Your guide to HR KPIs: Tracking what truly impacts your workforce

Key performance indicators (KPIs) are a pivotal business tool used by nearly every company regardless of industry, and at nearly every level of leading corporations.

Human resources KPIs are metrics that specifically measure the effectiveness of HR strategies and how the activities of human resources align with overall business goals and organizational performance.

These KPIs are important for any modern HR department if they want to make data-driven decisions that truly make a difference to the business and its workforce.

Often dubbed 'people analytics', they can significantly improve how organizations identify, attract, retain and develop talent. Businesses utilizing HR metrics can see an 80% increase in recruiting efficiency, a 25% rise in business productivity, and a 50% decrease in attrition rates.

37% of companies in the top performance quartile report using such KPIs compared to just 1% in the lowest performance quartile.

In this guide for HR managers, we delve into what HR KPIs are, why they matter, and how to measure them effectively.

What are HR key performance indicators, and why do they matter?

HR key performance indicators are measurable values tied to workforce and business goals. They provide an in-depth, data-led understanding of HR performance, practices, programs, and processes and how these impact facets of the business.

They can also be used to identify trends such as why an organization struggles to retain high performers or which recruitment strategies are most successful.

Tracking HR KPIs is essential for:

• Aligning HR activities with business objectives.
• Identifying drivers of high performance and engagement.
• Making data-informed decisions to address workforce challenges.
• Streamlining the recruitment process and diversifying hiring.
• Benchmarking against industry standards and competitors.
• Understanding how HR strategies and programs influence employee productivity.
• Anticipating and addressing staffing needs.

Common challenges in tracking HR KPIs

Despite their importance, tracking HR KPIs comes with challenges that can hinder the extraction of meaningful insights. These include:

• A lack of access to accurate, real-time data, especially if HR data is spread across multiple systems or departments or there isn't a standardized data entry method.
• Difficulty aligning KPIs with broader business strategies.
• An overemphasis on quantitative metrics which can lead to overlooking qualitative insights such as employee satisfaction.
• Too much focus on metrics that don’t drive actionable insights.
• Limited budget, tools, and personnel to collect and evaluate data effectively
• Meeting ethical, legal and compliance standards for data collection and storage and employee privacy.

Core categories of HR KPIs

HR key performance indicators can be grouped into core categories that reflect the essential functions of human resources within an organization.

These categories help businesses monitor key areas such as recruitment, employee productivity, satisfaction, retention, and workforce efficiency.

By breaking key HR metrics into these distinct areas, organizations can gain a clearer picture of the effectiveness of HR initiatives and identify opportunities for improvement.

Recruitment and hiring metrics

Recruitment and hiring metrics evaluate the efficiency and effectiveness of an organization's recruitment processes.

These metrics often include recruitment costs, such as advertising, agency fees, and internal resources, alongside data on time-to-hire and candidate quality.

They also track new employee success rates, ensuring hires align with the organization's goals and culture.

Recruitment and hiring KPIs include:

• Application completion rate
• Candidate call-back rate
• Candidates per hire
• Employee referrals
• Fill rate
• Time to hire
• Cost per hire
• Quality of hire

Employee engagement and satisfaction metrics

These key HR KPI metrics are designed to assess how invested and fulfilled current employees feel within the organization. Measuring employee satisfaction and tracking employee engagement metrics like participation in initiatives or feedback scores, provide insights into the health of the company culture.

By understanding these factors, organizations can take targeted steps to improve workplace morale and retain talent.

KPI data focused on employee engagement and satisfaction includes:

• Employee Net Promoter Score (eNPS).
• Employee engagement score
• Employee satisfaction score
• Pulse survey participation rates
• Absenteeism rate

Retention and turnover metrics

Retention and turnover rate KPIs focus on understanding workforce stability by analyzing the total number of employees compared to employee departures over a given period. Such metrics provide insight into how well an organization retains its talent and identify patterns or reasons behind turnover.

Monitoring these rates helps businesses address issues that may affect employee satisfaction and loyalty.

HR KPI measures for retention and turnover include:

• Voluntary turnover rate
• Involuntary turnover rate
• Turnover rate by department, manager or position
• Employee retention rate
• New hire retention
• Average tenure
• Cost of turnover
• Empty positions

Productivity and performance metrics

Human resources KPIs related to productivity and performance assess how effectively employees contribute to organizational success and the factors influencing their output. These metrics include the employee productivity rate and indicators like training hours, training costs, and the impact of training programs on employee performance.

By evaluating training and development efforts alongside productivity levels, organizations can optimize employee training to enhance overall performance.

Productivity and performance metrics also include:

• Revenue per employee
• Goal completion rate
• Training effectiveness score
• Task completion rate
• Customer satisfaction score
• Human capital ROI
• Overtime per employee
• 360-degree feedback

Diversity, equity, and inclusion (DEI) metrics

Diversity, equity, and inclusion (DEI) metrics evaluate how well an organization fosters a workplace that values and supports individuals from varied backgrounds. These KPIs track data on representation across different roles, pay equity, the inclusivity of HR processes, and hiring and promotion practices.

By measuring DEI, organizations can identify areas for improvement and build a culture of fairness, belonging, and opportunity for all employees.

Important HR KPI metrics related to DEI include:

• Gender and racial representation
• Pay equity analysis
• Employee perception of inclusivity
• Diversity in company leadership
• Employee resource group (ERG) participation
• Accessibility
• Partners and vendor collaboration

Employee benefits KPIs

Employee benefits KPIs focus on the effectiveness and utilization of the perks and benefits offered by an organization. Through tracking employee benefits KPIs, organizations can ensure their offerings align with employee needs and contribute to overall job satisfaction and retention.

Employee benefits HR KPI examples include:

• Benefits utilization rate: Percentage of employees who use the benefits offered.
• Cost per employee for benefits: Total cost of benefits divided by the number of employees.
• Employee satisfaction with benefits: Measured through employee satisfaction surveys and feedback mechanisms.
• Enrollment rates for key programs: Participation in offerings such as health insurance, retirement plans, and wellness programs.
• Impact on retention: Correlation between benefits satisfaction and employee turnover rates.
• Return on investment (ROI) of benefits programs: Assessing the value derived from benefits versus costs incurred.
• Leave utilization metrics: Monitoring usage patterns for parental leave, sick leave, and PTO.

How to select the right HR KPIs for your organization

Before any HR team can start tracking KPIs, they must first choose appropriate metrics that align with one another and the overall goals of an organization, for example, growth or employee retention.

Key tips for selecting suitable key performance indicators:

• Involve leadership in identifying priorities.
• Consider industry benchmarks for competitive insight.
• Use employee feedback to guide engagement and satisfaction metrics.
• Create specific, simple-to-understand metrics.
• Ensure each KPI provides something tangible to track.
• Make sure KPIs are attainable. If they're unreachable, this may affect the morale of the HR department.
• Setting a realistic time frame for each KPI.
• Assigning the tracking and reporting of KPIs to key people.

Mistakes to avoid when selecting KPIs

Selecting the right KPIs is essential to ensure meaningful insights and effective decision-making. However, common mistakes can result in data that is irrelevant, misleading, or even counterproductive. Avoiding these pitfalls is key to building a strong foundation for tracking and analyzing HR performance.

When selecting KPIs, try to avoid:

• Focusing on too many metrics at once
• Relying on outdated or irrelevant data
• Ignoring qualitative data that complements KPI findings
• Focusing solely on short-term goals
• Overlooking benchmarking    

Tools and techniques for tracking HR KPIs

Tracking HR KPIs effectively requires the right tools and techniques to collect, analyze, and present data in meaningful ways. These may vary depending on the size of your organization and the industry you operate in, but there are some key strategies worth considering.

Using HR technology

There are many different software and platform options that make capturing and displaying HR data straightforward. For example:

• HR analytics platforms for centralized reporting: These platforms collate data from various HR functions, providing a comprehensive view of metrics like turnover rates, employee satisfaction, and performance in one place.
• Applicant tracking systems (ATS) for recruitment KPIs: ATS streamline hiring processes by tracking key recruitment metrics, such as time-to-fill and cost-per-hire, ensuring more efficient talent acquisition.
• Employee engagement platforms for real-time insights: Tools like pulse surveys and feedback platforms offer instant insights into how employees feel, enabling proactive engagement strategies.
• Working with vendors for benefits analytics: External agencies and employee benefits platforms can provide detailed analysis of benefits utilization and cost-effectiveness, helping organizations optimize their offerings.

Visualizing your data

The sheer amount of data collected when tracking HR KPIs can make it overwhelming and difficult to glean valuable insights from when kept in its raw form. Presenting the data in a more visual manner can make it easier to understand and spot patterns and ultimately, lead to better decision-making.

• Dashboards for at-a-glance understanding: Interactive dashboards present complex data in a clear, visual format, making it easier to track progress and identify trends at a glance.
• Regular reporting to track trends over time: Generating consistent reports ensures that the HR department can monitor changes, measure success, and identify areas for improvement over months or years.

Benchmarking performance

It can be beneficial to measure HR KPIs against industry standards and your own organization's historical performance to help ensure that current performance is aligned with best practices and helps move the business towards its goals.

• Comparing against industry standards: Benchmarking KPIs against peers in the industry helps identify competitive advantages and areas requiring attention.
• Analyzing historical data for long-term insights: Tracking metrics over time provides context for current performance and helps predict future trends, enabling strategic workforce planning.

Examples of actionable HR KPI strategies

There are plenty of HR KPIs to choose from but before you begin to formulate your tracking plan, let's look at some HR KPI examples and how using data-driven insights to make strategic decisions can enhance overall performance and employee satisfaction.

Improving employee retention

• Use exit interviews to address high turnover areas: Gather feedback from departing employees to identify common reasons for turnover and target specific areas for improvement.
• Enhance onboarding experiences based on retention metrics: Use retention data to refine onboarding programs, ensuring every new employee feels supported and integrated from day one.

Increasing employee engagement

• Monitor pulse surveys to identify areas of improvement: Regularly assess employee sentiment through short surveys, using the feedback to address concerns and improve workplace culture.
• Introduce recognition programs for high-performing teams: Foster a positive work environment and boost morale and motivation by acknowledging and rewarding top performers, as identified by KPIs.

Strengthening recruitment outcomes

• Adjust job postings to target better-qualified candidates: Analyze recruitment data to refine job descriptions and target the right candidates who align with the organization’s needs.
• Improve interview processes using feedback from quality-of-hire scores: Use feedback from new hires and hiring managers to continuously improve interview questions, processes, and selection criteria.

Enhancing employee benefits KPIs

• Boost benefits enrollment: Simplify enrollment processes and increase education about available benefits.
• Improve satisfaction with benefits: Use focus groups or surveys to identify gaps and enhance offerings.
• Optimize cost-effectiveness: Regularly review benefits ROI and adjust to ensure maximum value for employees and the company.

Why HR KPIs are crucial for future workforce success

In today's data-driven world, HR KPIs are essential for making informed decisions that drive business success and enhance employee satisfaction.

Focusing on KPIs ensures agility in adapting to changing workplace dynamics, allowing HR leaders to respond quickly to emerging trends. By starting small, prioritizing high-impact metrics, and leveraging technology, organizations can streamline data analysis for better outcomes for all.

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References

• People Analytics | McKinsey & Company 
• HR KPIs: Guide, 20 Examples & Free Template
• 12 Employee Turnover and Retention KPIs to Measure in 2024
• 16 Employee Turnover and Retention Metrics to Track
• Recruiting Metrics Cheat Sheet
• Navigating 6 Challenges of People Analytics
• Judging Success by the Numbers: How an Overemphasis on Performance Metrics Can Damage Your Organization
• 23 Employee Performance Metrics To Track
• 9 DEI metrics and KPIs you should be tracking (+ examples)
• 12 Key DEI Metrics To Track For An Inclusive Workplace
• Measuring HR KPIs: Best Practices and Tips
• The 10 biggest mistakes companies make with KPIs‍
• Whitepaper on People Analytics Data-Driven Decisions in HR