So much of Human Resources (HR) has to do with the human touch: checking in with employees, making sure that they feel psychologically safe and secure, promoting a healthy culture, and so forth. But, at the end of the day, you’re responsible for more than just your employees’ feelings (as important as those are). You also have to ensure your organization’s HR strategies are driving it toward success.
That’s the crucial role KPIs play. Love them or hate them, they have become an essential way for HR leaders to assess the effectiveness of their HR initiatives, and guide their strategic decisions. In short, they tell you whether the things you’re doing are working or not. So let’s explore some essential HR KPIs and metrics you should be focusing on in order to drive success.
What are HR Key Performance Indicators (KPIs)?
Just like regular key performance indicators (KPIs), HR KPIs are quantifiable metrics used to gauge the performance and effectiveness of organizational strategies, team objectives, and the individual contributors driving them. The only significant difference is that HR KPIs are focused solely on HR initiatives. Or, more specifically, how those HR initiatives are contributing to the organization as a whole.
There are no hard and fast rules for what these HR metrics can measure. As we’ll explore later, they can be used to give you valuable insights into anything from employee engagement, to performance and productivity, and training and development. And once you can measure these, you’ll have a better understanding of how to get the most out of your workforce.
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Characteristics of a good HR KPI
So if HR KPIs are capable of measuring a range of different HR initiatives, can they even share any similar characteristics? While they may be applicable to a variety of metrics, effective HR KPIs should still all have the following traits:
- They should be aligned with organizational goals. In order to be useful, KPIs should focus on metrics that directly contribute to how well HR is achieving the organization’s HR strategy (and, by extension, how well the organization is meeting its own objectives).
- They should be measurable and quantifiable. KPIs that attempt to measure abstract concepts or subjective emotions cannot be verified. Instead, in order to track progress accurately over time, they should be concrete, tangible, and preferably with a specific goal.
- They should be relevant and timely. Ensure any KPIs you set actually give you insights into what the HR department or organization is currently involved with. Don’t try to measure aspirational KPIs that have little relation to ongoing activities.
- They should be realistic and actionable. Any KPIs that involve goals that your team or organization cannot actually meet won’t be very helpful. Likewise, they should help drive decisions and improvements that can be put into action.
With these characteristics established, let’s explore some key HR KPIs across different facets of HR management.
Recruitment and staffing KPIs
Tracking KPIs in recruitment and staffing is essential for optimizing hiring processes and achieving organizational goals.
Time to fill
This metric measures the average duration it takes to fill a vacant position from the time it is opened (usually indicated by when the position is advertised) to the time an offer is accepted. A high Time to Fill rate may indicate inefficiencies in the recruitment process, challenges in attracting suitable candidates, or some other shortcomings, such as an uncompetitive salary rate or a poor employer reputation.
Cost per hire
Cost per hire calculates the total expenses that are invested in filling a vacant position. This helps assess the efficiency and cost-effectiveness of your recruitment efforts. These costs can include advertising and recruiting for the position, any agency fees, and the costs of any staff time spent reviewing resumes and interviewing candidates. It should also include the cost of training and materials. Divide the sum of these amounts by the number of hires in a certain period to get this KPI.
Quality of hire
The quality of hire KPI evaluates the performance and contribution of new hires to the organization over time. It considers factors such as job performance, retention, and cultural fit to determine the effectiveness of the recruitment process in selecting top talent. Calculating this KPI can help you strategically adjust this process in order to attract candidates that may be a better fit for your organization.
Employee engagement and retention KPIs
Understanding and monitoring KPIs related to employee engagement and retention is crucial for fostering a motivated workforce and reducing turnover rates.
Employee engagement score
The employee engagement score is a measure of how emotionally committed individuals are to your organization’s goals. It’s a good way to know how much effort employees are willing to exert toward their work. This will allow you to predict multiple factors, such as overall productivity, innovation, and retention, among others. You can determine this score by regularly sending out surveys to employees asking them about their levels of engagement and satisfaction with their roles.
Turnover rate
This KPI measures, as a percentage, the amount of employees who leave your organization within a certain period of time. A small percentage should be expected as part of natural churn. But if this rate becomes too high, then it may be a sign of underlying issues, such as poor job satisfaction, inadequate career development opportunities, or ineffective leadership.
Engagement rate
Unlike the Employee Engagement Score, the Engagement Rate KPI is a measure of how often and in what ways employees use organizational technology, platforms, communication channels, and other tools, as well as their active participation and interest in organizational activities and initiatives. A high rate of engagement will tell you that the workforce is finding value in organizational offerings, while a low rate likely means that there is something missing.
Employee net promoter score (eNPS)
Like customer NPS, the eNPS measures overall employee satisfaction and loyalty. It can focus on how they feel about the organization as a whole, or on more specific aspects, such as their individual team or department, or on certain activities. Like customer NPS and the Employee Engagement Score, the best way to measure eNPS is typically by sending out regular surveys. This way, you’ll know what is working and, more importantly, what needs to be addressed.
Performance and productivity KPIs
Evaluating performance and productivity KPIs is vital for ensuring that organizational objectives are met and that employees are working efficiently and effectively.
Employee productivity
This metric quantifies both the success and efficiency of employee output within a specified period. This can include how much work is successfully completed, the average length of time it takes for certain tasks to get accomplished, the rate of errors or rework, and so forth. Knowing this KPI will help you identify high-performing employees (as well as low ones), determine where resources should be directed, and improve overall organizational efficiency.
Performance rating
As opposed to just productivity, this KPI evaluates individual employee performance against goals and expectations that have been previously agreed on. For instance, at the beginning of a quarter, an employee and their manager may meet and agree on completing a certain amount of projects or reaching a specified sales goal. How successful they are at doing this will determine their rating. The value of this KPI is that it provides a structured framework for performance management and feedback.
Revenue per employee
Revenue Per Employee is a calculation of the total revenue generated by the organization divided against the total number of employees. So if your organization made one million in revenue with 100 employees, then your Revenue Per Employee would be $10,000. This KPI can be a good indication of productivity and efficiency, as well as a useful way to determine when and how you should expand or reduce the workforce.
Assessing KPIs in training and development helps organizations measure the effectiveness of their programs and the growth of their employees’ skills and capabilities.
Training effectiveness
This measures how successful your organization’s training programs are in teaching and communicating required knowledge and skills. There are many ways to do this. You could send out surveys after each training program, conduct post-training quizzes, or just have one-on-one discussions with employees in order to gauge their thoughts and feelings about your training programs. Regardless, this metric is an important way for you to assess how well your training programs are contributing to organizational growth.
Training investment and cost per employee
This KPI focuses on quantifying the resources that are required to successfully train and develop each employee. This can be expenses related to course materials, instructors, technology, and even lost productivity time. Together with the Training Effectiveness KPI, it is an important way to evaluate the return on investment of training programs and help properly prioritize how resources are distributed.
Compensation and benefits KPIs
Analyzing KPIs related to compensation and benefits is essential for maintaining competitive pay structures and ensuring employee satisfaction and retention.
Compensation competitiveness ratio
This metric determines how competitive your organization’s salary rates are. It does this by either comparing individual salaries against industry averages for the same role (the “individual compensation ratio”) or by taking the compensation of a group of individuals, usually within one department or team, and comparing that average against a similar industry rate (the “group compensation ratio”). Knowing this KPI will help you determine whether your compensation practices are competitive, which is important for attracting and retaining top talent.
Rate of benefits satisfaction
Usually considered a part of the Employee Engagement Score, this KPI is focused specifically on how satisfied employees are with the organization’s benefits. These can include large offerings like healthcare and retirement plans, as well as smaller ones like wellness programs and continuing education opportunities. While offering adequate compensation is an important part of staying competitive, good benefits can also be highly beneficial and are worth measuring on their own.
Pay equity
The Pay Equity KPI concentrates on how fair and equal compensation is across the organization. It typically compares pay across demographic groups, such as gender, ethnicity, and age. Not only is this important for maintaining legal compliance, but it is also vital in order to maintain employee morale. An organization with large pay gaps between demographics may have a difficult time attracting and retaining talent.
Geographical differential
A subset of Pay Equity, Geographical Differential instead assesses how compensation levels vary based on geographic locations. Since cost-of-living expenses can be very different depending on the location, there should be some variation to this metric. If there is not, then your organization may not be practicing equitable and competitive compensation practices across different regions or markets.
Health and safety KPIs
Monitoring health and safety KPIs is crucial for creating a safe workplace environment and ensuring the well-being of all employees.
Accident frequency
A fairly straightforward KPI, this simply measures the number of workplace accidents or incidents within a specific period. However, in order to remain accurate, there should be a clear and simple reporting process in place so that every accident is accounted for. Doing so will help you identify potential safety hazards so that you can prioritize preventative measures and promote a culture of safety and well-being.
Employee wellness index
The Employee Wellness Index tracks the overall health and well-being of the workforce. It does this by taking into consideration factors such as stress levels, work-life balance, and access to wellness programs. It may also look at additional factors, such as the average number of sick days employees have taken over a certain period. Knowing this information can help your HR department build health and wellness programs that better support employees.
Lost time injury frequency rate (LTIFR)
The LTIFR is a calculation of the number of work-related injuries or illnesses that have resulted in lost workdays, typically measured against 1 million hours worked. To work this out, you just multiply the number of work-related injuries by 1 million, then divide that sum by the total number of hours worked in the reporting period. For instance, if there were 8 work-related injuries that resulted in lost time, and a total of 2 million hours worked, you would have the following formula: (8 x 1,000,000) ÷ 2,000,000. This equals an LTIFR of 4. Knowing this number can help you determine how effective your safety protocols are.
Healthcare cost per employee
This KPI simply looks at the average healthcare-related expenses the organization pays per employee over a certain period of time. It’s a good way to determine the financial costs of healthcare benefits so that you can identify potential opportunities for reducing those expenses and adding in potentially more efficient and rewarding employee wellness initiatives.
How Predictive Index can help you monitor and meet your HR KPIs
HR KPIs can give you useful, concrete ways to track the performance and effectiveness of your HR initiatives. But with so many possible metrics to follow, they can also become overwhelming.
By enabling you to leverage data analytics and predictive modeling, Predictive Index can help make monitoring and managing your HR KPIs much easier. Use our models to identify trends and patterns, make adjustments to individual KPIs in real-time, then access a dashboard where you can gain valuable insights that allow you to make data-driven decisions that maximize HR performance. Request your demo today to get started.
