Everyone has a different definition of success.
This is certainly true in the world of business. Sure, your company could be bringing in a large amount of revenue, but profits could be low. Your employees may be handling a large volume of work, but customer service levels could be suffering. Maybe you are adding several new customers each month, but losing just as many on the other side. Accurately judging performance can be tricky.
What are the best HR Metrics and Key Performance Indicators for Human Resources?
Most HR business intelligence issues stem from a lack of documentation and planning on the front-end. What HR metrics, or Key Performance Indicators (KPIs), are you going to measure? What are the target levels, or benchmarks, for each HR metric? Who is accountable for high/low performance in each HR function? These questions are further complicated when analyzing the operations of a non-revenue generating function, or cost center, such as Human Resources (HR). The Human Resources Department plays a vital role in setting the company up for success, but does not contribute to the bottom line directly. So how can you measure success in Human Resources?
Let’s take a look at these five ‘layers’ of performance, and the corresponding Key Performance Indicator examples for Human Resources, to provide you with a holistic, top-down view of Human Resources Department operations.
5 HR Metrics Examples and Human Resources Department Key Performance Indicators
How to Measure Headcount and Organizational Capacity with HR Metrics
How many people are working in Human Resources relative to the number of business unit customers (in this case, the ‘customers’ are the company’s employees) that they serve? How many customers is each Human Resources employee responsible for?
Key Performance Indicator Example for Human Resources Departments # 1: Human Resources (HR) Staffing Ratio
HR Key Performance Indicator Definition: The number of company-wide employees divided by the total number of Human Resources (HR) employees working for the company at the same point in time. HR Department employees are typically responsible for recruiting, hiring, employee relations, compensation and benefits management/administration, payroll processing, training and development, and strategic human capital management operations.
HR KPI Calculation: Total Number of Employees / Number of Human Resources Department Employees
Typically, you want your HR Staffing Ratio to be as high as possible, which would indicate that staffing levels within the Human Resources function are under control, and that each staff member is serving a large number of customers. Of course, you need to assess the quality of service being provided as well, but we will get to that later. A low, or lagging, value for this Human Resources Key Performance Indicator demonstrates the opposite: overstaffing, poor staff productivity, and non-standard, inefficient processes. Look to examine individual employee productivity and streamline (or automate) repetitive processes such as employee on-boarding and record management to improve lagging values.
How to Measure HR Employee Productivity with HR Metrics
How much work is each individual HR employee producing? Who are the high and low performers? What are high performers doing differently?
Key Performance Indicator Example for Human Resources Departments # 2: Requisitions Filled per HR Recruiting Employee
HR Key Performance Indicator Definition: The total number of open positions (i.e., requisitions) within the company that were filled over a certain period of time divided by the total number of employees working within the Recruiting and Hiring function.
HR KPI Calculation: Total Number of Positions Filled / Number of Recruiting Employees
A high, or leading, value for this Human Resources Department Key Performance Indicator demonstrates that individual recruiting employees are on-boarding a sufficient number of new hires. Set a target to see which employees fall below a certain level and look to coach those staff members on how to improve their productivity. Look to high performers to establish best practices that can be rolled out to the entire staff. Of course, you also need to take into account the number of positions that are open and the quality of new hires being brought in before making a final judgment on employee productivity.
How to measure HR Employee Work Quality with HR Metrics Examples
How frequently are employees leaving the company? Why are they leaving? How can we improve the hiring process to reduce turnover?
Key Performance Indicator Example for Human Resources Departments # 3: Turnover Rate
HR Key Performance Indicator Definition: The number of employees who left the company (voluntarily or involuntarily) divided by the average number of employees working for the company over the same period of time, as a percentage.
HR KPI Calculation: (Total Number of Employee Separations / Average Number of Total Employees) * 100
A high Turnover Rate can be indicative of several things: below average compensation levels (compared to other companies), a lack of thoroughness within the screening process, sub-par employee benefits and/or less than ideal working conditions. In order to move towards industry leaders for this Human Resources Department Key Performance Indicator, benchmark compensation levels against peer companies and work on creating an interview process that will weed out candidates who are not a good fit for the company and the position being filled.
How to Measure Employee Service Levels with HR Metrics Examples
Is the Human Resources Department providing quality service to its customers, the employees of the company? How satisfied are the customers? How can service be improved?
Key Performance Indicator Example for Human Resources Departments # 4: Interview-to-Offer Cycle Time
HR Key Performance Indicator Definition: The number of business days required to extend a job offer to a candidate after interviews are completed, from the time the candidate selected for the position was first interviewed until when the job offer is extended to that candidate.
HR KPI Calculation: (Sum of Time to Extend a Job Offer After Interview) / Total Number of Offers Extended
A relatively high value for Interview-to-Offer Cycle Time is typically related to a few common factors, including inefficient interview processes (i.e., letting the candidate know what is expected during and after an interview, not providing the candidate with relevant information during the interview process, etc.), long cycle times dedicated to hiring decisions, and sub-par Recruiting & Hiring employee training and performance. Each of these factors can lead to longer interview and offer submission cycle times and increased candidate frustration which can vastly increase the chance that the candidate rejects the offer put forth by the company and instead accept a position in another company. To move towards industry leaders for this Human Resources Department Key Performance Indicator, make sure to provide the interviewed candidates with all relevant information concerning the interview process during the interview itself, and ensure that recruiters and relevant managers use standardized checklists to improve communication between involved staff members while also reducing the overall amount of time needed to accept or reject the candidate.
Other Human Resources Service KPIs for HR Managers: Healthcare Expense per Covered Employee, Requisition-to-First Interview Cycle Time, Cycle Time: New Hire Training
How to Measure Operational Cost with HR Metrics Examples
What is the cost of doing business within the Human Resources Department? Where are my costs the highest? Are there costs that can be lowered or eliminated?
Key Performance Indicator Example for Human Resources Departments # 5: Cost per Hire
HR Key Performance Indicator Definition: The total cost of recruiting and hiring (labor, job postings, travel costs, etc.) for all open positions (front-line or entry-level staff, managers, directors and executives) divided by the total number of positions filled over the same period of time.
HR KPI Calculation: Total Recruiting Costs / Number of Open Positions Filled
Costs related to filling an open position (i.e., bringing in a new employee) include posting the job description on relevant sites (Monster, LinkedIn, or similar), travel expenses (e.g., flying a recruit in to interview), and time taken to interview and orient the potential new hire. For this Human Resources Key Performance Indicator, examine the performance of individual recruiting channels to see what the success rates are, and look to eliminate costs related to low-performing channels. Also, look to promote from within to mitigate recruiting and hiring costs.
Proper planning is half of the battle for any HR process improvement project: establishing your Human Resources Key Performance Indicators, determining how to gather the required data, then setting up reasonable goals will get you started on the right foot. Framing your analysis in this fashion can give you the ammo required to start improving HR operations. By examining all five of these ‘layers’ of performance concurrently, you can uncover hidden improvements that will improve the efficiency and effectiveness of not just your Human Resources Department, but any department or line of business.