The Best HR KPIs Aligned With Company Strategy

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This article will summarize a long research that was done for various kinds of HR KPIs. Below you will find the list of KPIs that I recommend for a Human Resource department. This is not another “50+ KPIs for HR” list. I’m giving you not just the KPIs, but detailed instruction about how to use specific KPIs and why I think these are the best choice for your business. I invite you to read the article, and then try to implement these HR KPIs in your business and share your experience in the comments.

Why do HR managers and executives need KPIs?

The goal of any HR specialist is to help a company achieve its business goals by finding and hiring the right people, and then training and managing them in the right way and ensuring the consistency of the process. While the goal and the strategy of HR might be clear, how could one tell that their HR department is on the right track? Is the HR strategy being executed effectively? Key Performance Indicators (KPIs) will help in this case, but only if applied according to certain rules.

Lagging and Leading KPIs

Before we start with HR KPIs let me explain that all KPIs can be divided into lagging and leading.
Two type of KPIs tell different stories about your HR
Lagging KPIs are focused on the past, and they measure the output. For example, the “Turnover rate” is a lagging KPI. Lagging KPIs tell the story about the current state of your HR, but they don’t tell you how to change this state.
Leading KPIs are focused on the future. Leading KPIs measure the input that should be introduced to achieve better results. For example, for the lagging KPI “Turnover rate” a leading KPI pair might be “Employee Engagement Rate.”
We could say that “Employee Engagement Rate” (leading KPI) is what influences the “Turnover rate” (lagging KPI). Don’t draw a conclusion that lagging KPIs are useless and what you need are leading KPIs only. It’s just two type of KPIs that tell you different stories about your HR; and you will need both of them. What makes a difference is how you are going to use these KPIs.

Leading and Lagging KPIs in BSC Designer

Users of BSC Designer can specify if the indicator is a leading or lagging one:
1. Go to the “Business goals” tab and find some business goal with an aligned KPI (or align some new KPI):
Indicators aligned to the business goal in BSC Designer
2. Select an aligned KPI and in the properties change “Indicator type” to “Leading” or “Lagging.”
Change the type of indicator to "leading" or "lagging" in BSC Designer
3. Switch to the “Strategy map” tab. Leading indicators will have a light green background, lagging indicators will have a light gray background:
Leading and lagging indicators visualized on strategy map in BSC Designer

HR KPIs Best Practice

A KPI by itself cannot be good or bad. Let’s take a “turnover rate” KPI as an example.
  • A bad HR manager only measures it without making any noticeable impact on a business.
  • A good HR manager can have the same KPI, but use it exclusively for top-performers and have a step-by-step action plan about how to keep top-performers in the company, thus making a measurable difference to the company’s outcomes as a result.
I’d like to summarize some best practices for HR KPIs here.
HR KPIs Best Practice

1. Define Cause and Effect Links

Before you start thinking about KPIs, define the strategic objectives that you have. The HR department is not a separate business; it works for the company, and it helps the company execute the strategy. Plus, it manages a company’s most valuable asset, its employees. Make sure that the HR department in your company understands how its activity is linked to the ultimate objectives of the company.

2. Align KPIs With a Specific Objective

KPIs are not a stand-alone measurement product. They are supposed to track your progress in achieving certain business objective. If you have a KPI, then it should be linked to some kind of business objective. If you have a KPI that is not linked to any objective, then probably you don’t need this KPI at this very moment as it has nothing to do with the company’s business objectives.

3. Add an Action Plan

If you have a business objective and a KPI, it means that you know the goal and you know your progress towards this goal. But nothing will happen unless you start doing something. Add an action plan to your HR KPI.  For example: if you measure employee engagement index in some way (that’s your KPI), what is your action plan to improve it?

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