Human Resource KPIs: 5 KPIs You Should Consider

Editor's Note: Take a look at our featured best practice, HR Strategy: Job Leveling (26-slide PowerPoint presentation). Job Leveling is a disciplined approach to gauge the value of work for individual positions across the organization. It entails ascertaining the nature of work done by each position, authority levels, and the effect of each job on business results. Jobs that are configured inadequately bread [read more]

Also, if you are interested in becoming an expert on Human Resource Management (HRM), take a look at Flevy's Human Resource Management (HRM) Frameworks offering here. This is a curated collection of best practice frameworks based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. By learning and applying these concepts, you can you stay ahead of the curve. Full details here.

* * * *

Bill Gates said, “In business, the idea of measuring what you are doing, picking the measurements that count like customer satisfaction and performance… you thrive on that.” This shows the importance of measuring performance. Human resources tasks are critical to organizational development, reinforcement, and cultural change.

Human Resources key performance indicators (HR KPI) are strategic tools employed by the human resource in actualizing organizational goals and strategy. This is an evaluation tool to measure performance. Human resources KPIs mirrors the general performance of an organization and that of the departments and individuals.

They serve as pointers for the human resource department in general to establish their contributions towards the organization as a whole. The importance of KPI in HR is vast. They serve as checks and balances to evaluate HR strategy. And like the words of Bill Gates, you thrive on that.

As a human resources manager or department, it is vital to apply key performance indicators to examine processes related to recruitment, training, talent management and so on. Paying close attention to human resources, key performance indicators are meant not just for human resource managers or human resource departments alone but also for everyone who has a role to play in the organisation’s development.

Key aspects of HR that reinforces the KPI to consider. Pay, performance management, training and development, recruitment and reinforcing the business’s values are all essential elements of business culture covered by HR.

Every KPI is unique to each organization, depending on its goals. The following are the most vital five indicators to consider as the world gradually eases back to normalcy from the global pandemic. These indicators would help the success of human resources and subsequently that of the organization.

1. Employee Performance/Productivity: Performance and productivity have a Siamese relationship and an essential task of Human Resources. Given this, a measure of productivity through either effort or result is an important KPI in any organization. Performance rating and productivity rating as a human resource key performance indicator go beyond the employee alone. It is an overview report and analysis that ensures you have the correct number of employees and is functioning at a task they are best optimized to handle. This indicator can be measured by keeping track of the individual or department’s substantial task. Performance and productivity also have various KPI’s to measure this indicator. An example of an indicator to measure productivity/performance is a reward-based performance review.

2. Turnover: Turnover is another indicator to measure human resource performance. This is an indicator that measures the number of employees leaving the organization. This number should not be high as a high turnover rate implies an additional recruiting cost. Turnover can be retirement, voluntary, involuntary or unwanted. Retirement is employees leaving because their tenure is over. This should not be high as this can be a pointer that such an organization is losing experienced employees. Involuntary turnover is resignation instigated by the employer. Voluntary turnover, on the other hand, is resignation instigated by the employee. Unwanted turnover is when the good hands are leaving. Irrespective of turnover, it is important to pay attention to this indicator.

This is because they are an indication that the organization is losing money, competence, and possibly a negative stain on its recruitment process, as ex-employees would propagate any perceived bad experience and make talent recruitment a tedious process. Indicators that can further measure turnover includes annual voluntary employee turnover rate, average performance scores of departing employees, new hire retention rate, amongst others.

3. Talent Retention: Retaining talent is another key performance indicator. It is efficient in estimating the time an employee spends in an organization. The rate of employee turnover is a good indicator to estimate the number of employees staying back.

This is important because having to hire a new employee and train them up to speed is costlier and time consuming hence the need to pay close attention to talent retention as an HR KPI. Indicators to further help talent retention asides turnovers are talent management program and employee retention calculation.

4. Employee Satisfaction: The satisfaction of an employee is important to retain such an employee. This is a very important performance indicator that determines what happens for turnover and talent retention. Why it is important to pay close attention to this indicator is because there might be no indication until an employee hands in their notice of resignation. And by then, it would be too late to salvage the situation and subsequently affect turnover and talent retention.

5. Absenteeism Rate: This is still very relevant irrespective of the current ” remote work” culture that is currently being adopted by various organizations. Absenteeism is a key performance indicator that measures the days an employee was absent as compared to the official days expected to be present. Not showing up to work is an indication that there might be an underlying problem that needs to be handled. The problem could be an indication of an unhappy employee or being unfit for the organization’s cultural practices. Applying this indicator would help uncover the problem and handle it appropriately.

In conclusion, every human resource KPI is unique to each organization. And above all, all five KPI’s should be considered as they would enhance human resource management and optimize every role of the human resource of an organization.

Want to Achieve Excellence in Human Resource Management (HRM)?

Gain the knowledge and develop the expertise to become an expert in Human Resource Management (HRM). Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. Click here for full details.

The purpose of Human Resources (HR) is to ensure our organization achieves success through our people. Without the right people in place—at all levels of the organization—we will never be able to execute our Strategy effectively.

This begs the question: Does your organization view HR as a support function or a strategic one? Research shows leading organizations leverage HR as a strategic function, one that both supports and drives the organization's Strategy. In fact, having strong HRM capabilities is a source of Competitive Advantage.

This has never been more true than right now in the Digital Age, as organizations must compete for specialized talent to drive forward their Digital Transformation Strategies. Beyond just hiring and selection, HR also plays the critical role in retaining talent—by keeping people engaged, motivated, and happy.

Learn about our Human Resource Management (HRM) Best Practice Frameworks here.