What Are HR KPIs?
You Must Be Able to Measure HR KPIs for Them to Add Value
If you work in Human Resources, you’ve probably heard of the term HR KPIs and know that it stands for Key Performance Indicators. But, aside from the usual HR measurements, what does the term, HR KPIs actually mean in a Human Resources department?
What Are HR KPIs?
A KPI is a performance measurement that ties directly to your organization’s goals. Not all numbers are KPIs, but all KPIs have numbers associated with them. You can gather data, track your KPIs, and compare them from month to month to see whether the HR department is making their appropriate contribution to accomplishing the organization’s business goals.
Overview: How Are HR KPIs Selected?
All KPIs are tied to specific overall business goals, and as such, HR managers and stakeholders such as managers or senior staff need to work together to develop the appropriate KPIs for each business unit. Your HR KPIs will be different from the neighboring business unit’s KPIs. That’s because you have different goals even though, ideally, the goals of both units work together to achieve the overall goals and strategy of the business.
HR KPIs Leading and Lagging Indicators
Some HR KPIs are leading indicators and some are lagging indicators. Leading indicators help you figure out what the future will bring. For example, if you see an increase in sales, that might mean you should gear up to hire more employees to keep up with production demands. In a second example, the productivity of the workforce is a leading indicator of the amount of money the organization will need to expend in labor costs.
Lagging indicators tell you about the past—employee turnover is a lagging indicator of the employees’ job satisfaction and engagement. Employee sickness rate or absenteeism is a lagging indicator of the cost of labor.
You need both kinds of indicators in your Balanced Scorecard to predict future success and to track past events. As these examples demonstrate, the leading indicators are less precise, but they provide insight into the performance of a KPI over time.
The lagging indicator is more precise because the events have already occurred, but they only provide you with significant information after the fact. This allows for future changes in your business strategy but not for changes to the present.
Sample HR KPIs
While you have literally hundreds of different KPIs for different HR departments, the following KPIs are common ways to measure the success of an HR department.
As an HR department member, you will want to review this list of potential HR KPIs to determine which of these indicators will best demonstrate your HR department’s contribution to your business.
They are key because every business, for instance, wants to measure the turnover rate, as keeping valued employees on board is essential for business success. In regard to absenteeism, a manufacturing company that employs hourly workers and where every job needs a person on duty, must track rates of absenteeism. Consequently, businesses will want to measure employee engagement and employee satisfaction.
Sample HR KPIs
When measuring the success of an HR department, key HR KPIs include:
- Employee absenteeism rate (hourly employees)
- Benefits satisfaction
- Employee productivity rate
- Employee satisfaction index
- Employee engagement index
- Quality of hire
- Turnover rate
- Number of full-time, part-time, and contract employees
- Average tenure of an employee
- Average time to fill a job vacancy
- Cost per hire
- Training cost per employee
- Diversity rate
- Candidates interviewed per hire
How Do You Put an HR KPI Scorecard Together?
The first step in putting an HR KPI scorecard together is deciding on your goals. KPIs are value- and goal-based, which drives what you choose to measure. The second step is to choose KPIs that match your company or departmental goals and values.
Each KPI should be checked to make sure it meets the SMART goals criteria. Each HR KPI must be:
For example, if you believe that “Employee Turnover Rate” is a potential HR KPI but your organization experiences below industry average turnover already, your time will be better spent collecting data for a more informative KPI.
You may wish to choose “Training Cost per Employee” as a KPI, but if you only hire one or two people per year, this is not a relevant way to measure your success. If you’re hiring 50 new employees, then “Training Cost per Employee” is a reasonable KPI because it is a significant cost and time factor.
Next, you’ll need to determine the costs to include in the measurement of “Training Cost per Employee.” Consider the salary cost of everyone in the room—trainer and trainees, the cost of the room, materials, how long it takes employees to work independently with their new knowledge, and so forth. If you can’t measure it, the goal doesn’t work for an HR KPI.
You can input this information on a dashboard that gives up-to-date information, or put the information in a formal report. (Dashboards are often associated with Balanced Scorecard methods referenced above, but they can work for KPIs as well.)
While constantly up-to-date information is expected and needed from some KPIs, this doesn’t make a great deal of sense for every KPI. You don’t, for instance, need to look at turnover every day in most businesses.
What Else Should You Know About HR KPIs?
Your scorecard should show the data you collected over time. Today’s data tells you very little—what you want to know is whether this quarter is better than last quarter and whether you are predicting that your next quarter will be better still.
You also don’t want to get caught up in the panic of outlier numbers. One person quitting in a department of five people looks like a 20% turnover. But, if that was the only person to quit in the last five years, you have no need to panic.
Do Your HR KPIs Align with the Business as a Whole?
This is a critical step for selecting appropriate KPIs. As one HR KPI, you may be focused on reducing your cost per hire when the sales department decides to do a rapid expansion to support a new product. This means you need to hire external recruiting firms to get the job done. Naturally, that will increase your average cost per hire. This is important to note in your scorecard—you changed what you did to support the business in accomplishing this specific sales department goal.
Your goals should reflect your company’s needs. When you see your results, you’ll need to make changes if you aren’t achieving your goals to ensure your business will benefit. Doing the same thing and expecting different results is a waste of everyone’s time. having information isn’t good enough—you’ll need to act on it and accurate, appropriate HR KPIs can help you to do so.
Clear Point Strategy. "48 HR KPIs & Metric Examples (And How To Implement Them)," Accessed Oct. 29. 2019.
Clear Point Strategy. "A Full Balanced Scorecard Example (Including 6 Templates)," Accessed Oct. 29, 2019.
University of California. "SMART Goals: A How-To Guide," Page 3. Accessed Oct. 29, 2019.