Measuring HR KPIs: Best Practices and Tips
Take a quick Google search on organizations’ most valuable assets, and you will see tons of results revealing that an organization’s employees are its most important assets.
This is true and for many reasons. People can make all the difference in your organization’s success. With a motivated, talented, and happy workforce, you will execute your company strategy and achieve your objectives.
Nevertheless, having a motivated, talented, and happy workforce isn’t enough. To make the most of your team, you need to be able to monitor and track performance; this is where HR KPIs come in.
Human Resources KPIs enable you to measure the success of departments and employee satisfaction and establish and maintain effective practices throughout the organization.
When you measure performance, you can improve at managing people and expectations.
There are many KPIs that your HR managers should be tracking to ensure that your HR processes are well-optimized, but not all of them may be vital to your business.
In this piece, we will discuss the best HR KPIs to measure and highlight some of the best practices and tips to implement for HR management and team success within your organization.
Overview of HR KPIs
HR KPIs are specific, measurable values used in tracking predefined organizational goals of human resources management. HR departments use these KPIs to optimize their recruiting processes, employee engagement, turnover rates, training costs, etc.
This means that KPIs in HR measure how successful your HR is in realizing your HR strategy. The HR strategy follows a company strategy.
In other words, HR KPIs reflect organizational performance for HR because they were established based on HR outcomes relevant to achieving company objectives. These business objectives are often formulated in the Balanced Scorecard.
Let us look at an example to see how this works.
“Redorion is an organization trying to innovate in a very competitive environment. As a result, the board of directors resolved to cut expenditures everywhere except in the product innovation department. The entire organization, including HR, must save money. The question is, how will this ambition be converted into HR KPIs?
This reduction might be applied to recruitment costs. For example, The current cost is $500,000 and needs to be reduced to $400,000. In this case, the KPI is ‘Recruitment Cost in Dollars,’ with a current score of $500,000 and a target of $400,000.
A second HR KPI that might be measured is ‘innovative behavior,’ which could be measured in the annual engagement survey.
Let’s assume its present score on a 10-point scale is 6.2, with a goal set at 7.5 or higher.
The HR KPI template could look as follows.
HR KPIs are not limited to the above example. Your HR team can add several KPIs to reach a specific business objective, and each of these KPIs can be broken down into other smaller goals.
To realize your HR strategy, it’s best if the KPIs align.
Features of good HR KPIs
Now you know what HR KPIs are, note that not all KPIs are HR key metrics. So then, what are the key features of good HR KPIs?
Below, we discuss them in detail.
The first characteristic of a good HR KPI is that it must be specific, simple to understand, and easy to follow by each team member.
When metrics are clear, it’s easier for teams involved in achieving them to focus on what needs to get done to achieve the target.
Next, it must be measurable. After all, the reason for KPIs is so that you have something tangible to track that will give you insight into the effectiveness of your HR team.
An example of a measurable HR KPI goal can be seen from the cost reduction example we gave earlier, where the hypothetical company Redorion planned to reduce its current recruitment cost from $500,000 to $400,000.
Understand that KPIs that can’t be measured can’t be improved on!
Your HR KPI must be attainable. For example, while striving to reduce the turnover rate is a worthy goal, it is impractical to expect it to be kept at zero.
As we mentioned, there are many KPIs, but not all are relevant to HR. Also, some KPIs may be HR metrics but may no longer be appropriate for a specific period.
For example, training employees might not be on your list if you’re early in your HR management phase.
Instead, you could concentrate more on hiring – so setting specific KPIs for costs and hire times might be more relevant and vital for your business at this point.
Also, it is essential to note that an HR KPI may not benefit everyone in your organization, but it must be relevant to your HR department and overall business strategy.
When you set goals and KPIs, you need a time frame in which you plan to achieve them. When your goals have a time frame, it increases motivation and makes your KPIs easier to track.
Easy to break them down
Good key performance indicators are drillable. When setting KPIs, your HR team should be able to break them down into smaller measures.
This helps you to understand the situation better and improve your activities in the future.
Aligned with each other
Your KPIs should be defined considering both HR strategy and your business’s overall strategic vision. Your HR metrics should be aligned to help departments succeed and improve.
A good HR KPI must be assigned to key people who will control the tracking and reporting of your KPIs. If your HR metrics are specific and focused, you’ll have no problem assigning them to different people and making them responsible for achieving them.
A good HR KPI can be effectively tracked. However, manually tracking metrics and KPIs is a time-consuming task.
You need to collect, organize, evaluate, and optimize data, and there is a higher likelihood of entering incorrect data.
Instead of handling it all manually, KPI tracking tools like Kippy can help automate your HR metrics' tracking and reporting.
With Kippy, you get real-time insights into the effectiveness of your HR processes and optimize your operations.
Best HR KPIs to measure
Now you know the features of a good HR KPI, this section will discuss some of the most critical HR KPIs to track and measure the HR department’s success for the overall success of your organization.
The following are some of the best HR KPIs to track:
1. Employee satisfaction rate
This is one of the best HR KPIs that shouldn’t be neglected, especially in this time of shortage of talented workers and the associated ‘war for talents.’
The employee satisfaction rate measures the number of your workforce who would recommend your organization as an excellent place to work versus those who wouldn’t.
This KPI is vital to helping you retain your talent and guides you in keeping your employees motivated and satisfied.
In this regard, you can regularly conduct employee satisfaction surveys built on your KPIs.
If you ask them questions related to your metrics, you’ll be able to analyze data and get essential insights on improving your organization.
This HR metric measures the percentage of your workforce’s total working days. It is a significant employee engagement KPI as it illustrates the employee’s motivation and engagement in his work and, more generally, the organization.
Recent data on employee engagement from Gallup suggest that just 32% of full- and part-time U.S. employees are engaged at work, while 18% are actively disengaged.
And disengaged employees are more likely to call in sick or skip some work days. In fact, most are merely going through the motions until they find a new job.
And that is not all; according to Gallup’s 2022 report on the state of the global workplace, disengaged employees cost the world $7.8 trillion in lost productivity. That’s equal to 11% of global GDP.
Observing this metric to do what most organizations fail to do and prevent lost productivity in your company is essential.
If you 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?
If so, why? Then, implement an appropriate strategy to remediate the situation.
Also, before you craft a strategy to minimize absenteeism, create a management handbook for your absence policies and make categories for absences. That way, you can easily monitor and measure the absenteeism rate and devise a solution.
3. Recruitment costs
This simple HR KPI evaluates how much money you spend on each new employee.
It includes all costs associated with:
Recruiting (advertising, marketing, recommendation incentives, the time cost of recruiter screening and selecting CVs, then performing interviews)
Training (manager/instructor time, supplies, and time cost of a new employee).
These costs add rapidly and severely to a company’s budget. However, work cannot be done, and business cannot be run without personnel.
The key is to invest in employees who will give you more value than what you are paying them for.
So, while the investment may make the finance department unhappy, the potential for talent acquisition is always worthwhile.
When evaluating this metric, measure the cost per hire according to the recruitment source and determine which is the most or least expensive. Then, use all of this information to optimize your recruitment process so that it doesn’t consume many resources while giving you the most output.
4. Recruiting conversion rate
This KPI is more of an HR performance metric because it focuses on HR executives rather than regular employees. This KPI calculates the percentage of the total number of applicants turned into hired staff at the end of the process.
There is no predetermined ratio for effective recruitment. It depends on your company, region, and sector.
But this is a metric you can use to study all the steps involved and compare different recruitment approaches you have adopted to determine the most efficient while also considering other indicators (such as the retention rate 90 days after hiring).
The primary goal of this KPI is to find the source that gives the best candidates at the lowest cost.
5. Time to hire
This is another straightforward HR KPI that needs no explanation. This metric measures the time passed between posting a job offer and hiring a new employee for that specific position, which is, on average, 36 days, as per the Society of Human Resource Management (SHRM) report.
Tracking this metric will help you analyze how efficient your hiring process is regarding the time and resources spent to fill a position, similar to the Recruiting Conversion Rate.
It also advises doing realistic business planning since a layoff or someone resigning must be managed and anticipated as much as possible.
A lower figure is usually preferable but should not be the primary criterion.
Investing time to discover the perfect fit is critical, and while a smart hire may be costly at first, the rewards will always outweigh the costs.
To measure this metric correctly, keep in mind that it is more of a process evaluation than an objective to reach by lowering the numbers at all costs.
The goal of recruitment remains the outcome, i.e., an employee who is a good fit for the position.
6. Training costs
This HR metric measures how much you have invested in your employee’s development. This is a helpful metric to track because it enables you to make smart decisions when developing your team’s skill set after being hired.
If you find that specific training has been giving the best yield, you can use it going forward with other employees. But if you find some courses that didn’t help, you can take them out of your program.
However, training costs should not be limited to new hires – more and more workers today wish for better job development and continuous learning.
Investing in employee development is an option often too little considered by HR management. Usually, the return on training costs is greater than the initial investment.
To find out if the training was successful, you can have a test session to evaluate the candidate’s performance based on the training. This will give you insight into the effectiveness of the training.
7. Employee productivity
When examined comprehensively, employee productivity is an intriguing HR KPI that considers multiple variables. This KPI is typically computed by dividing the total sales by the number of employees.
However, for a more in-depth analysis, consider the following factors that influence productive output:
Availability, i.e., the amount of time employees spent actively working.
Performance, or the amount of product delivered.
Quality, or the number of saleable products produced during that time.
This sounds more like a manufacturing-oriented strategy but can be adapted to different industries.
Aside from analyzing staff performance, productivity metrics can assist you in understanding how much your employees have done and how well they have done it, as well as modifying their working methods as needed.
Constantly measuring productivity can ensure greater profit and increase employee motivation and recognition. However, manually tracking productivity is inefficient and daunting.
Using tools like Kippy can automate the process and make monitoring your staff productivity KPI efficient.
8. Talent retention
You may not know, but hiring new team members is more expensive than retaining existing personnel. And the longer it takes you to hire them, the more expensive it is.
On the other hand, having exceptional, skilled, motivated employees is a true asset to your firm, and you should make every effort to keep them.
Instead of losing your staff, talent retention allows you to maintain and present them with excellent opportunities.
Talent retention can be measured and tracked by implementing a strategic talent management program.
The correct metrics will reveal who is leaving when they are leaving, and why. If you have this data, you can optimize your engagement and improve the performance of your staff.
9. Talent rating
The relevance of regular, constructive employee and internal feedback meetings is undisputed and is taken for granted in most companies today.
However, to evaluate its recruitment efforts, your HR department must measure the quality of your personnel.
For example, it may be established that employee assessments in the IT department are unsatisfactory, which may be due to erroneous evaluation criteria utilized during the recruitment process or missing and irrelevant examinations focused on the wrong themes.
To be able to identify such deficiencies and have an adequate overview of the quality of your employees at all times, you should develop an individual employee evaluation system (talent scoring) based on certain criteria, including:
The more individual and better your employee evaluation system, the greater the potential benefit of this KPI for HR managers.
You may also like: 8 Ways to Identify Key Talent (+Tools to Do It).
10. 90-day failure date
This KPI calculates the percentage of new hires who stay for less than 90 days. By examining and understanding this data, you can build an efficient recruitment process and a benefits plan that meets the demands of employees.
11. Turnover Rate
This KPI measures how many employees leave, whether voluntarily or involuntarily. It demonstrates your company’s effectiveness in retention initiatives, and, like the time to fill, it can help plan for talent replacement.
People who do not fit in with the company should ideally quit, which benefits both parties.
However, when your talents depart, it becomes an issue since it is permanent: people never, or very seldom, return.
People generally quit their supervisors rather than their jobs. This is why, if you have a high turnover rate, you should track the core causes and identify potentially problematic areas that need to be corrected.
Some good questions to ask include:
Why would you stay with us?
What are the things you like about our company?
Is it better than all the other organizations you have previously worked with?
Getting answers to questions like this will help you understand how you can decrease the turnover of high-performing employees. You can also offer them incentives that will appeal to them and make them stay.
Pro tip: Aiming for a low turnover rate is always better for satisfactory performance in the long run and lower recruitment costs in total.
You may also like: 5 Tools to Identify High-Potential Employees (Ranked!).
12. Manager feedback score
This KPI combines employee satisfaction and manager feedback scores to determine how managers influence the degree of satisfaction in the workforce.
It is an important measure to track because it allows the human resources department to identify areas where employees are uncomfortable with their superiors and address them to keep them from leaving the organization.
After all, people don't quit terrible jobs; they quit awful bosses, as the phrase goes.
In fact, according to studies, 57% of dissatisfied employees left because of their bosses. Demonstrating the importance of developing a trusting and supportive employee-manager relationship.
Pro tip: Look deeper into low manager feedback scores to find their reasons and develop practical solutions.
13. Average time stay
This HR measure calculates the average number of weeks, months, or years your employee stays with your organization. It is an excellent indicator of your company's attrition and tells you if you retain staff well.
Employee retention and satisfaction can be efficiently measured with the new staff position.
Since you already know how much it costs to hire and train a new employee, the longer they remain, the better! This allows you to get a higher return on your assets.
This indicator becomes even more valuable when combined with other KPIs, such as Employee Turnover.
14. Female to male ratio
This HR KPI is rarely utilized and is considered a taboo in many organizations. However, monitoring the female-to-male worker ratio, particularly in top-management roles, can reveal much about a company.
Some industries are highly gender-biased (for example, IT and engineering are dominated by males, whereas women dominate care and nursing).
This has historical and sociological explanations, but as societies evolve, it is critical to be aware of and foster diversity - not only gender diversity but also nationality diversity and curriculum diversity.
The more perspectives you gather, the larger your viewpoint and the more different your approaches and innovative possibilities. That is a tremendous competitive advantage in modern globalized economies.
15. Gender diversity by role
This KPI tracks the proportion of male vs. female/diverse personnel in leadership positions. As previously stated, many industries are still skewed toward men. As a result, this is a vital KPI to monitor when it comes to diversity because you want to guarantee that your business is varied at all levels.
Setting realistic goals is a fantastic method to ensure this.
For example, most companies globally aim to increase the proportion of female and diverse workers in management posts to 20% by 2025.
This might help you determine whether the actions you take are helping you achieve your end goal.
Consider measuring this KPI with other diversity groups like those with disabilities or ethnicity. This will allow you to ensure you are not biased towards any demographic group.
16. Overtime hours
Overtime is a good HR indicator to track because it reveals a lot about employees’ willingness to work around their schedules for the company’s sake. However, it could also signify a flaw in your work process, such as employees working more hours just to obtain the extra compensation.
HR’s job lies in figuring out the difference between the two.
If you notice a lot of overtime hours while your firm’s work volume has increased, there is nothing to worry about.
However, if there is no specific cause for a rise in overtime, you should be cautious, investigate the reason, and make necessary changes so that overtime occurs only when the company wants it.
Businesses should also take care not to overwork their personnel.
Employees who believe they are overworked will not be motivated by further compensation. And this can directly impact another of the HR KPIs we discussed earlier: the absenteeism rate.
17. Dismissal rate
This KPI is impacted by two significant factors: employee and employer terminations. Other influencing factors include the expiration of employment contracts, retirements, resignations due to incapacity to work, etc.
You can use the dismissal rate, one of the essential KPIs for human resources that focuses on lost talent, to monitor the quality of your recruiting measures transparently and understandably.
Examine it from several perspectives, such as the length of employment, teams, departments, or individuals for your junior specialists.
Pro tip: You should try to keep this KPI as low as possible, especially for your junior staff, as they will be your most valuable resource in the future.
Best practices and tips for measuring HR KPIs
Effectively measuring HR KPIs is important in improving human resource management and organizational performance.
Here are some best practices and tips to help you achieve accurate and meaningful measurements:
Define Clear Objectives
Start by asking yourself what you want to achieve. Are you aiming to decrease the turnover rate, improve employee satisfaction, decrease overtime hours, or something else?
By clearly defining KPI objectives, you can effectively identify, track, and measure HR goals that will impact your business most.
Identify your key metrics.
Identify the right metrics to track by working backward from your organization’s goals. Discuss with your company leaders, HR team, and key decision-makers across departments to agree on priorities and focus areas.
This will also help to avoid data overload.
Focus on the vital few
Resist the temptation to track too many KPIs, and don’t fall into the trap of collecting data you won’t be able to act on soon.
For example, if your organization can’t handle the HR-to-employee ratio, you don’t have to waste time calculating and reporting on it.
Ensure your HR KPIs align with your strategy
In an HR survey conducted by BambooHR, more than two-thirds of respondents who participated said that it’s extremely important to measure the impact of HR initiatives as it influences their organizational strategy.
If your company hopes to make informed, strategic choices for the future, ensuring your HR metrics align with your corporate strategy is a must.
Identify the right audience for each HR metric
Not every metric will be equally beneficial to every team. Some indicators, such as new-hire turnover or time-to-hire, will be highly beneficial to your recruiting staff but may be less relevant to your middle management.
SHRM advises us not to waste anyone’s time with metrics or analytics irrelevant to their responsibilities and decisions” to make HR metrics as beneficial as possible.
Conduct regular meetings to review HR KPI progress.
Take the time to evaluate your departmental scorecard regularly to evaluate areas where you may be underperforming and discuss potential metrics to improve or remove.
While having a defined meeting cadence is beneficial, ensure your department’s communication lines are always available.
Things change, and HR team members who live those metrics daily should be able to provide input at any time.
Visuals are handy for departmental meetings because they allow for quick performance assessment.
Dashboards, for example, capture a lot of KPI data and will enable you to display it to the group meaningfully.
Everyone can quickly see where they are running behind schedule, and you can direct the conversation to the problem areas.
Takeaway: Measure HR KPIs and enhance team performance profitably
HR KPIs are specific, measurable values that track how efficiently your human resources and strategies contribute to your company’s objectives. As we mentioned, there are many metrics to track, but not all of them are HR KPIs or significant.
Hence, choosing the right HR KPI relevant to your business is critical.
Measuring these HR metrics will provide HR teams with valuable insights to facilitate better decision-making and problem-solving in HR management.
However, manually choosing, tracking, and measuring them is stressful and time-consuming. Worse still, it comes with the risk of selecting KPIs irrelevant to your HR strategy and overall company objectives.
The good news is you can use a holistic KPI management tool to make the process effective. Kippy is a fantastic KPI tool that enables instant access to an infinite set of AI-generated KPIs based on your objectives.
Kippy will allow you to import, define, and monitor your HR KPIs, in addition to helping you cascade your strategic objectives to every layer of your organization.
Ready to seamlessly measure HR metrics and improve HR management processes? Schedule a demo today and see how Kippy can help.