There’s a growing recognition that, often, a company’s most important assets are its people. Without people – and talented, happy, motivated people at that – you will never execute your company strategy and achieve your goals.
HR or Human Resources KPIs are critical as they help measure the department’s success and employee satisfaction and establish and maintain effective practices throughout the organisation.
Therefore, the Human Resources department of any business is progressively essential. Senior HR leaders – be they HR Directors or Chief People Officers – sit on Boards and Leadership teams and are accountable for the types of KPIs we’ll outline in this article. There are many important KPIs that a good HR leader would track as part of their strategic planning.
But first, let’s understand HR KPIs and how to measure their success or failure using key metrics.
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What are HR KPIs?
Human Resources key performance indicators (HR KPIs) are metrics used to measure how HR is aiding and contributing to the success of an organisation.
All in all, HR KPIs analyse how efficient a company’s HR team is in accomplishing its HR strategy. Organisations base their HR strategy on the human resources-related outcomes needed to achieve the company’s business goals.
Establishing HR KPIs is essential to achieving the best return from a company’s human capital. Also, HR KPIs prove indispensable to meeting the key objectives of the HR department.
KPIs for HR: Metrics to Measure
To be successful in their job, HR managers need to use HR KPIs that reflect the larger goals of the department and company. Further, they must be:
- Concrete: The KPI should be tangible and have a specific purpose.
- Measurable: If you cannot measure the KPI, it isn’t a KPI.
- Reachable: Stay realistic when defining a KPI that will determine your success.
- Relevant: Monitor only the things that truly matter; don’t waste time with indicators that do not contribute to your company.
Here are our top 7 KPIs to consider for measurable success:
In the wake of the Great Reshuffling, many organisations are dealing with exceptionally high turnover and attrition rates. Some reports show turnover rates have jumped 20% higher than their pre-pandemic average. That’s why measuring turnover is more important than ever. Turnover refers to the percentage of employees left over a certain period.
A high turnover rate is tough on company culture and usually leads to a less motivated and productive workforce. While it can vary by industry, the turnover rate should stay below 10%.
If your turnover rate is high, you may want to ensure that you provide fair compensation, a good work environment, and healthy company culture.
Duration in the position
Many employee departures are closely related to their time in the same position. They tend to look for opportunities outside the company if they feel employers won’t promote them.
If you find that opportunities for growth within the company are limited, it might be a good idea to discuss this with management.
Average time for recruitment
The ‘average time for recruitment’ measures the time between the announcement of an employee leaving the company and when they are replaced. It is quite possible to optimise the average time of each new hire.
Education and training
Employees’ courses and learning and development programs directly impact the company’s activity.
This HR KPI is meant to help boost the productivity levels of each employee. It does this by creating specific strategies to increase the loyalty and satisfaction levels that employees feel when working with the company.
This KPI is going to measure the efficiency of your workforce. It analyses how long it takes for employees to accomplish specific tasks and goals set for their position in the company.
Essentially, it analyses how much work employees are taking on and how well they perform these tasks.
To understand employee productivity, HR should consider all the factors impacting employees’ productive output. This includes the time employees spend working, their performance or the quantity of product produced, and the quality of the product delivered.
So employee productivity data should inform future office policies.
Cost per hire
This HR KPI measures the number of resources invested in each employee. Measuring labour costs includes the costs associated with recruitment, such as advertising positions, the time cost of reviewing and choosing C’s, and conducting interviews.
Cost per hire also extends to training, manager training, an external trainer hired, and the materials used. This can take up a significant part of the company budget.
However, it is a significant part of any company’s success, as, without talented, dedicated employees, businesses cannot function properly, let alone succeed. Therefore, investment in talent acquisition is vital.
Finally, probably the most critical KPI to ensure you have in place and are measuring is;
This HR KPI is an essential one that companies should not neglect, especially due to the ‘war for talent.’
Employee satisfaction is dependent on a range of factors beyond just financial benefits. These include a positive work-life balance, remote working and flexible working options, and non-monetary benefits. Among them are gym membership discounts and sustainable and social company culture.
Companies can measure talent satisfaction through employee satisfaction surveys, which they should regularly conduct to ensure all employees’ needs are being met and any issues or concerns they have are being addressed.
The importance of setting up an HR KPI dashboard
An HR dashboard is a dynamic overview of the essential HR metrics in one place. The HR dashboard provides a slice-and-dice overview of the workforce, their performance, absence, and turnover. It is vital for strategic decision-making in HR. Every business needs one to measure its successes and deliver accurate reports to its stakeholders.
A final word
So there are some common and important metrics relating to people. As always, we recommend choosing the KPIs from this list that makes the most sense for your business to ensure you have a focused HR reporting dashboard. Too many KPIs can lead to a lack of focus. So pick your key areas of focus and get measuring!
Remember, when setting your KPIs and building a KPI dashboard, it’s essential to focus on the most important KPIs for your team and your business. Do not have too many as that will result in a lack of focus and could be detrimental to results.