As the human resources function increasingly expands its role as a strategic pillar of the business, there becomes a correlating need for rich data to enable the strategy, drive decisions, and showcase the value you’re providing to the business.
Any executive team worth their salt is going to rely on a healthy dose of data to support critical decisions, including the investments in the human resources space.
After all, as engineer, statistician, and management theorist W. Edwards Deming once famously said, “In God we trust, all others bring data.”
So, how do you create an analytical approach for decision making, incremental improvement and value realization? The answer is simple: HR key performance indicators (KPIs).
As an HR leader, a major part of my role includes defining the KPIs for the programs I lead and ensuring they provide my leadership team and business partners with the critical insights needed to track our progress.
In this article, I’ll take you through:
- What are HR KPIs?
- Why set HR KPIs?
- How to set meaningful KPIs
- Common HR KPIs
- Case study: leadership development KPIs
Let’s dive in.
What Are HR KPIs?
HR key performance indicators (KPIs) are measurable metrics used to track the effectiveness of HR-lead processes and strategies against organizational goals.
Your human resources strategies and initiatives should always be mapped back to your organizational strategies, and likewise your HR KPIs should be able to articulate how HR professionals are providing real value realization against those same strategies.
There’s no one size fits all model for KPIs. The business goals of an organization are going to vary dramatically based upon company size, maturity, and industry.
As such, your KPIs will be highly personalized to give you the right information to make key decisions, track incremental improvement over time, and prove the value you are providing to your organization.
Why Set HR KPIs?
KPIs are an essential tool for all walks of business life and human resources is no exception.
In fact, I’d argue HR KPIs are arguably one of the most significant indicators of your organization’s success.
It’s almost become cliche to hear that ‘our people are our most important asset,’ but the reality is the success of your organization hinges upon your people.
HR KPIs give you the benefit of:
- Measuring progress against goals. KPIs enable you to track your progress against certain key goals (for instance diversity, equity, and inclusion metrics) and showcase incremental improvement over time.
- Making decisions founded in data. Gone are the days when HR could make decisions based on gut feelings or guesswork. KPIs transform your decision-making into an evidence-based approach, allowing you to make the best-informed decisions possible for your organization and understanding the impact your business decisions have on your people.
- Aligning your HR department with wider organizational business objectives. Role clarity has a direct impact on your employee performance. HR KPIs that stack logically back to your organizational strategy gives your HR team an immediate line of sight to how the work they do impacts the overall success of your organization.
- Increasing accountability. With increased clarity also comes increased accountability. Your HR team will not only gain a deeper understanding of how they impact organizational success, but can take direct ownership and accountability into how they contribute to that success by making measurable, incremental improvements against your goals.
- Proving your value. It’s often hard to showcase the impact you’re having within the HR space. KPIs make this simple by showing how your team is directly contributing to the organization's strategies. This turns budget conversations on their head! Afterall, it’s extremely hard to request additional resources (or protect your current resources from job eliminations) if you can’t articulate how your people are contributing to your overall business and HR strategy.
How To Set Meaningful KPIs
Drafting effective KPIs is a bit of an art and a bit of a science.
There’s a level of subjectiveness in that KPIs require you to have a deep understanding of the business and use your subject matter expertise to determine what will be most impactful for you to track.
On the flip side, KPIs will only provide value if they’re specific, measurable and provide objective insights into your organization’s effectiveness.
Some guiding principles to keep in mind when creating meaningful KPIs include:
- Less is more. KPIs should truly be the top performance indicators that align to the success of your organizational strategy. KPIs should not be exhaustive. They need to be simple, intuitive and clearly showcase your progress over time.
Ask Yourself: Does this goal help us understand our progress against our organization’s HR strategy? If the answer is unclear, you may need to revisit if this goal is appropriate as a KPI or refine it to create cleaner alignment.
- Actionable/outcome oriented. As indicated earlier, KPIs provide you with critical insight into the data that can help drive decision-making for your company. Your goals must provide the appropriate insights to both track and adjust appropriately to improve performance.
Ask Yourself: how will this data inform key decisions we’ll need to make in the future? If you’re unable to articulate the actions you can take based on the metric, it most likely isn’t the right KPI to include.
- Be specific and measurable. All goals that you set need to have the correct level of specificity to be measurable.
Ask yourself: Can this be quantified? Can this be observed? Can this be tracked over time? If you’re struggling to say yes to any of these questions, you likely need to make some adjustments to ensure your KPIs can be tracked appropriately.
Goal setting frameworks: SMART goals and OKRs
Leaning on existing frameworks is a great way to accelerate your foray into any new space. Luckily with KPIs, there are some commonly used goal setting frameworks like SMART goals and OKRs that you can easily jump into and start leveraging.
The SMART goal framework is one of the most universal and popular goal setting frameworks around. It’s commonly used for performance management, individual development plans, strategic planning and, yes, for KPIs.
The SMART goal framework articulates 5 key components of a well written goal:
If you’re looking for more information about SMART goals, check out this great People Managing People article on how to write SMART goals.
Objectives and Key Results (OKRs)
OKRs are another commonly used goal setting framework designed to allow businesses to set goals and track their progress over time.
Objectives become the overarching goal that’s aligned with your organizational strategy/mission, while the key results are measurable and action-oriented human resources metrics that enable the realization of the objectives.
The benefit of OKRs is that they’re designed to align individual and team goals with the higher-level business goals of the organization or function.
This enables a clear line of sight and a deeper understanding for all colleagues into how the work they do contributes to the success of the organization.
Additionally, the more granular key results allow you to work in a more agile manner by flexing your approach and enable continuous incremental improvement over time.
For more information on OKRs, please refer to our What Are OKRs and How Can You Use Them article.
Common Human Resources KPIs
As stated before, the KPIs that you’ll leverage are going to be specific to your business and talent strategies you’re trying to achieve.
But, to help get you started, I’ve listed out some important KPIs that you may consider leveraging based upon the strategies you are trying to realize at your organization.
KPIs for employee satisfaction
1. Net promoter score. Employee net promoter score (NPS) is a great judge of your employees loyalty and satisfaction with working at your organization. This can be assessed by asking your people to rate how likely they are to recommend working at your company to others via an employee satisfaction survey.
2. Employee Engagement. Employee engagement is another great indicator of employee satisfaction. Engagement is usually captured through an engagement survey and indicates the level of emotional satisfaction and commitment your people have with your organization.
3. Employee turnover and attrition rates. Turnover, or the rate at which your employees are exiting your company, is one of the best indicators of employee satisfaction with their work experience.
Depending on your organizational needs, you may consider goals associated with employee turnover/attrition in general, regrettable turnover rate (loss of high-performing employees), and/or voluntary termination (employees leaving of their own accord).
KPIs for recruitment and talent acquisition
4. Average tIme to fill. If you’ve ever worked as a member of a recruitment or talent acquisition team, you’ll know that time to hire is one of the most popular and significant indicators of success within this space.
Your recruiting team’s ability to find quality candidates and fill requisitions in a reasonable amount of time is one of the key indicators of the success of your hiring process.
5. Internal versus external hire ratio. Measuring your organization’s internal/external fill ratio is a significant KPI for measuring your ability to develop talent in house and facilitate internal mobility. This is essential for retaining top talent over time.
6. Diversity hiring. An extension of your diversity, equity and inclusion (DEI) efforts, diversity hiring measurements give you keen insights into your ability to hire diverse talent that’s reflective of the demographics of the communities in which you work and serve.
KPIs for learning, development and growth (L&D)
7. Training and onboarding effectiveness. KPIs for training and onboarding effectiveness can include measuring employee satisfaction with training (CSAT), knowledge acquisition, performance improvement, and return on investment. Marry this to the training costs for your programs and this is essential in determining the value you’re providing through your learning and development strategy.
8. Internal mobility and promotion rates. One of the primary drivers of your organization’s efforts from an L&D perspective is to allow your colleagues to grow their careers within your organization. KPIs associated with internal mobility and promotion are essential for tracking your ability to build career paths internally at your organization and develop the next wave of talent to move into increasingly complex roles.
9. Employee skill development. Another key measurement of the success of your learning and development strategies is the actual development of your employees’ skill levels. This can be benchmarked via annual skills assessment exercises designed to track the growth of your employees’ skills over time.
KPIs for innovation
10. Employee innovation index. Employee innovation index is a mechanism through which you can measure your organization’s ability to drive innovation via your employees. This can be tracked via engagement survey results, innovation programs, number of patents filed and/or other key metrics designed to best capture the growth of innovation at your organization.
11. Employee Ideas Generated. A lighter-weight approach to measuring innovation is to simply to track and measure your organization against the number of innovative employee ideas generated. Crowdsourcing ideas from your employee population is a great way to democratize innovation and empower your people to drive innovative change.
12. Speed to market. In an increasingly agile world, speed to market is an increasingly useful metric to measure innovation. In an agile environment, whether it’s in tech teams or your HR department, your ability to introduce new products to your customers/employees in a timely fashion is one of the leading indicators of the innovative nature of your organization.
KPIs for resilience
13. Employee wellbeing. Resilience is an area that became increasingly important during the COVID-19 pandemic and has continued to be a focus for organizations since. Employee wellbeing is one of the key indicators of the resilience of your organization.
14. Employee trust in leaders. Your employees trust in leadership is another indicator of resilience, especially through times of turmoil as your employees deal with stress and change better if they have trust in the leadership team.
Luckily this is also an easy KPI to track via your engagement survey process as common engagement survey questions include: "I trust the leadership team to make the right decisions for the company?" or “I trust the leadership team to act with integrity.”
15. Employee productivity through change. Employee productivity is a baseline KPI in many industries. However, when you add in employee productivity rate through change all of a sudden you have a great KPI for resilience. Change is the only constant in life and work and your employees’ ability to be productive through change is paramount.
KPIs for diversity equity and inclusion (DEI)
16. Diversity representation. Goals associated with diversity representation help you track your inclusion of employees of diverse experiences, demographics, backgrounds, cultures, ethnicities, genders, and sexual orientations.
While KPIs for diversity representation are commonly tracked at a more global level for organizations, a common approach is to also to set specific goals associated with the diversity representation organizations would like to see within their leadership/executive team members as well.
17. Promotion and talent retention rates for underrepresented groups. Setting goals associated with both promotions and employee retention of underrepresented groups is a great way to drive inclusivity at your organization.
Disparate promotion and/or employee retention rates for underrated groups versus your organization overall may indicate a need to take a different approach to create a company culture in which all employees can thrive regardless of their background.
18. Employee engagement survey results. You may also consider building KPIs around engagement results for underrepresented groups in your organization. Akin to tracking promotion/employee retention rates, this is a great way to understand the commitment your diverse colleagues have to your organization and drive strategies designed to improve their experience working for your organization.
19. ERG participation rates - Employee resource groups (ERGs), are “groups of people who work in the same organization (not necessarily with each other regularly) who unify based on a common identity, lived experience, common goals, or intersectional backgrounds and aspirations.” KPIs drafted to drive participation rates can directly impact your overall DEI efforts, improving employee engagement and talent retention
KPIs for employee health and wellness
20. Benefits satisfaction. Investing in health and wellbeing is a critical means through which organizations take care of their employees, improve moral and productivity, and reduce absenteeism/presenteeism. KPIs for benefits satisfaction help you measure if your health and wellness efforts are having the desired impact they are intended to provide.
21. Health and wellness program participation. Participation rates are a great baseline measurement of whether your health and wellness programs are hitting the mark for your employees. This helps you understand what types of programs resonate with your employees and ensures you personalize your offerings to meet their unique needs.
KPIs for Compliance
22. Training completion percentages for compliance training. One of the simplest, but also one of the most important, compliance KPIs to track is simply employee completion percentages for compliance training. This is essential for risk mitigation and ensuring your employees are given the requisite knowledge needed to comply with company and industry compliance requirements.
23. Ethics Reporting. Ethics reporting is an essential measurement of your employees trust in your compliance processes and willingness to report unethical behavior. This can be measured via either the volume of ethics reports that come in or via engagement survey questions designed to tease out your employees' level of comfort with reporting instances of unethical behavior at your organization.
24. Labor Law and Policy Compliance. KPIs associated with labor law and policy compliance help you measure and improve the level of compliance you have with both external and internal compliance needs. This can be tracked through internal audits and help ensure your organization’s operations are legally sound and designed to avoid legal liability/penalties.
KPIs for Compensation
25. Market Salary Competitiveness. Measuring your market salary competitiveness is a significant benchmark of if your compensation strategy is working as intended. It’s important to note that not every organization strives to pay the exact market rate for the work being done—depending on your strategy and needs you pay more or less than market rate.
26. Turnover due to compensation. Understanding how you stack up against the external market, combined with other KPIs like employee turnover due to compensation, can help you measure and adjust your compensation practice over time. This KPI would generally be tracked via exit interviews or surveys.
KPIs for environmental, social and justice (ESG)
27. Carbon footprint. ESG is becoming increasingly important for organizations as investors, consumers, and employees demand more from the companies they support and increasingly align the investments in organizations who share their values. Setting goals around reducing carbon footprint is one of the primary ways that organizations can track and improve their sustainability and impact on the environment.
In case you were wondering, HR can influence this by encouraging a sustainable approach to how your employees interact with your real estate space (i.e., limit wasted office space by enabling work from home/hybrid office policies designed to reduce energy consumption and contribute to a sustainable impact on the environment).
28. Employee Health, Safety. KPIs for employee health and safety are focused around monitoring an organization's success in providing a safe workplace for their people. This can include goals around injury frequency, near-miss accidents, and sickness. Goals in this category will vary greatly based upon the industry and work environment (i.e., factory work versus corporate office environment).
29. Employee Community Involvement/Volunteerism. KPIs for employee community involvement are a great way to measure your organization’s success at empowering your people to get involved in the local communities in which you work and serve. Common goals can include participation rates, volunteer hours logged, number of partnerships with local communities and other measures of impact driven through the volunteer activities performed by your people.
Case Study: Leadership Development KPIs
Let’s take a look at a real life example of how I’m currently using KPIs to drive our technology organization’s learning, development and growth strategy.
Like many organizations, investing in the growth and development of our people is a top priority to enabling continued business success.
This is especially true in the technology space where critical hard skills evolve rapidly, and it’s essential that employee populations stay up to date on the latest technical skills.
As a Talent Strategy leader, I partnered with our executive technology team, our learning and development leads, and HR Managers/Business Partners to come up with a talent strategy focused on enabling these critical needs.
Likewise, this same group spent numerous iterations defining and refining the KPIs that we would use to measure and track our success. Some examples of what we landed on include:
1. Employee Skill Development Example: “20% percent incremental improvement in Employee Skill Development Index in 2023”
This KPI seeks to track an incremental improvement in employee skill development within a calendar year.
Employees are asked to complete a skills assessment to baseline their current proficiency levels against critical organizational skills.
After completing numerous learning and development activities over the calendar year, employees are then asked to reassess their capabilities so we can measure incremental improvement in proficiency level based upon our learning and development efforts and rebaseline our employee skill set.
2. Training Effectiveness: 25% increase in learning and development CSAT scores in 2023”
This KPI tracks improvement in Customer Satisfaction Scores (CSAT) for our learning and development offerings. Incremental improvement over the course of 2023 showcases our ability to learn from our evaluation strategy and provide best in class training experiences to our employees.
3. Internal Mobility Rates: 10% increase.
This goal is designed to track our ability to create internal mobility opportunities for our colleagues. We choose to focus not just on promotions but on any internal movement across our career lattice. This KPI allows us to better understand how skill development equates to career growth within our technology space.
4. Mentorship Program Participation Rate: “20% mentor program participation rate by 2025”
Social learning is a key part of colleague learning, growth and development and something we felt was critical to track.
Unlike the other goals we set above, this KPI has a target of 2025 rather than within the 2023 calendar year.
This enabled us to set realistic, measurable goals for 2023 and 2024 to help ramp up our mentor program and ensure we have sufficient high quality, trained mentors to support our mentees.
Start Setting KPIs To Help You Tell A Story And Push Forward
Ultimately, measuring the right human resources key performance indicators is an essential part of how your HR department can make incremental improvements and provide value over the time.
This also empowers you to tell the story of the value you are providing to your organization.
As Chip and Dan Heath wrote, “Data are just summaries of thousands of stories–tell a few of those stories to help make the data meaningful.”
I’d encourage you to begin to leverage the HR KPIs that help you to tell the story of your success and help you build a measurable strategy to create the best HR function possible.
Some further resources to help you set and track goals:
- 10 Key Recruiting Metrics To Focus On (And 12 Advanced)
- 40 HR Metrics You Should Track And Data Collection Best Practices
- 4 Learning And Development Metrics That Actually Help Drive Business Success
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