HR KPIs: metrics you should be tracking

There are so many HR metrics that could be keeping you up at night. But what do you need to focus on to know you’ve succeeded in your strategy? And what can you bring to the board that is bound to impress? We explore the KPIs you’ll want to focus on, and why.

Why are KPIs important to a HR department?

All departments in your business will ideally have KPIs (or Key Performance Indicators) which track long-term performance against achieving your objectives. KPIs may be used at a team or individual level, and often provide focus for roles, guide decision making, and provide tangible milestones to measure success. In large teams they are often created in a hierarchical or ‘drip down’ structure, where wider business objectives are broken down into smaller and smaller chunks so all levels of the organisation contribute towards them.

HR KPIs typically include trackable metrics that measure processes related to recruitment, training, talent management and employee satisfaction. A KPI is only useful if it has a direct link with your overarching business strategy. Importantly, you should only be tracking the KPIs that are business-critical; they are called ‘key’ performance indicators for a reason!

KPIs will vary depending on the nature of your business, and the HR KPIs you do choose to track should support decision making for your business’ strategy.

Eight HR KPIs to track

Employee turnover

As the people-people of the business, many HR departments take ownership of employee turnover. Turnover rate calculates the proportion of employees that have left their job as a percentage of all of your employees in the same period. This may be due to termination, resignation or job abandonment, etc.

It’s no surprise that happy employees stay where they are for longer. A survey from clutch found that the most important workplace values for full-time employees are fair pay (55%) and fair treatment (54%). While salary goes a long way to keep employees in the workplace, and HR departments should be benchmarking salaries, employee retention feeds of a whole number of things, like employee benefits packages, wellbeing, engagement and much more.

Rate of absenteeism

Absenteeism can be costly; in fact, a recent report showed Britain’s poor record on health costs the economy £43 billion a year. While some absenteeism is normal in a business, we all get poorly or have an unexpected emergency crop up after all.

Monitoring your absence rate is helpful to identify any problems in your business in cases where it is higher than expected. Absence rate can be measured by individual, team, department or your entire business to understand any issues that are specific to one area of your business. It can also help to flag any underlying health and safety issues that are causing your employees to take more time off work.

Time to hire

Getting the right people in the right places will have a dramatic impact on business performance. So as the people putting staff there it seems only right that HR departments measure success against this.

Using this metric is helpful if you are forward planning for a growth phase. Time to fill tells you how long it takes you to fill an open position. This KPI is useful to plan your hiring and can help you to understand any lengthy stages in your recruitment process that are slowing down your time to fill.

Quality of hire

A crucial KPI to track if your business is going through a growth phase, quality of hire measures HR’s success in finding loyal, talented candidates. A low score could indicate an ineffective selection process, or the wrong recruitment channels are being used.

Quality of hire is often measured using a number of indicators: retention metrics, manager satisfaction ratings and performance metrics. You can also use performance reviews and manager feedback to gauge the quality of hire. If an employee is performing well, it stands to reason that they were a quality hire.

Time to hire

Similarly, another crucial KPI for growing businesses: the time it takes from a candidate applying for a role or being sourced to making a hire. Quick and efficient recruitment is essential when looking to get the right people into your business. This HR KPI is a measure of how long it takes you to identify the best candidate for a role.

Internal vs. external hiring ratio

Of course, hiring internally is significantly cheaper and often quicker than hiring externally. Although external hires often bring fresh perspectives and experience that internal hires.

This HR KPI can also highlight areas where employee progression is most common and where your people aren’t ‘growing’ internally. Understanding your ratio of internal/external hires can help your HR team to develop succession plans.

So how can you keep good people in your business? According to LinkedIn, 94% of employees would stay with a company longer if there was an investment in learning. So, if one of your key KPIs is retention it’s going to go hand in hand with employee development and training.  

Employee NPS score

Many businesses use Net Promoter Scores (NPS) to understand customer loyalty and satisfaction. It asks how likely they are to recommend your product or service to a friend on a scale of 0 – 10.

HR departments have turned to measuring this across their employee network too. Measuring employee satisfaction without HR Software is no easy feat. HR professionals use employee surveys to measure engagement and satisfaction, gauging employee happiness through things like pulse surveys. This allows you to understand the difference between your happiest employees (known as ‘promoters’) and you least happy employees (known as ‘detractors’). And more importantly, how you can make improvements across the board.

What to do next

Sick of pulling HR reports to see where you’re tracking against your KPIs? Sounds like you need a personalised HR Software demo.