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Human Resources (HR) analytics is an effective tool for human resource management. And the magic behind the analytics is the existence of HR KPIs or key performance indicators. HR KPIs can help HR make data-driven decisions for people management, hiring and retaining the best candidates that will help further the business’ objectives and help it grow.
HR analytics driven by HR KPIs is seen by companies as an effective tool for human resource management in the new normal post the pandemic when both at-office and remote work coexist in the same business. Management can make better decisions, and the benefits of their decisions are reflected across the organization at all levels.
What Are KPIs in HR?
KPIs in HR are measurable metrics that help assess the success of HR activities. Whether a company meets these HR KPIs in turn becomes a representation of its organizational strength and the effectiveness of HR.
HR KPIs vs. HR Metrics: What is the Difference?
HR KPIs and HR metrics are often used interchangeably, but there is a difference between the two. While HR KPIs refer to measurable metrics that decide how HR functions directly contribute to meeting the organization’s goals, an HR metric, though measurable, may only provide insights into workforce trends and may not align with any business objectives. In other words, every HR KPI is a goal-oriented HR metric, but every HR metric is not a KPI.
What Makes HR KPIs Crucial for Business Success?
HR KPIs and metrics are crucial for business success as they offer measurable insights regarding the workforce, enabling HR professionals to suggest new initiatives, track the progress of existing initiatives, and even align them with the business’ goals. This allows better employee management, in turn leading to business growth.
What are the Important HR KPI Best Practices?
To incorporate HR KPIs and metrics, HR leaders can take the following steps:
1. Shortlisting Key Interest Areas
Select the business priorities after consulting with the business management and then pick the HR metrics that are applicable.
2. Narrow the Selection of HR KPIs to Only a Few
Select a fixed number of HR KPIs that are most relevant and manageable over a certain duration.
3. Set Targets for Your KPIs
Look at industry standards and your company’s current standing and its vision to set a target for each KPI.
4. Use Data Management Tools
Use systems that help you gather the data efficiently, cleanse it and use it effectively for analysis.
5. Research HR trends
Research trends in the industry and in HR specifically and use these to suggest improvements to HR strategies.
6. Clear Communication to All Stakeholders
Communicate the results of KPI analysis to investors, the management and other key stakeholders and receive input from them.
7. Review and update the HR KPIs
Review the KPIs periodically and use the learning acquired in the process and real-world data to adjust and realign the KPIs.
How Can Effectively Incorporating KPIs Improve Company Culture?
Effectively incorporating a list of top HR KPIs and following them can improve company culture. This is because they reflect the way the employees engage with the company and among themselves. Take, for instance, any employee satisfaction metric or a team metric which tells how well a team is performing.
These could be crucial to understanding the way the employees have become a part of the company culture. If they are dissatisfied or things are not going well, then the policies or methods in HR can be tweaked accordingly to improve the atmosphere at work.
What Are the Top 10 KPIs in HR to Track?
There are different types of HR KPIs to track at each stage of the HR process right from sourcing to exit of the employee. Below is a list of the top 10 HR KPIs to track to ensure your business’ success.
1. Source of Hire
Type: Recruitment
Meaning of Source of Hire: Tracks where the company finds its new employees. Ultimately, it measures which platforms or channels are most effective in recruitment.
2. Time to Hire
Type of HR KPI: Recruitment
Meaning of Time to Hire: The total amount of time it takes for a business to hire a new employee. Ultimately, it is a measure of how reliable the recruitment process is.
3. Applicant Satisfaction Rate
Type of HR KPI: Recruitment
Meaning of Applicant Satisfaction Rate: Measures how satisfied candidates are with the hiring process from the initial sourcing to the interviewing phases, basically becoming a gauge of the candidate’s experience.
4. Onboarding Completion Rate
Type of HR KPI: Onboarding
Meaning of Onboarding Completion Rate: The percentage of candidates who complete the onboarding in each period is called an onboarding completion rate.
5. Onboarding Difficulty Rate
Type of HR KPI: Onboarding
Meaning of Onboarding Difficulty Rate: A measure of the overall difficulty of the onboarding process based on candidate experience.
6. Training Completion Rate
Type of HR KPI: Learning and Development
Meaning of Training Completion Rate: the number of employees who complete a training program within a given period
7. Training Program ROI
Type of HR KPI: Learning and Development
Meaning of Training Program ROI: Used to assess the financial benefits of training as compared with the cost of training.
8. Goal Achievement Rate
Type of HR KPI: Performance
Meaning of Goal Achievement Rate: It is a measure of the number of times a goal is achieved as compared with the number of attempts made.
9. Absenteeism Rate
Type of HR KPI: Employee Engagement
Meaning of Absenteeism Rate: The ratio of the number of unplanned absences in a month to the total number of working days.
10. Retention Rate
Type of HR KPI: Employee Engagement
Meaning of Retention Rate: the percentage of employees who continue to remain with a company over a certain period.
Why Should HR Leaders Care About KPIs in HR?
Here are some reasons why HR leaders should care about KPIs in HR:
- They help distinguish between productive teams and non-productive ones, and therefore impact on the bottom line.
- Give an idea of how inclusive and diverse the workplace is and help decide what can be done to improve diversity and inclusion.
- Give an idea of the engagement of employees across departments and help suggest what can be done to improve their performance.
- Suggest changes to learning programs by looking at completion rates, learner satisfaction and learning program ROI.
- They also give an idea of the efficiency of the HR team itself, looking at what tech is in use now, what the HR cost is per employee, and the expenditure on HR operations.
How to Overcome HR KPI Tracking Challenges?
Your business can overcome HR KPI tracking challenges by doing these things in particular:
- Communicating the importance of HR KPIs to the management and justifying the choices your HR team made.
- Having an HR data governance system in place, which governs how data is captured and how it is stored.
- Having technology that helps collect and analyze the data with maximum accuracy without giving up ease of use.
- Assigning the work of HR Analytics to the right stakeholders, both within the HR team and the management.
- Regularly review and refine the HR KPIs to align with the business goals and make them more meaningful to the management and business.
HR KPI Examples in Action
A company, ABC, sourced 15 hires from LinkedIn, 5 from Facebook, 10 from Glassdoor and another 12 from Indeed. So, we can conclude that when it comes to source of hire, LinkedIn is the most effective channel. But job boards saw a greater number of recruits in all than social media, which makes it more effective as a type of source. This is the importance of the source of hire HR KPI.
The same company hired its CEO, one of the candidates it hired in 22 days, which was the longest it took to hire someone, showing the relevance of time to hire, especially for strategic positions. The time to hire for a writer was very short (only 5 days), which shows that there must be a limit on the time to hire for positions that can be easily filled.
How to Select the Right HR Partner for Your Business?
Selecting the right HR partner for your business is very important for your business’ growth. You need to find a recruitment partner who understands HR analytics very well. They must also understand the processes in HR, get a good idea of your requirements, and be able to provide you with a solution to the problems you are currently facing. If they provide a dedicated relationship, that’s a great sign and showing their support will be great too.
Frequently Asked Questions (FAQs)
1. What Is the Best HR KPI Technologies and Solutions?
Solutions such as HRIS and HRMS tools help measure HR KPIs. Even some workforce management tools also help measure HR KPIs in general. When it comes to recruitment, ATS is a useful tool to measure and draw insights for HR KPIs.
2. What Are the Essential HR Metrics for Efficient Management?
The most essential HR metrics for efficient management can be divided into many types such as recruitment, compensation, employee engagement, cultural, onboarding and performance-related metrics.
3. How Can Tracking HR KPIs Improve Employee Retention?
Tracking HR KPIs can improve employee retention by looking at employee satisfaction scores, employee net promoter scores, cultural inclusion index etc. and improving them over time.
4. What Is the Most Important Recruitment KPIs?
The most important recruitment KPIs are cost of hire, time to hire, source of hire and applicant satisfaction rate. Most of these can be generated by very good ATS and candidate management software.
5. How to Use HR KPIs for Diversity and Inclusion Initiatives?
HR can look at KPIs like diversity percentage, employee ratings on diversity and inclusion training programs, and cultural inclusion index, to decide how diverse and inclusive the company is, and then decide what can be done to improve the workplace conditions.
6. What Are the Best Practices for Setting HR KPIs?
The best practices for setting HR KPIs are understanding the business priorities, setting the business goals, connecting the goals to HR metrics that are relevant, and assigning stakeholders to manage the HR KPIs.
7. What Are the Long-Term Benefits of Tracking HR KPIs?
The long-term benefits of tracking HR KPIs are many. Some of them are saving costs by investigating- and cutting cost-intensive practices, improving employee productivity, creating a better office and employee culture, and reducing the risk of non-compliance and legal problems.
Contact Us For Business Enquiry
Rajkumar Shanmugam
Rajkumar Shanmugam is the Head of HR at ALP Consulting, bringing over 19 years of comprehensive HR leadership experience across India and international markets. His expertise spans talent acquisition, employee relations, performance management, compliance, and HR transformation. Rajkumar has a proven track record of driving people-centric initiatives, enhancing workplace culture, and aligning HR strategy with business goals. With extensive experience in US staffing operations and global mobility, he continues to lead organizational excellence through innovation and employee engagement.
