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8 Crucial KPIs for HR to Improve Your HR Management

8 Crucial KPIs for HR to Improve Your HR Management
Alexandre Diard
8 Crucial KPIs for HR to Improve Your HR Management

All companies have business goals and objectives that they want to achieve, and in order to do so there have to be set management practices put into place to measure progress. Succeeding with an HR strategy is crucial for a firm and there are many ways to measure your progress. KPIs, known as key performance indicators can help you understand your workforce, HR team’s efficiency, and productivity. Using the right KPIs for HR can help you analyze data better, set achievable goals, and measure success. 

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What is a KPI?

How would you measure the results of your company’s goals and hard work in order to succeed? This is where KPIs for HR. Key performance indicators for Human Resources can be used to show you how efficient your HR team is, how well they’re utilizing the HR strategy, how engaged they are, their satisfaction rate and so much more. KPIs essentially measure your company’s performance. There are many online reporting tools now available that allow you to share and update the latest HR data with your team. 

Using KPIs allows your HR team to gain more insights into their work and progress which enables better decision-making processes. Using KPIs for HR, such as the ones we will discuss below, are crucial to a company's HR function as it can help them achieve and measure their HR goals

Main KPIs for HR Management

Human Resources key performance indicators can help you understand how your HR function is impacting the rest of your company. There are several KPIs for HR that you can utilize, but we will cover some of the key ones that can help with your strategic and organizational goals.

In order to help you set up your HR dashboard, PeopleSpheres has categorized a few main KPIs for HR you can use:

 

  1. KPIs to monitor leave and absence: Employee engagement is very important in order to succeed with HR strategies. Measuring their absence whether it’s sick leaves or excused/unexcused absences can help you predict the future rate of absences and plan your strategies accordingly. In order to monitor this, the 2 KPIs for HR that can be utilized are absenteeism rate and average number of vacation days per employee. 

  2. KPIs to monitor employee training: Employee training has a direct impact on performance management including productivity and success rate at the company. Employee training can help determine how confident they feel on the job and improves their efficiency. A few KPIs that are helpful are average number of training hours per employee and employee satisfaction. 

  3. KPIs to monitor payroll: Having an accurate payroll system is very important so that employees can get their paychecks on time. Monitoring payroll also helps you understand if your system is running properly, what improvements can be made and what strategies can be implemented to do so. The two KPIs we will discuss are average salary and compensation cost as a percentage of revenue. 

  4. KPIs to monitor employee productivity: Employee productivity is extremely important in order to achieve your organization’s strategic goals. Monitoring employee productivity helps measure the efficiency and effectiveness of your employees, how long it takes for them to complete certain tasks and how good they are at performing them. A few KPIs that are used to monitor employee productivity include talent rating and talent turnover rate. 

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Monitoring Leave and Absence 

Employees may take time off for many reasons. It’s important to understand the record of employee absences and leaves to prepare for the future and there could be many benefits in tracking these aspects. Leave and absences can have an impact on the company’s organizational goals, strategies, and financial position. Issues in absences and leaves can influence employee productivity and affect retention rates in the long term. 

Absenteeism Rate

The absenteeism rate is measured as a percentage of your total working days within the workforce. This KPI can help you understand how motivated and engaged your employees are. This is very important because the behavior and engagement of your employees impact your company culture. When employees aren’t satisfied or motivated there is an increase in sick calls and absences. There will be times when there are sick leaves, excused absences, and even unexcused absences.

Managing these and calculating absenteeism rates can help you better prepare for the future and gives you the ability to plan effectively to achieve your strategic objectives. A useful tip is to adhere to a strict attendance record and to note employee day offs and which type of absence it was. You can use useful software to see the employee clock in time and keep an accurate record. Implementing a good HR dashboard can be a great way to effectively display all the data you need in an actionable manner. 

Average Number of Vacation Days Per Employee

Work-life balance is critical to ensure employee satisfaction and productivity within a company. It’s important that your employees work collectively towards your company objectives, but at the same time, it’s normal for them to want time off work.

You can analyze the number of vacation days each employee takes, find an average and then connect it to how employee performance is at the time. If you find that work has been slower than normal and vacation days have been used up less, that could be a factor. Other times, you may find discrepancies in higher rates of vacation days being used. This indicator can be useful when it comes to analyzing the overall productivity at the company and can help you understand what your employees need if they’re not feeling motivated. 

Monitoring Employee Training

Valuable training sessions can help benefit your employees' skills and performance. Training sessions help employee development and it gives them a chance to understand where the company is going, what the future goals are, and what they should expect. 

Average Number of Training Hours Per Employee

The average number of training hours per employee is a metric that gives you a measure of how much time existing employees are spending in training. You can calculate it by taking the total number of training hours of all employees and dividing it by the number of employees.

It’s important to have periodic training so that they could strengthen their skills, learn about technological changes, procedures, and much more. A low average could indicate poor performance, poor scheduling of proper training sessions, or an opportunity to align workforce needs with the training offered. This quantifiable KPI can be useful for various reasons, one being the fact that you can further utilize it to calculate the cost of your training programs. 

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Employee Training Satisfaction 

Having an effective training program can improve employee experience and satisfaction on the job. A good training program can result in high-performing employees that help you achieve your business objectives. Measuring training satisfaction can be done through scores, figuring out what employees liked, what could be improved, post-training quizzes, and much more. This could tell you how well your training program is delivering knowledge and skills that will help employees excel at their goals and in return, the company’s goals. 

Monitoring Payroll

The payroll process is important to ensure that your paychecks are paid out accurately, how much cost is allocated to this process, and what you could do to improve the process.

Average Salary

Measuring average salary can help you set pay rates for the future, determine if employees are being paid accurately according to their work, and employee retention. You can measure average salary by pooling together a certain team, department, or entire company. To calculate you have to total the salaries and divide it by the number of people from the group/company. 

Compensation Cost as a Percentage of Revenue

It’s important to assess how much your company is spending on employees and what that means in relation to your revenue. If it’s spending too much, and there isn’t enough revenue to reinvest into other parts of your business, this indicates that you should rethink your workforce strategies and how many employees you need. 

Monitoring Employee Productivity 

Analyzing your employee’s productivity helps you understand their satisfaction levels, engagement and their impact on financial performance. If you find low productivity it can mean that your company’s processes need to improve along with your company culture.

Talent Rating

Employee compensation is a big cost for the company, therefore the HR department needs to assess and gain quality employees that will contribute to the company’s goals. To understand any discrepancies in talent and their work, you can develop an employee evaluation system. To effectively get an overview of the workforce at your company you can implement a talent management dashboard. 

Talent Turnover Rate

Your HR department should keep tabs on how much talent is continuously being turned over. If your company has a high turnover rate, it could be problematic because the constant change affects your recruitment costs, productivity and overall business objectives. When you’re lacking professionals because there are constant changes being made to talent, it can halt productivity. It’s important to keep this rate low, because your employees are the future of the company and their retention is crucial. 

Conclusion

A key performance indicator can be thought of as a measurable business metric that tells you whether a business process is working. This includes everything from talent acquisition, to onboarding new hires to retaining them. KPIs for HR professionals are more than a list of key HR metrics to look at each weekly meeting. It is a way to leverage analytics to gauge the performance measures of all HR functions and ensure their profitability. In other words, KPIs for HR are a way to measure the ROI for key business functions that they are responsible for. As we mentioned. There is no need to track these business metrics manually on a scorecard, instead consider setting up a KPI dashboard. This makes it easier for an HR manager to visualize KPIs and metrics, apply benchmarking, and explain them in a qualitative way.

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