Find out more about HR KPIs and how they can inform business strategy.
What Are HR KPIs?
An HR KPI, or key performance indicator, is a measurement that ties directly to your organization’s goals. HR KPIs contain important data about your company's human resources department, how it is performing, and how those results support the business as a whole.
You can gather data, track your KPIs, and compare them from month to month to see whether the HR department is making its appropriate contribution to accomplishing the organization’s business goals.
How Do HR KPIs Work?
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 human resources as a business unit.
Your HR KPIs will be different from the neighboring business unit’s KPIs. That’s because each department will have its own individual goals, which work together to achieve the overall goals and strategy of the business.
You can use HR KPIs to create a balanced scorecard, which is a kind of report that looks at a variety of different indicators to understand how a business is doing.
Creating an HR KPI Scorecard
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's or department's 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-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.
But say you’re hiring 50 new employees. In that case, “training cost per employee” is a reasonable KPI because there 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—as well as 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, 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.
Your scorecard should show the data you collected over time. One data point 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.
Types of HR KPIs
While you can have hundreds of different KPIs for human resources, 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.
When measuring the success of an HR department, key HR KPIs include:
- Employee absenteeism rate (for 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
- HR KPIs are measurements that indicate whether a human resources department is meeting its goals as they relate to the business.
- HR KPIs should be specific, measurable, and actionable.
- You can use a variety of HR KPIs to create a balanced scorecard, which will give you a broader overview of how the department is faring against its business goals.
- Simply having information isn’t good enough—you’ll need to act on it, and accurate, appropriate HR KPIs can help you to do so.