Contact
Free trial
HR Metrics |

7 MIN

How to Choose the Right HR KPIs for Your Business

HR KPIs
Alexandre Diard
HR KPIs

All businesses that want to expand and evolve in the marketplace must first measure their performance. HR KPIs are a requirement that has expanded throughout the corporation, first in sales, then in employee productivity, and now in the personnel and talent department. Setting KPIs in human resources is critical to getting the most out of a company's human capital, achieving HR's strategic goals, and conquering all HR metrics.

Related articles:

- Which KPIs to optimize for HR management?
- HR Measurement: Everything You Need To Know About HR Metrics

 

 

Free trial

 

What are HR KPIs?

 

HR KPIs stands for Human Resources Key Performance Indicators. These are units of measurement for determining the outcomes of specific actions related to the human resources function. As a result, they serve as a point of reference for HR managers to evaluate procedures, and identify accomplishments and improvement opportunities in performance management. 

Human resources indicators track things like talent acquisition, training, performance review, employee retention, and talent management. These indicators allow us to set goals and know if we are on track to meet them at all times. HR KPIs act as strategic tools that help you figure out if you're meeting your HR goals in a way that's consistent with your overall business strategy. HR KPIs, in other words, reflect organizational success for HR because they are based on outcome variables that are vital in achieving business objectives and employee development.

 

Example HR KPIs

Some of the most important HR KPIs that every human resource professional and manager should be aware of are the following:

  • Absenteeism Rate: These key business metrics calculate the average absence rate for all employees as a proportion of total working days. It's an important employee engagement KPI since it measures how motivated an employee is in the workplace and in the company as a whole.

  • Cost per hire: This indicator represents the average amount of money spent on employing a single person. An increased cost per hire could indicate that you need to enhance some aspects of your HR processes. You can lower your recruitment costs and increase the efficiency of your hiring process by doing so.

  • Retention rate: The retention rate for employees is a metric that indicates how successfully your organization can keep its best employees motivated and engaged since the day they were recruited. However, it can also be a key performance indicator of your recruitment performance that can tell you whether you are hiring people that fit the role and culture of the company. Measuring this KPI allows you to put in initiatives and methods aimed at keeping your personnel satisfied, well-trained, and prepared to do their jobs well. This KPI is mainly based on the employee satisfaction. Are there compensation and benefits in your company? Is the workforce planning adapted to the employee? What are your retaining strategies? 

  • Turnover rate: This HR KPI counts how many people you replace or lose over time. The first-year turnover rate is the proportion of people leaving within the first year of working for your company. Since early resignations suggest an underlying incompatibility between a new hire and the company, the first-year employee turnover tells if you need to enhance your recruiting, onboarding and training processes.

  • Compensation KPIs: Compensation KPIs track how much funds your organization invests into its personnel. Salaries, training, bonuses, and other benefits such as healthcare, promos, offers, etc., with which you compensate your hires for their work are included.

  • Ratio of salary competitiveness: This ratio compares the company's salaries to the salaries of other companies that provide to the same job roles. This will have an impact to your company attractive potential new hires. 

  • Percentage of the workforce's cost: This metric includes the money that is spent on the salaries, incentives, bonuses, benefits and training of the employees by the company.

Free trial

 

What makes a good HR KPI?

 

Good KPIs are ones that:

  1. Provide concrete feedback on progress toward a targeted outcome.

  2. Help you make better selections, measure what needs to be measured.

  3. Compare performance over time to observe the extent of the impact that it has.

  4. Can track productivity, profitability, durability, reliability, administration, adherence, behaviors, economics, project performance, people performance, or resource usage.

  5. Either assess the current situation of the business (lagging indicator) or predicts the future conditions of the business (leading indicator).

 

The SMART Method

The SMART method is a simpler method to determine what HR-strategy KPIs are essential for smooth operations of a company. SMART stands for:

  • Specific
  • Measurable
  • Attainable
  • Relevant, and
  • Time-bound

Every department can use SMART objectives to determine their members' KPIs, objectives, and key responsibilities by breaking down the organization's overarching vision into little, bite-sized portions. SMART goals assist the HR department in analyzing the business process, always keeping the organization’s aim in mind and working toward the greater goal.

Any HR professional can set SMART goals that provide them with measurable objectives and the means to attain them, keeping them engaged and motivated throughout the process. HR experts can track their success by comparing it to predetermined benchmarks.

They can instantly spot any divergence from the predetermined path and rectify it, saving both time and resources. HR SMART goals assist HR quantify their demands, so they know exactly what they need from the board in terms of funding and resources to fulfill their objectives. HR SMART goals, in a similar vein, help quantify the outcomes, such as relative contributions to the company's core development in terms of expanding the market, and improved employee feedback.

 

Free trial

 

Characteristics of Quality HR KPIs

HR managers must employ HR KPIs that represent the department's and company's bigger goals in order to remain effective. Furthermore, in order to make a functional KPI, following aspects must be kept in mind:

  1. Focused: The KPI must one clear objective.

  2. Measurable: A KPI isn't a KPI if it can't be measured. This is mainly done through key metrics that are cloud-based, data-driven and quantifiable. 

  3. Reachable: When developing a KPI which will evaluate your success, it should also be reasonably attainable.

  4. Relevant: Only track the things that are always important to your organization; don't waste time on indicators that don't add value to your business. They should be aligned with the goals of the company and per-employee.

  5. Correlation: The KPIs should be connected to the desired result. When we talk about corporate objectives, the HR KPIs must be linked to these objectives.

  6. Understandable: These quantifiable metrics and KPIs should be easily understood by management teams.

  7. Actionable: The KPIs you choose to track must be able to inform the actions and decisions taken by HR leaders.

 

Conclusion

HR KPIs are complicated, as they require a detailed understanding of the organization's strategy and goals, but they are the best approach for HR to contribute as quickly and efficiently as possible to the overall strategy for running smooth operations in the company.

This can be done with an HR software to obtain a competitive advantage. A KPI dashboard can provide this overall, detailed, and quantifiable metrics to accomodate into all your business needs. HR technology is changing its business performance due to new innovation. This can be success factors into your company or something that will limit your business-processes. 

 

Free trial