people to achieve their goals.
Employee satisfaction index
Employee satisfaction can be measured via attitude, engagement, and pulse surveys, as well as stay and exit interviews. Unsurprisingly, dissatisfaction is a common reason for employee turnover.
Employee engagement index
Employee engagement is measured through the same tools as employee satisfaction (minus the exit interview). High employee engagement predicts higher productivity, better customer service, lower turnover, and many other relevant and positive outcomes.
Employee innovation index
Innovation can be measured using attitude or engagement surveys and is increasingly becoming a key driver of business success. It’s part of HR’s role to enable this innovation within the organization.
Employee wellbeing index
This metric provides a composite score from surveys measuring employees’ mental and physical health, work-life balance, stress levels, sense of purpose, and other factors that impact productivity and retention.
Internal promotion rate
This KPI is measured by dividing the number of senior functions filled through internal promotion by the total number of senior positions filled. Internal hires are often up to speed faster, reduce the risk of bad hires, and stay longer in the role.
Net Promotor Score (NPS)
A Net Promoter Score is an excellent way of measuring the degree to which someone would recommend a service or business to another person.
To find out how satisfied employees are with HR’s services, you can measure the NPS of HR.
Using the Net Promotor Score, you can also measure to what degree people recommend working for the organization – employee net promoter score (eNPS). The NPS can be a solid HR KPI, depending on your strategic goals.
Manager effectiveness (index)
Various metrics can contribute to tracking manager effectiveness, including:
- Turnover and retention per manager
- Engagement scores per manager
- Team performance metrics
- Absenteeism per manager
How a company measures the effectiveness of its managers will depend on the organization’s goals. Doing so helps it assess the impact of managers on, among other things, team satisfaction and productivity.
Percentage of cost of the workforce
This metric measures the proportion of an organization’s total expenses that is allocated to workforce costs, calculated by dividing workforce expenses by the organization’s total costs.
While not commonly used, this KPI can be valuable for identifying opportunities to reduce costs or evaluate the potential benefits of automation in streamlining operations.
Quality of hire
Put simply, quality of hire represents the value a new hire brings to a company. It indicates how much a new employee contributes to an organization’s long-term success.
The quality of hire demonstrates how effective HR is in recruiting and selecting candidates. Consistently maintaining a high quality of hire enables the organization to reach its strategic goals more easily.
Turnover rate
Turnover is a common metric and an important KPI since high turnover can be very costly. Calculating employee turnover, however, is much trickier than it may seem. For an in-depth overview, you can check out our article about how to calculate employee turnover rate, in which we discuss various approaches and propose a best practice.
Involuntary turnover rate
Not all turnover is voluntary. Involuntary turnover refers to the percentage of employees who leave the organization due to employer-led decisions, such as layoffs, terminations, or redundancies. This can be calculated as a percentage of either the total number of employee departures or relative to the total number of employees in the organization during the same period.
Voluntary turnover rate
This is the number of employee-led departures. Again, you can consider it as a percentage of the total separations or in relation to the total number of employees.
Unwanted turnover rate
Not all turnover is bad. It is usually positive when bad performers or actively disengaged people leave the organization. Unwanted turnover occurs when good or high-performing employees leave the company for reasons that could have been avoided (i.e., compensation, management, lack of development opportunities, etc.).
Training effectiveness
The training effectiveness evaluates how well a training program achieves its objectives by measuring its impact on employees’ skills, knowledge, and job performance, as well as its contribution to the company’s financial results. Effective training should deliver measurable improvements in these areas to justify its value.
Training ROI (Return on Investment)
As the name suggests, training ROI assesses how much a company gains financially from its investment in training programs by comparing the benefits (e.g., increased productivity) to the training costs. To calculate training ROI, subtract the total cost of the training from the net benefits gained, then divide that result by the total training cost.
90-day quit rate
This refers to the number of new hires that leave the company within three months (or a year if you opt for the 360-day quit rate). It is part of HR’s role to ensure that the right people are hired. Failing to do so will have a measurable, negative impact on the organization’s effectiveness.
HR KPIs vs. metrics
Every KPI is a metric, but not every metric is a KPI. That’s the main difference between the two. The table below gives a brief overview of HR KPIs and HR metrics.
Examples of what HR KPIs are not include:
- Average length of service/tenure
- Average salary
- Average interviewing cost
- Average number of vacation days per employee
- Average number of training hours per employee
- HR-to-FTE ratio
- Employee training satisfaction.
These aren’t KPIs because they tell us nothing about effectiveness. For example, do we need 1 HR staff member per 100 employees or 1.5? Measuring the HR-to-FTE ratio alone doesn’t answer that question.
Put simply, HR KPIs are not just average employee data. They are measurable metrics directly linked to the organization’s strategic goals.
Characteristics of good HR KPIs
As we’ve already mentioned, good HR KPIs are unique to the organization and its goals. Let’s explore two frameworks that you can use to shape and set KPIs that help you track your progress towards these goals.
Eckerson’s KPI framework
In a 2009 paper, Wayne W. Eckerson described several characteristics of “good” KPIs. These can be applied to creating KPIs in HR as well:
- Sparse: You should only focus on a few HR KPIs. After all, they are called key performance indicators for a reason. Focus on the essential ones for your organization and leave the rest out. The general rule remains the fewer, the better.
- Drillable: You should be able to drill into detail. Why aren’t we meeting our recruitment cost target? What groups are the costliest to recruit? By drilling down, you can predict your future success more easily and see where progress is lacking.
- Simple: Users, including people from outside the HR department, need to understand the KPI. If it’s not simple, it is hard to communicate and focus on.
- Actionable: HR only focuses on KPIs related to HR outcomes because they can influence these. HR is not responsible for revenue or sales success. Only focus on the KPIs that you can affect.
- Owner: In line with the previous characteristics, KPIs need to have an owner. The owner is rewarded in case of success and is held accountable if the target isn’t hit. The owner of an HR KPI typically is a senior member of the management team, like a department leader or manager.
- Correlated: The KPI should be related to the desired outcome. When we speak about business targets, the HR KPIs need to be related to these business outcomes. Griffin (2004) states that there should be a direct link from KPI to goals, from goals to objectives, and from objectives to strategy.
- Aligned: We briefly touched on the alignment of HR KPIs earlier. KPIs shouldn’t undermine each other.
SMART goals framework
Most of us are familiar with another, more straightforward framework that summarizes the above. This alternative, defined by Hursman 2010, is the well-known SMART acronym. It stands for:
There’s a simpler framework that we are all familiar with that summarizes the above. The alternative, defined by Hursman (2010), is the well-known SMART acronym. This stands for
- Specific
- Measurable
- Attainable
- Relevant
- Time-Bound.
Knowing these criteria and applying them can help you create the relevant Human Resources key performance indicators your organization needs to succeed.
Let’s look at an example of what this can look like. Take the internal promotion rate metrics. It’s a SMART KPI because it aligns with the criteria:
- Specific: It focuses on a clear outcome—tracking the percentage of employees promoted within the company.
- Measurable: The promotion rate can be quantified, making it easy to track progress over time.
- Attainable: Companies can reasonably influence this metric through internal development programs, mentorship, or succession planning.
- Relevant: It aligns with organizational goals like talent development, employee retention, and cost-saving measures by reducing external recruitment needs.
- Time-bound: The metric can be tracked over a specific period, such as monthly, quarterly, or annually, to evaluate trends and improvements.
This KPI highlights both employee growth and organizational efficiency, making it a valuable tool for tracking HR and business success.
An example of something that is not a SMART KPI is the average length of service. While it is simple to measure and attain, it lacks relevance and is not time-bound. The duration of an employee’s tenure doesn’t provide insight into their efficiency, productivity, or contribution to innovation, nor does it directly connect to the organization’s goals or priorities.
Leading vs. lagging KPIs
Key performance indicators can be leading or lagging. Kaplan and Norton (2007), the researchers who developed the Balanced Scorecard, explain the difference in their paper.
Leading indicators are forward-looking and focus on causes or predictors of future events. They help anticipate outcomes. For example, productivity is a leading KPI for labor costs, as higher productivity can lower labor costs in the future.
Lagging indicators look backward and measure the results of past actions or developments. They reflect outcomes already achieved. For instance, if productivity is a leading KPI, sickness rate could be a lagging KPI, as it shows the effect of productivity-related efforts. Another example of a lagging KPI might be labor cost per employee.
Here’s an example: Let’s say the business goal is to enhance employee qualifications. This is relevant, especially in industries where continuous training is critical. In that case, a leading indicator could be time to proficiency—how quickly employees complete training and begin applying their skills. This predicts improvements in productivity and innovation.
A lagging indicator could be the percentage of employees who completed the qualification, showing the final outcome of training efforts.
As you may notice, leading indicators are often less precise but offer interesting insights into a KPI’s ongoing performance and potential outcomes. Lagging indicators, on the other hand, are more precise, but only after the fact.
Using both types of KPIs helps build a well-rounded HR scorecard that tracks past achievements and forecasts future performance.
HR KPIs case study
As mentioned above, not all metrics are KPIs, and not all KPIs will assist in understanding HR performance. Let’s look at how a company in the maritime sector sets its HR KPIs for its recruitment department.
The Western maritime sector is in difficult waters. Fifty years ago, most ships were built in their home country; today, building large cargo ships and tankers in East Asia is much cheaper.
For the U.S.-based shipbuilding company in our HR KPIs case study, competing with cheap labor and steel from China was difficult. Therefore, a cost-differentiation strategy was not an option. The company decided to invest heavily in technology and innovation, knowing that most of its current client portfolio was interested in their high-tech shipbuilding skills (mostly smaller vessels) at a much higher price point.
As strategic goals don’t happen in isolation, the U.S. company had to cut costs while becoming more innovative through smarter hiring. This meant that:
- They had to decrease their recruitment costs
- They needed to hire more qualified professionals.
The image below shows what their recruitment strategy map looked like. The arrows indicate the internal relationships between the company’s different goals. The executive board decided on the strategic objectives, and based on those, HR established the HR goals.
To implement these goals, the company created specific KPIs. For example, they measured the reduction in lead time and evaluated their attractiveness as an employer. Once the KPIs were established, they assessed their current performance levels and set targets for improvement.
The resulting HR KPI framework outlined clear metrics aligned with their strategic goals, enabling the company to track progress and adjust strategies as needed.
HR KPI template
An HR KPI template is an excellent tool for monitoring key performance metrics in HR. It enables Human Resources teams to:
- Align their HR initiatives and activities with the company’s goals
- Measure the success of these initiatives over time
- Strive for continuous improvement.
To help you get started, we have created a free, downloadable HR KPI template in Excel that is easy to customize:
HR KPI best practices
Let’s explore some best practices for implementing and tracking HR KPIs, for example:
- Set KPIs based on organizational goals: As highlighted throughout this article, you need to define KPIs that align directly with the organization’s strategic objectives, focusing on outcomes that drive business success. For example, a company aiming to improve productivity might track KPIs like time to proficiency for new hires or task completion rate.
- Leverage people analytics and KPI dashboards: Apply analytics tools like Excel or your HRIS analytics capabilities to connect data points such as recruitment costs, employee satisfaction, and demographics for actionable insights. Create an HR dashboard with your most important KPIs to keep track of and provide a handy overview.
- Empower your HR team: Provide your HR team with the tools, training, and authority to effectively track, analyze, and act on KPI data. This includes investing in people analytics platforms, fostering a data-driven culture, and encouraging proactive decision-making based on insights.
- Secure executive sponsorship: Engage organizational leaders to support HR initiatives by demonstrating how these efforts contribute to achieving key business objectives and improving overall performance. Ensure leadership understands the value of aligning HR strategies with measurable outcomes.
- Track performance over time: Regularly analyze how you perform on your KPIs and other HR metrics to identify patterns and adjust strategies accordingly.
A final word
HR KPIs are an excellent way for HR to contribute to the overall organizational strategy, providing measurable benchmarks to assess how HR contributes to business success. They not only track progress but also create a clear link between HR activities and the company’s broader objectives, such as improving productivity, enhancing employee satisfaction, or reducing costs.
Setting them, however, requires a thorough understanding of the company’s strategy and goals. This means HR must collaborate closely with leadership to identify key business drivers and determine how HR can support them.
FAQ
HR KPIs are strategic HR metrics measuring how well HR is contributing to the overall achievement of the organization’s goals. They are different from one company to another. Examples include employee productivity rate, internal promotion rate, NPS, and quality of hire (among many others).
The KPIs in an HR scorecard will vary from one company to another. Examples are recruitment cost (in dollars, for example) and the satisfaction score of the manager after one year (quality of hire).
A leading indicator in HR is a forward-looking metric that predicts future outcomes by focusing on activities or behaviors that precede those results. For example, time to fill open positions forecasts the organization’s ability to meet staffing needs, while employee engagement survey scores anticipate future retention and performance trends.
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