In recent years, the workplace has experienced many changes, such as the acceleration of digital transformation, greater awareness of the need for inclusion, and the effects of the COVID-19 pandemic. With so many businesses now having to pivot and adjust to new ways of working -- and with job candidates becoming more selective -- it's a good time for companies to review their HR key performance indicators (KPIs). This review might indicate that those metrics need to be adjusted so the organization can better track its current goals, or it might reveal new ways to use them to measure specific initiatives. An effective HR strategy is proactive and delivers the tools, environment, structure, and resources employees need to achieve the company's goals. With this in mind, the strategy needs to help an organization fulfill these tasks: In order to know whether an HR strategy is truly working and its effects on the company's objectives, the business outcomes that are influenced by HR practices must be quantified, measured, and tracked. But first, the organization must determine what its HR KPIs are. A KPI is a quantifiable measure used to evaluate how effective a company is at achieving key business objectives. (This doesn't mean that everything measurable is a KPI, though; only metrics that have a direct link to the organizational strategy can be called KPIs.) Because KPIs shed light on a company's progress toward its short- and long-term goals, the organization should select KPIs that directly link to its overall objectives, goals and strategies. HR KPIs measure both how HR contributes to the rest of the organization by realizing the organization's HR strategy, and how the HR strategy follows the organizational strategy. In other words, HR KPIs mirror organizational performance for HR, because they are defined based on the HR outcomes that are relevant to achieve business goals. By constantly measuring and tracking these metrics, HR can gauge whether its practices are proactively making a positive impact on the business's profitability. Choosing the right KPIs can also help HR track engagement, especially when hybrid or remote workplaces make it difficult for managers to interact with their teams in person through regular meetings or quick, casual, desk-side check-ins. For many companies, core HR KPIs include the following: No single set of metrics exists that fits every organization, though. Instead of searching the Internet for long lists of HR KPIs -- a practice that only encourages the bad habit of measuring for measurement's sake -- a company should identify the right three or four HR KPIs for its specific needs (e.g., diversity enhancement, hiring, employee retention). As increasing numbers of organizations pursue the benefits of having a more diverse workforce, it's important that they have KPIs in place to track progress toward those diversity, equity, and inclusion (DEI) goals. In particular, they can monitor their internal promotion data to see what numbers of women, people of color, LGBTQ employees, and members of other protected groups are being promoted from within. They can also review internal promotion data to see if employees in those groups are being promoted primarily to line roles or to individual contributor roles, or to management and leadership positions. When hiring the right talent is a challenge, KPIs can help a company identify any issues in its recruitment and hiring processes. Some of the metrics an organization might choose to measure include: These KPIs confirm which efforts are working, which aspects of recruitment need improvement, and how recruitment affects other components of the human capital strategy. It's always been true that employee satisfaction drives engagement, motivation, and retention. However, the factors that affect engagement and motivation may differ today from what they were before the COVID-19 pandemic. To get a sense of what employee satisfaction is like now, companies can look at factors that include: By gathering and examining data on which employees stay, how long they stay, and when they choose to leave, organizations can see some correlations between employee satisfaction and retention. By being transparent about what's being measured, companies can also use the KPIs to help individual employees and teams see how their work contributes to the big picture. Two of the most recognized drivers of organizational success are employee engagement and leadership alignment. Employee engagement has a direct impact on profitability and revenue generation for a pretty simple reason: engaged employees are more productive, and productivity leads to more opportunities for revenue generation. In addition, it's critical that the entire leadership team works to move the organization in the same direction. If each leader has a different goal in mind, they may be misleading their employees and spending time and money on unnecessary projects. For example, imagine a company that is experiencing fast growth but has high turnover among the leadership team and low employee engagement. If the company's business goal is to achieve profitable double-digit growth, the leadership team will need to identify the critical success factors that will drive that level of growth. (Some leaders may be able to identify key drivers based on their own experiences; others may need to research best practices to find that information.) Once the leadership team identifies the short- and long-term goals needed to achieve double-digit growth, it can outline the strategies that are necessary to achieve those goals. (For example, the leaders may choose to develop goals that focus on reducing operating costs related to productivity and turnover costs.) The difference between average-performing organizations and high-performing organizations is often as simple as having measurable goals. Keep in mind that KPIs are a mechanism that allows an organization to monitor the effectiveness of its strategies. That said, there should be clear connection among: To illustrate how this all works, consider the hypothetical company described above. The following outline spells out the organization's key objective as well as the goals, strategies, and KPIs that it might use to support this initiative. Objective:To achieve double-digit growth Goals Strategies KPIs Although creating the list of key performance indicators is challenging, collecting the data can be an even larger obstacle for many organizations: after establishing a baseline measurement for each KPI, companies must then track and document any changes (or lack thereof) during every month or quarter. If it's difficult to get a precise measurement at the start, though, using estimates is an acceptable option. During and after times of major change, KPIs can serve as essential HR metrics to help keep organizations on track. Building a purposeful plan to set, measure, and recalibrate HR KPIs for goals for remote teams, DEI initiatives, hiring, employee retention, and other areas sets the stage for a company to grow and thrive. Lisa Jasper is the director of performance improvement at Insperity. She can be reached at lisa.jasper@insperity.com.
What are HR KPIs?
Measuring DEI progress with HR metrics
Assessing and improving hiring practices with KPIs
Measuring employee satisfaction and retention
HR KPIs in action
Measurable goals are a must for HR metrics
KPIs have high value for HR