Recommended HR KPIs

Here is a list of recommended KPIs for HR. Your choice of the specific KPI and the specific way to use it depends on your current business objectives. Each KPI in the list is a result of a detailed analysis. Before you start using a specific KPI, I recommend for you to follow the relevant link. Also, check “HR KPIs in the Balanced Scorecard” section with my recommendation of an automation software.

HR Hire

I know there are 20+ HR Hire KPIs that you might have found. The problem is that these KPIs have nothing to do with your strategy:

• HR Turnover (why it is useless and how to replace it)
• Time to fill (why it is useless and how to replace it)
• Actual versus budgeted cost of hire
• Average interviewing costs
• Female to male ratio

I suggest starting with this HR Hire KPIs:

• Time to find required number of qualified candidates. Learn more about this KPI in the article.
• Yield Ratio, %. (Number of leads from recruitment method / Number of candidates invited to interview) x 100%. 

Training and development

In my previous article, I have explained why some KPIs are pointless:

• Average training cost per full time employee, $;
• Average number of hours per full time employee, hours;
• % of HR budget spent on training;
• % of employees trained;
• Employee training satisfaction index.

Please start with the article first, then the list of KPIs below will make sense for you:

• Time reduction achieved, %. If the goal of the training was to do something more effectively or simply faster, then you might track it by a KPI.
• Cost reduction achieved, %.  If the goal of the training was to do something in a more effective way then you might track direct cost reduction, which is a result of the training.
• Return problems rate, %. The KPI is applicable where the problem is clearly defined and linked to the final result. By the way, a repeated problem is one of the negative drivers of customer loyalty.  If you are able to decrease this number, you’ll make your customers happier.
• Performance improvement, %. The KPI must be linked to a specific performance index. For sales people it might be the number of sales generated, for a copywriter it might be readers to leads conversion.
• Improved qualification/skills results, %. The KPI is applicable only to this training where actual qualification/skills are measured, not just the facts studied in the training.

Loyalty and Reward

• High performers’ turnover, %. Turnover rate for the high performance employee. Read more.
• Employee Engagement Index, %. The measurement of the employee engagement index was described in this article. There is a  separate Balanced Scorecard available for an engagement.
• Reward KPIs. I have shared best practices about reward KPIs in Compensation and reward KPI best practices. The general recommendation is to choose a compensation program according to current business objectives of the company and to avoid using reward KPIs linked to the performance of individuals as they are not helping to solve the motivational problem.

Finance

Most Finance KPIs for HR are lagging KPIs (see the explanation in “Lagging and Leading KPIs” section), you are free to use any kind of finance KPI that you wish to. But make sure you link it to some specific business objective. In most cases it won’t be an easy task, as one number that you don’t know is the ROI of certain talent in your company. I suggest you find a way how you can calculate this ROI. By having even an approximate result you will be able to improve any financial KPI for HR:

• Talent’s ROI to Improve All HR KPIs. Learn more about calculating Talent’s ROI.

Productivity

One of the lagging measures for HR that might make a difference:

• Revenue per FTE employee. Formula: (Total revenue / The number of FTE employees) x 100.

HR KPIs in the Balanced Scorecard

When you have your HR KPIs,  what are you going to do with them?

Why dashboards are dangerous

One thing that I find especially dangerous is using classical dashboards. They are nice-looking; and you can play a lot with a data, but let’s have a look at some limitations:

• You don’t have access to a cause-and-effect connection between your goals;
• You don’t see the alignment between KPI and the specific business objective;
• You don’t see the action plan.

I was writing about dashboards before in detail. My conclusion was that the best dashboard you can have is a strategy map with KPIs on it. On the strategy map you can see the cause-and-effect connection between objectives; and you can see the big picture of what is going on. In the form of KPIs you have a visual indication of your success. Check the above-mentioned article for the details.

Balanced Scorecard

If you decide to use the “Strategy Map + KPIs” approach then what you might use is a Balanced Scorecard framework. With the Balanced Scorecard you can achieve all the requirements for the winning KPIs:
1. You can build a cause-and-effect connection between business objectives;
2. You can align KPIs with specific business objectives;
3. You can add an action plan to each KPI.
I was writing about using a Balanced Scorecard Template, and you can follow the same steps applying them to the HR department.

Balanced Scorecard Software

As an automation tool I suggest using BSC Designer. You already have HR KPIs described in this article there.

View HR KPIs online What is more important is that this software allows creating a strategy map with strategic objectives linked by case-and-effect connection, and aligning KPIs to these objectives and adding an action plan to KPIs. Example from this article explains how to do this for HR.

Execute your HR strategy

When you have all your HR KPIs in the Balanced Scorecard you can start working with your HR strategy. Use an action plan that you have for specific KPIs, and ask your employees to report their progress back to the system.
When your company moves ahead you might need to revise your business objectives and as a result revise your HR KPIs. Do it regularly in order to make sure you are still tracking what matters.