Ultimate Guide to Key Performance Indicators in HR
In this article, we will be talking about key performance indicators in HR. Human resources department is responsible for everything that is connected with hiring, managing, firing, sourcing, searching, tracking, benefiting, interviewing staff, payroll, etc. No matter what size your business is, human resources department is a significant component of the firm’s efficiency.
The goal of HR management is to help the company achieve its mission by hiring the right people, training and managing them to reach progress. It turns out that HR KPIs are one of the most exponential for the company. What KPIs does it include? There are more than 100 metrics, so let us observe the primary indicators.
Turnover KPIs show the number or percent of employees that leave the firm and are replaced by others. Usually, positions that need high-skilled personnel have low turnover, while unskilled positions have high turnover as these workers can be easily replaced by others. Other factors related to this metric include:Full-time employee turnover
- Part-time employee turnover
- Turnover cost
- Redundancy rate
- Time to fill.
Recruiting KPIs helps you understand where to source your best recruits, how well your new hires are performing and how did bad hires affect your financial state as well as training costs, HR costs and other. Metrics involve:
- Vacancy period
- New hires
- Cost per hire
- Turnover rate of new hires
- Financial impact of bad hire.
Retention KPIs shows the ability of the firm to retain its employees. Preventable turnover means the loss of employees, reasons why they left and measures that may be taken to prevent the loss. They are:
- Average employment period
- Preventable turnover
- Diversity turnover
- Financial impact of employee turnover.
Development KPIs generally indicate how the employees are satisfied with the work conditions – training, development, promotion and awards opportunities, relationship with administration, managers, and colleagues. They consist of:
- Training penetration rate
- Average training cost per full-time employee
- % of HR budget spent on training
- % of employees trained
- Employee training satisfaction index.
Payroll KPIs define which processes are critical to supporting the organization’s employee compensation system, how fair and attractive it is and what impact it has on company’s financial health. They include:
- Total payroll compared to last period
- New employees payroll / Terminated employees payroll
- Total payroll to gross revenue
- Average pay per employee
- Number of payroll transactions.
The KPIs given above are not necessarily applicable to every organization. They are defined depending on company’s type, size, industry, country, and other criteria.
All HR KPIs can be divided into two broad groups – lagging and leading. Lagging KPIs are focused on the past, they measure the output. For example, the “Employee Turnover Rate” is a lagging KPI. Lagging KPIs tell us story about the current state of your HR, but they don’t tell you how to change this state, while leading KPIs are focused on the future. Leading KPIs measure the input that should be introduced to achieve better results. For example, a leading KPI that match the above lagging KPI might be “Employee Engagement Rate.” Both lagging and leading KPIs are essential for analysis and monitoring – they tell you different stories about your HR.
Also, you can use the S.M.A.R.T. method for defining criteria for your effective KPIs. S.M.A.R.T. is an abbreviation, giving standards to guide in the setting of objectives conforming to the following criteria:
S – Specific, defining purpose for the business, target a specific area for improvement
M – Measurable, quantifying an indicator and setting goals for improvement
A – Attainable, stating what results can be achieved, given available resources
R – Relevant, relating the metrics to the success of the organization
T – Timed, showing the values or outcomes over period.
Key Performance Indicators in Human Resources reflect the performance of the organization, department and employees, and are a powerful tool for management. But merely using tons of KPIs might lead to confusion, not success. To gain better results, you should “Measure What Matters” for your company and staff.