HR Key Performance Indicators - How to use them in the best way

HR strategy

All HR starts with the HR strategy and it includes:

1. Workforce planning
2. Retention
3. Development

To measure our impact in the organisation we are using Key Performance Indicators (KPIs). 

KPIs and targets are related concepts but have distinct differences.

Here's a comparison between KPIs and targets:

• Definition:

  • KPIs are measurable metrics that help organisations track and evaluate their performance in relation to specific goals or objectives. They provide a quantitative or qualitative measure of progress and success in achieving desired outcomes
  • Targets are specific goals or objectives that organisations set to define the desired level of performance or achievement. Targets are typically defined in terms of specific metrics, such as revenue, market share, customer satisfaction or efficiency

• Focus:

  • KPIs focus on measuring performance and progress. They provide ongoing monitoring and analysis of key metrics to assess whether an organisation is moving towards its goals or objectives
  • Targets establish a clear desired level of performance or outcome that an organisation aims to achieve. They set a specific benchmark or milestone for success

• Relationship:

  • KPIs are often used to measure progress towards achieving targets. They provide a means of tracking and evaluating performance against the desired outcomes or targets set by the organisation.
  • Targets are the specific goals or objectives that an organisation aims to reach. They serve as a reference point for evaluating the success or failure of performance as measured by KPIs

• Flexibility:

  • KPIs can be more flexible and adaptable than targets. They can be adjusted or refined over time based on changing circumstances, priorities or strategies
  • Targets are usually set for a specific period and are less flexible. They provide a fixed goal to work towards within a defined timeframe

• Performance Assessment:

  • KPIs are used to assess performance by comparing actual results against predefined benchmarks or historical data. They provide insights into trends, patterns and areas that require improvement or intervention
  • Targets are used as a reference point to evaluate performance. They indicate whether the organisation has achieved or exceeded the desired level of performance

• Granularity:

  • KPIs can encompass a range of metrics and indicators that provide a more comprehensive view of performance. They can be both quantitative and qualitative, covering different aspects of the organisation's operations, processes and outcomes
  • Targets are typically more specific and focused. They set a specific, measurable goal for a particular metric or objective

In summary:

KPIs are the measurable metrics used to track and evaluate performance, while targets are the specific goals or benchmarks that an organisation aims to achieve.

KPIs provide ongoing monitoring and assessment of performance against targets, allowing organisations to gauge their progress and take corrective actions if necessary.

With this in mind we are ready to focus on specific HR KPIs. 

HR KPIs

Human resources KPIs are measurable metrics that help organisations evaluate the effectiveness of their HR functions and assess the overall performance of their workforce.

KPIs vary depending on the organisation's goals, but here are some common HR KPIs:

• Employee turnover rate: Measures the percentage of employees who leave the organisation within a specific period. High turnover rates may indicate issues with employee satisfaction, engagement, or retention strategies

• Time to fill: Measures the average time it takes to fill a vacant position. This KPI indicates the efficiency of the recruitment and selection process and helps identify bottlenecks or delays in hiring

• Cost per hire: Calculates the average cost incurred to hire a new employee. It includes expenses related to advertising, recruitment agencies, interviewing, background checks and onboarding. This KPI helps evaluate the effectiveness of recruitment strategies and cost containment efforts

• Absenteeism rate: Measures the percentage of scheduled work time that employees are absent from work. High absenteeism rates may indicate issues with employee morale, health or work environment and culture

• Employee satisfaction: Measures the overall satisfaction level of employees within the organisation. This can be assessed through surveys, interviews or feedback mechanisms. Higher employee satisfaction typically leads to increased productivity, engagement and retention

• Training and development effectiveness: Measures the impact of training and development programmes on employee performance and skill enhancement. This KPI can include metrics such as training hours per employee, training programme evaluation scores or the percentage of employees who apply newly acquired skills

• HR to employee ratio: Calculates the number of HR staff members relative to the total number of employees. This ratio helps assess the HR department's capacity to support and meet the needs of the workforce effectively

• Diversity and inclusion metrics: Measures the representation and inclusion of diverse groups within the organisation. This can include tracking metrics such as gender diversity, ethnic diversity, leadership diversity and employee feedback on inclusion efforts

• Performance appraisal effectiveness: Measures the quality and effectiveness of the performance appraisal process. This can include metrics such as completion rate, timeliness and employee satisfaction with the appraisal process

• HR Cost per employee: Calculates the average HR cost per employee, including salaries, benefits and other HR-related expenses. This KPI helps assess the efficiency of HR operations and cost management

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