HR metrics and KPIs help human resources (HR) professionals guide the development of their organization and track its efficiency.
Peter Drucker, management guru, famously stated: “What gets measured, gets managed.”
These measurements show the methods that are working, aren’t working, and where to focus future efforts. But what measurements should HR professionals be tracking to drive their organization toward success? Let’s take a look at some key metrics.
What are HR Metrics?
Human resources metrics, or HR metrics, provide data on a business’s performance.
What are Key Performance Indicators (KPIs)?
Key performance indicators, or KPIs, are quantifiable measures of performance over time for a specific objective. KPIs clearly articulate what an organization needs to achieve to reach its long-term objectives.
- Goals a team should aim for
- Milestones to measure progress, and
- Insight from team members across the organization
Successful strategic plans may have between five and seven key performance indicators to keep a pulse on how a team is performing.
What’s the Difference Between HR Metrics and KPIs?
While ‘HR metrics’ and ‘KPIs’ are often used interchangeably, there are a couple of important differences.
We like to break it down like this:
Key performance indicators help to define strategy and provide a clear focus for an organization. Metrics are measures of everyday activities that add value to an organization but aren’t the critical measure for achievable goals.
Think of it like this: Every KPI is a metric, but not every metric is a KPI.
For instance, ‘organic inbound website traffic’ is an example of a metric. While this metric is important to track, it is not as considered, or clearly defined as, a KPI.
An example of a KPI would be ‘targeted new clients per month.’
Now that we understand what each of these measurements is, let’s dive into what HR metrics and KPIs you should be tracking.
What HR Metrics You Should be Tracking
HR metrics help HR professionals understand and maintain efficiency in the daily operations of their organization.
While there are dozens of important HR metrics, let’s focus on a few that may be valuable for your business:
Quality of Hire
Quality of hire is an essential metric for evaluating the effectiveness of an organization’s hiring process.
A healthy quality of hire metric shows that:
- The hiring team brings in good people
- Managers support retention efforts, and
- New hires are consistently thriving in their roles
However, attempting to define this measurement can be difficult.
HR professionals may choose to review turnover, performance reviews, and hiring manager satisfaction as proxy measurements. The combination of these results can help indicate if a new hire is happy and performing well in their position.
Demographics and Diversity
Diverse teams are necessary for any company–but they don’t build themselves! HR professionals and hiring teams should be making cognizant efforts to build and maintain diverse teams.
To gain an understanding of their company’s demographics and diversity, HR professionals can analyze data such as the gender diversity ratio and pay gap.
Let’s take a brief look at each of these metrics.
The Gender Diversity Ratio
This ratio helps HR professionals determine whether there is an equitable or fair representation of different genders within a company. While this metric is most commonly used to measure the ratio of men vs. women, it can also include people who identify as non-binary or other gender identities.
HR professionals can make closing pay gaps a priority in their organization.
In the United States, the gender pay gap between men and women is approximately 18%. However, this gap varies by race and ethnicity as well.
According to the Bureau of Labor Statistics, white women earned 82% as much as white men, black women earned 85% as much as black men, and Asian women earned just 70% as much as Asian men.
By reviewing these gaps, HR professionals can understand their organization’s culture and how their policies apply to different gender groups.
Absenteeism rates are important for HR professionals to review because they can indicate poor management, employee burnout, workplace stress, and/or employee disengagement.
If an HR professional notices an employee is taking short absences regularly, they can schedule a 1:1 to check in on their health, well-being, and company satisfaction.
What KPIs You Should be Tracking
Time to Fill
Time to fill is the measure of days a company takes to fill an open position from the date the job is listed to the date the new hire accepts the position.
This metric is often expressed through dividing the total number of days for each position by the number of new hires or positions filled.
Typically, organizations measure time to fill for external candidates because hiring internal candidates includes a different process.
The Society for Human Resource Management (SHRM) set the benchmark for time-to-fill at 42 days.
Employee Turnover Rate
High employee turnover can have a range of negative effects on an organization. For example, high turnover can be costly, cause reduced morale, and make it difficult for employers to hire and retain high-potential talent.
To thoroughly measure employee turnover, HR professionals may choose to monitor several different metrics, including:
- Overall Turnover Rate: The percentage of employees that have exited the company over some time.
- Voluntary Turnover: Employees who leave a company on their own, whether for an opportunity at another company or to pursue other goals (i.e. going to school).
- Involuntary Turnover: Employees who are laid off or otherwise terminated.
By analyzing these rates, an HR professional can understand where the organization is excelling and where it may need improvement in terms of employee retention.
What is the Purpose of Tracking These Metrics?
HR metrics and KPIs help HR professionals to address company issues head-on, maintaining a clear understanding of where their company is at using data.
Determining which metrics should be tracked as KPI’s can vary based on an organization’s goals, values, areas for improvement, and needed areas to highlight in reporting. All metrics are important to keep a pulse on, but KPI’s are highlighted to provide a spotlight on those metrics that need focus.
According to the SHRM HR Magazine, HR is held back by the following shortcomings:
- 46% – Failure to identify shared priorities and strategic goals
- 34% – Inability to communicate effectively in real-time
- 27% – Failure to reference the most up-to-date, accurate data
- 24% – Lack of automation for shared HR/finance processes
- 21% – Use of different systems to access data
By tracking metrics, identifying high-impact KPI’s, and using data to drive your people-minded decisions, you can align your HR initiatives with your organization’s goals, obtain buy in from stakeholders, and have a clear vision of where to focus your efforts.
Need Help Tracking Your HR Metrics and KPIs?
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Read on for more information about our culture assessment and other services. Then, check out our article to learn how to bring emotional intelligence into the workplace.