Organizations around the world are stressing themselves on how to retain the best talent out there in the market. As you grow, you are looking at ways to demonstrate to prospective employees that you are a great place to work from, and the candidate would not only be compensated well but also have a fun time during their stint. HRs are the ones who have their tasks cut out when it comes to showing themselves as an exciting organization to be a part of.
It is impossible to assess where you are at if you don’t measure your progress. You need to understand what are the activities that existing employees love and what are the policies that they don’t like. Only then will you be able to know if you are performing adequately well as an employer. If you want to measure your success, then you need to have performance indicators that you should monitor like a hawk.
Metrics that have a direct link with organizational strategy are HR KPIs. They can be employed to understand the effectiveness of HR policies for the company. They are defined based on the HR outcomes that are useful to achieve business goals. These KPIs are used to optimize your recruiting process, employee programs, workplace issues, employee relationships, etc. Businesses these days know that their growth is directly related to how well their employees are treated.
How to select the HR KPIs?
All the KPIs are selected with the business objectives in mind. When finding out HR KPIs, all the stakeholders, including senior executives, managers, and HRs, should be present. The KPIs of HRs will be utterly different from those of the other departments. But on the whole, all the KPIs that are chosen by various departments should work in tandem to achieve the growth of the business.
HR is an integral part as they are directly responsible for the well-being of the employees. Some of the KPIs that we have chosen in this article is all about the success of the business while ensuring that the employees perform at their peak.
Each of the KPIs that you choose should be based on the universal theory for setting goals- SMART.
S – The KPI should be measurable in such a way that you can refer back to it and use it as a benchmark.
M – It should be measurable.
A – The KPI should not be impossible to achieve in the real-world. For example, while aspiring to reduce the turnover rate is a goal worth having, it is impossible to expect that the turnover rate can be maintained at zero.
R – The goal should be relevant. Relevancy of the KPI is something we discuss in this article. Just because there are a lot of measurable metrics, it doesn’t mean that you have to keep track of metrics that don’t mean anything to your business’ objectives.
T – The KPIs should be timely.
The best part about measuring KPIs is that you can track your progress over weeks, months, quarterly, half-yearly, and annually. By doing this regularly, you will be on top of your business growth. Also, don’t concentrate on numbers that might be an aberration and not the norm.
Note: The goals that you have for your KPIs should resonate with your company’s growth plans. If they aren’t in alignment with it, then the entire exercise is futile. When you see the results of your KPI and compare it with the previous scores, you should be in a position to predict the growth. If you think there is no progress, then you should either re-draw your goals or find out what is wrong with your incumbent processes. You need to work on the data that you get from your KPIs to make business decisions that will impact your company positively.
Top 10 HR KPIs to Track
While there can be a hundred and more KPIs for HR managers, we are giving you 10 HR KPIs that are relevant for most organizations. These KPIs will measure the success of the HR department and will also be partly responsible for the success too. Here you go:
1. Training costs
It is a helpful metric because it helps you track the costs that you have spent on the employees for their development. If you find that there are specific training which has given the best yield, then you can use it for most employees, but if you find that there are courses that didn’t help at all, then you can take that out of your curriculum.
Every new employee should be allowed to upgrade themselves. If you find some of them not performing well for particular training, the onus is on you to find out if the employee wasn’t ready or if it was too soon to dump a training on them. Thankfully, more often than not, the return on training is usually higher than the investment that was made initially. Employees grow in confidence after they are upskilled, it will even show on the results that these employees produce when they start working.
To find out if the training was successful or not, you can have a test session where you could evaluate the performance of the candidate based on the training. This will allow you to decide if there was any improvement for the candidate.
2. Employee productivity
This is an exciting metric, as it is essential and fundamental. While you can have a rough estimate of the productivity by dividing the total sales during a particular period by the number of employees, we will suggest you dig a bit deeper. There are more variables that you can involve when measuring employee productivity as a KPI.
Factors like the amount of time your employees are working, the number of days that they are working, their qualifications, resources that are spent on them, etc., can be used to evaluate their productivity. When you continuously measure productivity, they will be able to know how good they have been performing, and there will also be a benchmark against which their work will be compared. It will also help them understand how much work they have done so far, how that work fares, and how they can be better professionals by improving their work. Constantly measuring employee productivity will also result in higher profits as well as increased motivation for employees, and they would feel as if the company cares about their progress.
3. Hiring costs
Hiring is one of the most important activities that is performed by the management team as well as the HRs. If the hiring process is flawed, not only is there an issue with the kind of output you will get from poorly performing employees, you will also see that it will directly impact on the motivation of your existing employees. Keeping Cost Per Hire as a metric will help you understand what it takes to get the perfect fit. This KPI measures the number of resources that you need to invest in each new employee. It includes every cost- marketing, referral incentives, the time cost of recruiter, selecting CVs, subscription to recruitment apps, conducting interviews, etc.
The costs associated with hiring has a lot of impact on your bottom line. That’s precisely why you should not consider recruitment as a simple process that doesn’t affect much. It has a direct effect on everything that your company does. Your business cannot function without the help of employees who have to be efficient at what they do. As a business person, your job is to invest in employees who will give you more revenue than what you are paying them for.
When measuring this metric, find out which is the recruitment source for each of them. Which is the most cost-effective source? Use all of this information to optimize your hiring process so that it doesn’t take up a lot of resources while giving you the most output.
4. The turnover rate of high performers
There will be different kinds of employees whose performance varies, and there will be a lot of factors that will be responsible for this. An employee ‘A’ who is good at your company might not be a good fit for a different company. It could be because he/she is happy with the culture at your place while they might be wary of a different atmosphere where they have little freedom. This will cause them not to give their best.
You will always find that high-performers thrive because of the office culture. They are extremely sensitive to the work atmosphere. Why? Because they are continually hunted by other companies, who want their talent. Good employees always have a lot of options in front of them, and if you need them to stay, then you need to ensure that you give them reasons to stay. A relaxed working environment is a good one, for starters. Ask your employees about the reasons why they would stay with your company. What are the things they like about your company? Is it better than all the other organizations they have previously worked with?
Answers to all these questions will help you understand how you can reduce the turnover of high-performing employees. You will be able to offer them incentives and facilities that will appeal to them and make them stay. If your top performers are leaving, then have an exit interview with them where you understand what went wrong and how you can ensure that you don’t make such mistakes in the future.
5. Job Referral Percentage
Referrals are one of the most popular ways to hire new employees because there is a factor of trust. Also, if the referral rates are high, it means that your present employees are happy with the way things are. Why? Because people will refer their friends only when they already have a decent experience at the current firm. Otherwise, they wouldn’t be a part of any referral program, even if it looks lucrative to them.
Job referrals are also a great way to hire suitable candidates who are more likely to stay with the company. By not following the traditional method of hiring, you will be able to reduce your expenses as the usual method takes up a lot of time, effort, and money.
If your employees often take leaves on a whim, it means that there is something inherently wrong with the way your company is functioning. While there may be genuine reasons why employees might not be able to come to the office, you also need to monitor to see if there is a massive trend of Absenteeism. If employees take leaves en masse, even that reflects poorly on the company. There is only one answer for all of this- your employees are not happy at the workplace.
The formula for Absenteeism = (total number of workdays lost)/(number of workdays available)
You shouldn’t make your employees think as if they are doing a disservice by taking leaves because they are well within their rights to do so. You should be a little more careful about Absenteeism only when you observe that it is a trend among most employees. For those who have genuine reasons, never slight them. When your organization grows, it will become difficult to track it, which is precisely why having Absenteeism as a KPI will keep you on your toes.
7. Time to fill a new employee
Let’s say that the role of the Digital Marketing Head is lying vacant for a long time. Do you understand the implications of it? Who will be monitoring social media posts? Who will take care of the paid ads? Who will control the various software that you have subscribed to? Will the marketing side be handled effectively by the marketing team without a head?
What does ‘Time to Fill’ as a KPI measure? It measures the time taken to fill a new role after the job offer has been posted. It tracks the efficiency of the hiring process and how optimally are the hiring resources used. It also helps assess if you are well planned if there are hiring contingencies like a layoff or if someone has quit without warning. All of these are situations that will happen without a doubt.
Businesses should invest time and effort into reducing the time that is taken to fill a job role. We would suggest not to concentrate on reducing the number alone because that is not the objective of the process. The aim is to find a technically-strong candidate with leadership skills.
8. Recruiting Conversion Rate
This KPI measures the number of applications who eventually become employees once the process ends. There are a lot of factors that depend on this number. This KPI applies only to big companies when they are not sure about the number of candidates that they want to select from a pool of candidates. When it comes to small and mid-sized companies, they usually have a specific number in mind and do not necessarily hire with the future in mind.
You can use this KPI to include all the steps that you choose while hiring and its efficacy. The main objective of this KPI is to find out which source gives the best candidates. It is an HR performance metric more than anything else. In this, compare the different methods that you use along with the cost per hire for each of them. Using this data, find out which is the best method that will suit your business and its budget.
9. Overtime Hours
Overtime is a fantastic indicator as it tells a lot about the willingness of the employees to stretch their timings for the business. But it could also mean something tragic where employees might be working overtime just to get the extra pay. HR’s work lies in finding out the difference between these two.
If you see a lot of overtime hours when the quantum of work has increased for the entire company, then there is nothing to worry about. But if there is no specific reason for the increase in overtime, then you need to be wary of it and make appropriate changes so that overtime happens only when the company requests for it.
Businesses should also be careful that they don’t stretch out their employees. If employees feel as if they are overworked, even extra pay would not act as a source of motivation for them. They will lose their motivation to come to work every day, and you will not see their best work reflected there too. It will also increase Absenteeism. If there is overtime almost every day, then there is something inherently wrong with your process or with the way your employees work.
10. Net Promoter Score
It is one of the most popular methods on earth that will tell you about loyalty. It asks a simple question using which you can find out how satisfied your employees are with the services of the HR. NPS is generally used to find out the loyalty of customers and to see if they would be interested in referring your services/product to anyone else. You can measure the NPS of HR. It can also be used to find out how willingly they would be recommending the company to a friend of theirs for a job in the company or a client who is looking to hire similar services.
Depending on the goals that you have, NPS can be a game-changer. It will help you unearth trends that might have been ignored earlier because the word of the employees was not taken into consideration.
If you choose the right HR KPIs, you will be showing a mirror to the organization. Once you keep measuring these KPIs, you will need to monitor its progress both at the department and organization level. Ensure that you share it with all the stakeholders and keep course-correcting if the need arises.
Create an HR KPI dashboard where all of this information can be accessed easily by anyone in the organization. By sending it to the entire organization, you can make others understand the strategic importance of the department, and it will help show how they are performing against others. Do remember that even if you are not performing well, it is all right. The aim is not to show them in poor light, but use the metrics to keep improving. Only when you welcome both positive and negative outcomes will you grow as a business.
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