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HR KPIs: Which metrics to measure as a People team

HR KPIs: Which metrics to measure as a People team

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With HR getting a seat at the table, HR metrics have become a key part of the overall business strategy. So it’s no surprise that more executives now want to see reports from their HR teams more often. 

This article will give you a quick digest of HR metrics you should have on your dashboard. You’ll also learn why these metrics are essential and how to measure them. Here are the themes we’ll cover:

  • Productivity and engagement metrics
  • Retention metrics
  • Diversity and inclusion metrics
  • Talent acquisition and development metrics
  • Career mobility and development metrics
  • Digital transformation metrics

Productivity and engagement metrics

Employee engagement

In the jungle of work life, it’s crucial to identify what makes employees happy and how engaged they are at work. Boiling down employee engagement into a single metric is impossible, but doing your best to measure it pays off.

Many companies are using dedicated tools to run extensive employee surveys or regular pulse surveys. The survey should be a combination of open and closed questions in order to get both quantitative and qualitative feedback from your team. This will give you valuable insight into what your organization could be doing to make people feel more engaged.

There will be some survey results that are more important than others, e.g. because they’re concerning or correlate strongly with retention. So you will likely pay close attention to a handful of topics and measure the positive, neutral, and negative responses over time.

Measure it – Example:

Employee Engagement Score = weighted average across 4-5 survey questions with maximum adding up to 10

Employee net promoter score (eNPS)

eNPS can serve as a starting point for understanding your employees’ loyalty. Instead of asking customers if they would recommend your product (NPS), you are asking your employees how likely they are to recommend your company as a place to work. 

When used in combination with more specific metrics, eNPS can be a good indicator of how your employees perceive the company, whether they are happy with its culture or whether there is a risk of attrition. 

Measure it: Ask ‘How likely are you to recommend your company to a friend or relative?’ with a scale ranging from 0 (not at all likely) to 10 (extremely likely). Then, group respondents into promoters (score 9-10), passives (score 7-8), and detractors (score 0-6). Subtracting the percentage of detractors from the percentage of promoters yields the eNPS. Your eNPS can, in theory, range from -100 to 100.

eNPS range of scores from 0 (not at all likely) to 10 (extremely likely). The % of promoters minus the % of detractors gives you the eNPS.

See our full guide to eNPS here.

Time to productivity

This is an important metric when it comes to determining the quality of your onboarding, training programs, and other internal processes. The faster your new hires reach their full productivity, the sooner your hiring investment pays off.

You can influence time to productivity by offering different onboarding and training experiences to your recruits. Define what it means to be a productive member of the team, then see how long it takes for your new recruit to reach this benchmark. Compare different onboarding experiences to find out which one is most effective.

Measure it: Time to productivity = Total number of days before new hires achieve their KPIs / number of new hires

Retention metrics

Employee attrition 

Employee attrition is the lifecycle of your workforce. It’s neither positive nor negative and it consists of both voluntary and involuntary employee leave. 

Employees may move away or retire. Whatever their reason for leaving your company, it often isn’t because they have an issue with you – it’s simply the result of life happening.

Measure it: Attrition rate = (Number of leaves ÷ number of employees) x 100.

Employee turnover

With employee turnover, you are measuring how many employees have left your company. This shows the success of your retention efforts. There are 3 types of turnover:

Voluntary turnover is when employees leave on their own terms. A high voluntary turnover rate suggests that there’s something about the experience you’re offering that employees dislike, whether it be compensation, professional development, culture, or a recent shift in your organization’s goals.

Involuntary turnover, on the other hand, is not on the terms of the employee, which means they are either laid off or fired. A high involuntary turnover rate suggests a problem with your hiring process. Whatever the reason, you have ended up hiring employees who just haven’t fit with your culture or business needs.

Regrettable turnover is when an employee’s departure from a company has a negative impact on the team or organization. In other words, the organization really regrets losing these employees thanks to the great performance and value they bring to the company. 

Measure it: Employee turnover rate = (Employees who left / average number of employees) x 100

Average tenure 

This HR metric tracks the average number of weeks, months, or years an employee stays within a company. It is efficient to measure both retention and employee satisfaction. This metric is even more powerful if measured alongside other KPIs like employee turnover rate.

Measure it: Average tenure = number of years of employment for each employee / total number of employees

Absenteeism rate

Absenteeism is one of the initial metrics to uncover dissatisfaction and is a strong predictor of turnover. People with low engagement are more likely to call in sick or skip some days of work. 

This metric can give information to prevent this kind of leave, as long-term absence can be very costly and put business finances at risk. Low absenteeism rates can improve team productivity and employee well-being.

Measure it: Absenteeism rate = (days absent / total potential working days) x 100

Diversity and inclusion metrics

Diversity & inclusion ratio

Workplace diversity and inclusion programs are not only “nice-to-have” People initiatives anymore. Measuring diversity and inclusion within your company is a key KPI that can help create a welcoming company culture that retains your employees and attracts top talent. 

D&I programs have a direct impact on a company’s internal and external perception. Higher rates of diversity and inclusion have also been found to correlate with more successful companies that are able to weather difficult circumstances and even financial recessions.

The D&I metrics include representation and compensation rates based on, for example, gender, age, disability, race, ethnicity. To start a successful initiative, it’s important to review your People data and find out where your company has gaps.

Spot any imbalances that could lead to turnover. Important data points to consider include the number of employees that identify as each gender and ethnicity at the company level, as well as by seniority and department. It’s also a good idea to include compensation data by demographic to keep an eye on pay equity at your organization.

Measure it – Examples:

Diversity ratio = Group A : Group B : Group C

  • For gender, this would be # men employees : # women employees : # nonbinary employees : # other employees

Pay gap = The difference between these two medians

  • [total salaries of women employees] / 2 = median, women
  • [total salaries of men employees] / 2 = median, men

Talent acquisition and development metrics

Best sourcing channels 

Recruiters nowadays use multiple channels when sourcing the best talent. It can be anywhere from inbound leads to social media channels, email campaigns and a wide variety of job boards. It is vital to find out not which channel brings the most candidates but which channel comes with the highest number of high quality candidates.

Measure it: Sourcing channel cost = ad spent per platform / number of successful applicants per platform

Average time to hire

This most commonly tracked metric looks at the number of days it takes from a job being posted to when an offer is accepted. This can provide further insights into the effectiveness of your employment brand, marketing efforts, and application process. 

A long time to hire can also provide a perspective on your interviewing process. You may have too long of an application process, too many interviews, unclear selection criteria, or a weak candidate experience. 

Measure it: Time to hire = ( Time to Fill position 1 + Time to Fill position 2 + … + Time to Fill position ‘n’) / # of roles recruited for in that time period

Candidate NPS (cNPS)

The candidate NPS score stems from Net Promoter Score, a widely used marketing metric. In this case, you are asking the candidate how likely she or he would be to recommend the recruitment process to a friend. You are getting real insights as this is a metric focused on your rejected candidates.

This will show you how the job candidate liked or didn’t like their hiring process experience, how they felt they were treated, and what they will most likely tell others about their experience with your company. 

Measure it: Similarly to the eNPS metric discussed earlier, start by asking your candidates this question: ‘Based on your experiences this far, how likely is it that you would recommend a friend to apply for a job here?’ with a scale ranging from 0 (not at all likely) to 10 (extremely likely). Then, group respondents into promoters (score 9-10), passives (score 7-8), and detractors (score 0-6). Subtracting the percentage of detractors from the percentage of promoters yields the cNPS, which can, in theory, range from -100 to 100. For cNPS, generally everything >0 is good and everything >50 is excellent.

Cost per hire

Cost per hire, as its name states, calculates how much it costs for a company to hire a new employee. It is a critical metric that indicates how efficient your recruitment process is. If not calculated well, it might cost your business some significant financial losses.

To figure out the cost per hire, you need to take into account the amount spent per hire, costs of job ads, the efforts put into the hiring process, the time taken to fill the position, and the value the recruit adds to the company. If this becomes disproportionate, then you need to revisit and optimize your recruitment process. 

Measure it: Cost per hire = money you spend on hiring, both the internal and external/total number of hires in a specific time frame – a year, a quarter, or maybe a specific campaign.

Offer acceptance ratio

The offer acceptance ratio measures the percentage of candidates who were offered a job and accepted your offer. This is a great indicator of how candidates perceive your company brand. 

However, if a company has a low offer acceptance rate, this could mean that there are issues with compensation, job title, employee benefits, or many other factors that would cause a candidate to decline an offer.

Measure it: Offer acceptance rate = the number of accepted job offers /  the total number of job offers.

Quality of hire

Quality of hire gives a strong indication of an HR team’s success in finding loyal talent. If low-quality talent is constantly being hired, this means that HR is wasting time and resources on the wrong candidates. 

You can measure this by a combination of the percentage of candidates who are ultimately hired with the percentage of new hires who stay on with the company. You can also incorporate manager satisfaction with a new hire via a short survey that’s conducted three months after the start date.

Measure it: Quality of hire =  [average quality of hire score + (100 – turnover rate)] / 2

Career mobility and development metrics

Internal promotion rate 

This is an awesome metric for understanding the character of your internal movement. It measures the number of employees who are promoted within an organization for every employee internally transferred. As employees move around internally, either via promotion or move to a different department, HR should be tracking changes to the organizational structure.

You should track data around promotions and advancements within an organization. It will help explain why you might have low employee satisfaction or high turnover rates. 

Measure it: Internal promotion rate = total number of promotions in a year / total number of employees.

Impact of training (30 days after completion)

Upskilling your workforce and ensuring that they have all the skills needed to be productive should be an integral part of your organization. 

One-off training will usually not be enough. Naturally, your employees will go through a forgetting curve that will need to be factored in. 

Measure it: Take the skill level directly after the course as a benchmark. Then, measure this metric after 30 days have passed in terms of application of new knowledge and improved job performance.

Participation level at Learning & Development programs

There’s no benefit in your learning and development programs if your employees are not taking advantage of them. HR should keep an eye on participation levels, especially after a new offering is announced.

You can directly use built-in analytics of your training platforms for insights into usage, course completion rates, social sharing, etc.

Measure it

Sign-up level at L&D program = (number of employees who signed up for program / total number of employees) x 100

Participation level at L&D program = (number of employees who actually attend program / total number of employees) x 100

Digital transformation metrics

Average amount of non-productive effort

This will become a more and more prominent metric to track for modern workplaces. As your company grows, a large number of processes will likely jump into the daily workflow, and not all of them will generate value. An employee effort rating tells you the number of hours put in every week to complete basic tasks that don’t add to productivity.

For example, there might be a lack of integration between attendance and payroll, compelling employees to manually register their login hours and leaves. By measuring this HR metric, you can shape a more engaging and productive workplace and better decide on suitable software that your company will use.

Measure it: This could be measured as part of your eNPS or recurring survey. By asking employees to share how much time they perceive as being “wasted” on these admin tasks, you will be able to gauge over time how your choices or changes affect the amount of wasted time.

Effectiveness of HR software

This is a more complex and hard-to-measure metric, as the effectiveness of software can differ a lot. However, these metrics enable HR to determine what works for the employees and what does not.

Measure it: The way you measure this will change based on the aim of the software/tool that you introduced. For example: The effectiveness of learning and development software is measured in the number of active users, average time on the platform, session length, and software retention.

Productivity with the new software

It is recommended to maintain a tracker for employee performance and plot digital transformation initiatives on their performance curve. This will reveal correlations (both positive and negative), helping you make smarter decisions on digital transformation in the workplace.

Measure it: Use a comparison point of a recurring survey (i.e. before and after using the new software). You can also get closer to the practices of user-testing, measuring things like time taken to complete a task, how many clicks to perform an action, etc.

We’re on a never-ending quest to find the most important HR metrics and the one People KPI that every CEO or team should look at on a weekly basis. Have ideas? Anything we missed in this list? Let us know in the comments.

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