HR KPIs - The 12 Key Metrics To Track
by Tom Wright, on Jan 11, 2018 11:54:48 PM
HR KPIs are measurable values used by HR Teams to track and determine their progress on specific business objectives. These KPIs help determine how well HR Teams are performing. We've compiled the 12 best examples of HR KPIs as we continue building out our KPI examples mini-series.
For each KPI we've provided a brief description of what it might be useful for. We recommend that you create at least 2 KPIs for each of your key business objectives. If you're ready to start writing your own KPIs, we've created an easy 4 step formula to creating awesome KPIs
In this post, we're looking at examples of KPIs for HR teams. HR is a huge space, and there are literally hundreds of KPIs that you could be tracking. But as a starter for 10 (actually 12), we've identified 3 key areas where we think KPIs will have the biggest impact on the success of your organization. These are culture KPIs, talent management KPIs and employee efficiency KPIs.
HR KPI Examples
HR KPIs for understanding your culture
These examples of KPIs for HR are for helping you to understand whether or not your culture is where you want it to be. Culture plays a huge part in the overall success of the organization and is closely linked to other performance areas such as talent retention.
HR KPIs: eNPS
You've almost certainly heard of NPS, or Net Promoter Score. It's how we measure how likely a customer is to recommend our product or service to someone else. Well, eNPS is a simple but effective take on the same principle. Simply modify the question to suit employees, and measure it in the same way as described here.
HR KPIs: Absenteeism
High rates of absenteeism can be indicative of major problems with your culture. Whilst individual employees may have legitimate reasons for absence, you need to closely monitor the blended overall trend of absenteeism. This is especially so as your organization grows. The formula is (Total lost workdays due to absence) / (Number of available workdays) = (Absenteeism rate).
HR KPIs: Job Referral Percentage
Nothing is more indicative of strong culture than when you have a high rate of job vacancies filled by employee referrals. Employees will only refer their friends and family if they genuinely believe that they're working in a great place. A high rate of roles filled by referrals is not only indicative of a good culture but is also a very cost-effective way to hire low-risk talent.
HR KPIs: Turnover Rate of High Performers
Culture is important for everyone in the organization. High-performers are arguably the most sensitive to whether or not your culture is effective. That's because they tend to have a plethora of employment options, and can look beyond hygiene factors such as money alone. If your top performers are leaving, either you're not paying enough, OR you have a major problem with your organizational culture.
HR KPIs for understanding your talent
Your people are your strongest asset. Or at least, they should be. These HR KPIs are about helping you to understand how effective you are at managing and retaining your top talent. There's cross-over with the culture section above, so check out those KPIs first then move onto these more specific talent related HR KPIs:
HR KPIs: Internal to External Hiring Ratio
Hiring internally is almost always preferable to hiring externally. It's more cost-effective, a great way to retain talent and inspires others to build their careers at your organization. It's also reflective of the effectiveness of your training programs and talent management capabilities. Simply measure, of the hires in the last 12 months (rolling), what was the ratio of (internal hires: external hires).
HR KPIs: % of 'Cherish & Retain' Employees
If you're using a performance management platform, you'll be measuring not only employee performance but also their future potential for the organization. One of the most useful tools here is the 9-Box Talent Grid, which helps you measure those two dimensions of employee success in a fair and consistent way. Implement the 9-Box Talent Grid, and measure how many employees fall into the 'Cherish & Retain' group each year.
HR KPIs: Average Duration in Position
This is an interesting KPI, because you neither want it to be too high, nor too low. A low average duration indicates a poor job fit, either something wasn't right for the employee or the employer. But a high one can be indicative of a lack of career opportunities or stagnation in the workforce. It's tricky to say what a good average is, but I personally have found myself most engaged in organizations where I've moved (internally) every 18 to 24 months on average.
HR KPIs: Training Investment per Employee
Whilst this is very much a lead indicator, you should closely monitor how much you're investing in training and development. If you invest too little, it's likely that you'll either (a) struggle to develop top talent internally or (b) have top talent leave to pursue training and development opportunities elsewhere. It's again hard to say what a good number is here, but at Cascade we're aiming for a spend of around $2,000 per employee per year on direct training and development.
HR KPIs for understanding employee efficiency
When all is said and done, a large part of the HR function is around driving employee efficiency through a series of short and long term strategies and investments. These KPIs will give you an idea of how well you're doing overall as an organization in terms of the effectiveness of your HR:
HR KPIs: Revenue per Employee
This is one of the stats that almost all of the investors I've spoken to recently have said is important when they look at which companies to invest in. Whilst not a precise science, the revenue per employee (total revenue / total employees) is a good indicator of how efficient your overall organization is. Payroll is usually the biggest cost on the P&L. Organizations with a low revenue per employee rate don't tend to survive long. The key is to benchmark within your industry, as there is no 'right' answer for what this should look like overall.
HR KPIs: 3-Month Failure Rate
Most organizations have probation periods in their contracts with employees. But this doesn't protect you from the damage that a bad hire can cause. The amount of wasted money, time and energy that goes into bad hires (who don't make it through their probation) is a huge driver of overall efficiency. Measure how many employees failed before the 3-month mark, and try to manage this to be as low as possible.
HR KPIs: Average Time to Hire
Unfilled vacancies can be a killer to your overall productivity. The longer it takes to fill a role, the more cost you're likely to incur (both directly through recruitment and indirectly through opportunity cost of not having someone in the role). This could also be a sign that your culture or even reputation isn't where you need it to be. Don't try to manage this KPI directly, but rather monitor it and try to understand the underlying drivers.
HR KPIs: Average Time to Achieve Goals
We always like to finish these posts with a bit of a wildcard - if you're already using Cascade, you'll know that we're all about achieving goals. By using a goal management system, you can quantify exactly how effective your employees are at meeting the goals that you set for them, and how quickly they do so.
Hopefully you've found our examples of KPIs for HR teams useful! Next up, we'll be taking a look at KPIs for IT teams. If you're looking for a platform to help you create and track KPIs for your business, then look no further than our strategy execution platform Cascade!