What Are KPIs for HR and Why Are They Important? resources (HR) departments have evolved from being purely administrative to taking on a more strategic role within organizations With this evolution comes the need to measure HR’s impact and contribution to the business This is where HR key performance indicators (KPIs) come into play,
KPIs are metrics used to evaluate the effectiveness of HR processes and programs in achieving desired outcomes that align with overall business objectives. By setting targets for and tracking HR KPIs over time HR professionals can quantify their department’s value and progress.
In this comprehensive guide, we will explore what KPIs are, why they matter for HR, how to develop effective KPIs, and provide examples of essential HR KPIs to consider.
What Are KPIs?
KPI stands for “key performance indicator”. A KPI is a measurable value that shows how well an organization, department, team, or individual is performing against a predetermined goal or objective.
Some common characteristics of effective KPIs include
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Specific – They measure a precise process, activity or output.
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Measurable – Data and metrics can be captured to track performance.
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Actionable – They drive action by connecting to broader goals.
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Relevant- They measure something meaningful to stakeholders.
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Time-bound – Data is captured during specific periods.
KPIs help monitor strategic progress and tactical execution. They enable data-driven decision making by quantifying performance gaps and opportunities for improvement.
Why Are KPIs Important for HR?
HR teams are increasingly expected to operate as strategic business partners. This means showing their impact on critical workforce and organizational outcomes.
In the past, HR may have relied on intuitive judgements or anecdotal feedback. But this is no longer enough. Solid HR KPIs are now essential for several reasons:
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Demonstrate value – Metrics substantiate HR’s tangible contribution to the business.
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Track strategy – KPIs measure how HR activities ladder up to business goals.
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Identify issues – They reveal problem areas needing attention.
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Guide decisions – Hard data informs plans and investments.
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Boost credibility – Numbers add objectivity and gravitas.
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Enable benchmarking – standardized KPIs allow comparison across teams or companies.
HR professionals who fail to effectively leverage KPIs put themselves at a disadvantage. However, those who embrace measurement set themselves up for success.
How to Develop HR KPIs
Not all metrics qualify as good KPIs. To develop meaningful HR KPIs, consider the following steps:
- Align with Company Goals
HR strategies and priorities should directly tie to broader organizational objectives. Review your company’s mission, values and business plan when identifying potential HR KPIs. Metrics that map to critical business needs will be the most impactful.
- Involve Stakeholders
HR shouldn’t operate in a vacuum when selecting KPIs. Seek input from key stakeholders across the business to identify needs and determine which workforce metrics will resonate most.
- Limit KPIs
Tracking too many KPIs can become unmanageable and dilute focus. Pare down your list to a manageable number of essential, strategic KPIs.
- Set Targets
KPIs require targets to provide meaning and context. Determine realistic yet ambitious targets to push performance.
- Determine Measurement Cadence
Consider when and how frequently you will capture data for each KPI. Monthly, quarterly and annual measures are common.
- Establish Accountability
Assign ownership for monitoring each KPI to help drive ongoing focus and improvement.
- Analyze and Act
Don’t just collect KPI data. Regularly review reports, dig into the “why” behind results, and develop actions to pursue opportunities or resolve gaps.
By taking a rigorous approach to selecting and managing KPIs, HR can maximize their value and utility.
Essential HR KPIs to Consider
Many KPIs may look good on paper but fail to provide true strategic value. Focus your efforts on metrics aligned with business needs that provide meaningful workforce insights.
Here are some examples of powerful, commonly used HR KPIs:
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Turnover Rate – The rate at which employees voluntarily leave the organization. Highlights retention and engagement issues.
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Time to Hire – The average number of days to fill open positions. Indicates recruiting process efficiency.
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Absence Rate – The percentage of total work days lost to unscheduled absence. Can signal engagement or cultural issues.
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Cost Per Hire – The average cost of recruiting and onboarding each new employee. Helps track and manage hiring investments.
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Training Hours per Employee – The average training and development time per employee. Helps ensure learning needs are met.
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Internal Fill Rate – The percentage of open positions filled via internal candidates. Shows ability to develop and promote talent.
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Performance Review Completion Rate – The percentage of employees completing annual performance reviews on time. Highlights management effectiveness.
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Employee Net Promoter Score – The likelihood employees would recommend the organization as a great place to work. Signals engagement and retention risk.
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HR Expense Ratio – HR expenses as a percentage of total operating expenses. Helps manage HR costs and demonstrate efficiency.
This list provides a sample of major HR KPIs that offer valuable workforce insights. However, each company’s business objectives and HR strategy should determine their most important KPIs to track.
Best Practices for Tracking HR KPIs
Once you’ve determined which HR KPIs to monitor, you need an effective process to actually track them on an ongoing basis. Here are some best practices:
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Automate data collection where possible – Manual processes are inefficient, inconsistent and introduce errors. Leverage HRIS, ATS and people analytics tools to automate.
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Establish a cadence for periodic reporting – Monthly or quarterly updates are typically sufficient to spot trends. Avoid “data paralysis” from constant tracking.
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Use dashboards to visualize KPIs – Dashboards make data more consumable and actionable for business leaders.
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Analyze KPIs in the context of other workforce metrics – Cross-analyze KPIs with related talent metrics to better understand the “why” behind results.
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Translate KPIs into action plans- Don’t just measure. Use insights to continually refine processes, policies, programs and investments.
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Be nimble – Review KPIs regularly to ensure they remain tied to strategy and are driving value.
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Share results across the business – Ensure leaders organization-wide understand HR’s value contribution.
With the right focus and discipline around tracking KPIs, HR can accurately evaluate their own effectiveness and make data-driven decisions.
Summarizing the Importance of HR KPIs
In today’s evolving business environment, HR has the opportunity to elevate its strategic impact. But doing so requires embracing workforce measurement and analytics. Leading organizations are using pinpointed HR KPIs to:
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Quantify HR’s business contribution in the language of the business (numbers!)
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Prove investments in human capital generate significant ROI
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Identify high-impact levers to pull to optimize talent management
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Continuously refine and improve programs, processes and interventions
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Provide insights that help shape strategic business decisions
In short, KPIs enable HR to serve as a true strategic partner to the business. Measurement provides the proof that modern, forward-thinking HR organizations require to fulfill this role. Those putting in the work to develop and track meaningful HR KPIs will gain a sustained competitive advantage.
Female to male ratio
This HR metric is not often used and remains a bit of a taboo in many companies. However, measuring the ratio of female to male workers, especially in top-management positions, can tell a lot about a company. Some industries are very gender-biased (IT and engineering are overcrowded with men, while caring and nursing tend to be in majority female). This has a historical and societal explanation, but as our societies evolve, it is important to be aware of and encourage diversity – be it gender diversity, but also nationality-wise and curriculum-wise. The more horizons you gather, the broader the view and the more diverse the approaches and innovation possibilities you will have. That is an incredible competitive asset in our globalized economies.
There is no target rate in particular, as it also depends on the availability of the candidates at a certain time. But countless studies prove that a balanced environment – especially in boards of direction – is much more successful than any other in the long run.
Human Resources Key Performance Indicators and Metrics
An HR key performance indicator or metric is a measurable value that helps in tracking pre-defined organizational goals of human resources management. HR departments use KPIs to optimize recruiting processes, employee engagement, turnover rates, training costs, etc.
Expectations for HR professionals are continuously increasing and, in this article, we will look at the most important KPIs for HR to develop modern and effective management processes. Professional HR analytics software will provide you with all the necessary tools to extract valuable insights from existing HR data, and gain new, invaluable information. This includes a dynamic, interactive HR dashboard that consolidates all relevant metrics in a central location, without the necessity for advanced technical knowledge. Besides, you can automate each KPI and utilize modern online reporting tools such as datapine in order to share up-to-date and relevant HR data throughout your team.
Here is the complete list of the top 26 human resources KPIs and metrics that every HR professional and manager should know:
Absenteeism Rate: Evaluate the engagement of your employees
Overtime Hours: Monitor your employees workload in detail
Training Costs: Analyze the investments in your employees
Salary Cost By Department: Breakdown your total salary costs
Salary Cost Development By Department: See department salary-revenue ratios
Salary Cost Development By Country: Analyze salary-revenue ratios per country
Employee Productivity: Track the overall effectiveness of your workforce
Talent Satisfaction: Ensure your employees are satisfied in the long run
Manager Feedback Score: See if employees are satisfied with their managers
Cost per Hire: Analyze what it takes to find the perfect fit
Recruiting Conversion Rate: Find the best recruitment method
Time to Fill: Monitor how long you need to find a new employee
Headcount Development: Monitor vacancies and new hires
Average Job Tenure: Analyze how long employees stay in the company
Talent Rating: Assess the quality of your employees
Employee Turnover Rate: See how your retention efforts work
Talent Turnover Rate: Evaluate how many talents you continually change
Turnover Rate By Group: Monitor if your diversity groups are satisfied
Dismissal Rate: Find out if you’re recruiting the right employees
Female to Male Ratio: Understand the gender diversity in your company
Gender Diversity by Role: Track gender share in managerial positions
Gender Ratio By Department: Track gender share across departments
Ethnicity Diversity: Discover how diverse your departments are
Recruitment Breakdown By Ethnicity: Ensure a diverse recruitment process
Part-Time Employees: Watch the evolution of part-time workers over time
Average Time Stay: See how long your employees stay in your company
The first of our HR metrics measures the average absenteeism rate as a percentage of the total working days among the entire workforce. It is a highly important employee engagement KPI as it illustrates the employee’s motivation and engagement in his work and, more generally, in the organization. Studies have shown in the past that workers with low motivation and engagement are much more likely to call in sick or skip some days of work. Therefore, it is important to watch this metric over time and to reduce it, because it will inevitably impact your business: be it the company atmosphere or the overall productivity, in the end your finances and the general well-being of the business will be at risk.
If your find your absenteeism rate of the past month(s) higher than the historical rate, investigate and find the reasons: is it specific to one department or a company-wide issue? Why? Then implement an appropriate strategy to remediate the situation.
Overtime hours are a great indicator on many levels, but have to be interpreted differently depending on the context. A sudden rise in overtime hours might translate into a temporarily higher volume of orders or economic growth. They can show the dedication of your workforce as well as flaws in work processes, or an understaffed workforce that has to deal with high pressure. This will directly impact another of the HR metrics we have seen previously: the absenteeism rate. Indeed, if people do not mind working overtime every now and then, an amount of overtime hours that goes through the roof and a permanent high workload will decrease both motivation and employees’ satisfaction, which may result in an increasing absenteeism rate.
The reasons for a permanently high overtime should be investigated at an internal level, as it also can confine the potential growth of a business when it results in missing orders or projects.
Here is a Human Resources KPI example used when you want to measure how much you have invested in onboarding new hires and upgrading one’s education. It is a helpful metric to track employees’ development costs, and make smarter decisions when it comes to developing their skills set after they have been hired. However, training costs should not be limited to new hires – more and more workers today wish they had a better job development and wish for a continuous learning in their position. Investing in an employee for him/her to develop his/her already acquired skills, or new ones, is an option often too little considered by HR management. Often enough, the return on training costs is greater than the initial investment.
Implementing a little knowledge test and evaluating the scores of workers can help you see if the training provided was effective.
Top HR KPIs to Track in 2023
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 organization. All in all, HR KPIs analyze how efficient a company’s HR team is in accomplishing its HR strategy.
What is a human resources KPI?
The last of our Human Resources KPI examples is a good indicator of the attrition of your business, and lets you know if you are good at retaining talent. This HR metric tracks the average number of weeks, months or years an employee stays within a company.
What are the top 26 human resources KPIs & metrics?
Here is the complete list of the top 26 human resources KPIs and metrics that every HR professional and manager should know: Absenteeism Rate: Evaluate the engagement of your employees Overtime Hours: Monitor your employees’ workload in detail Training Costs: Analyze the investments in your employees
Do you need a HR KPI dashboard?
Your human resources department is responsible for hiring and retaining the best talent, and without an HR KPI Dashboard to guide them on how well they’re doing, your employees (and even managers) might be confused. To make your job easier, we’ve shortlisted ten human resources performance metrics and KPIs for you.
