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HR KPIs: what are they and which ones should you be tracking?

By 24/11/2020August 3rd, 2023Analytics, HR Software

Most departments within a business have Key Performance Indicators or KPIs. These are indicators of long-term performance and demonstrate how effectively a specific department is achieving its objectives. They may be at a team or individual level, but they are often used to help decision making, identify any areas for improvement and provide a platform to measure successes.

HR KPIs typically include trackable metrics that measure processes related to recruitment, training, talent management and employee satisfaction. A KPI is only useful if it has a direct link with your overarching business strategy. Importantly, you should only be tracking the KPIs that are business-critical; they are called ‘key’ performance indicators for a reason!

Below, you’ll find 8 of the most common HR KPIs that you might look to track in your department. Remember, not all of these will be applicable to you: all of your KPIs will vary depending on the nature of your business, and the HR KPIs you do choose to track should support decision making for your business’ strategy.

Quality of hire

A crucial KPI to track if your business is going through a growth phase, quality of hire measures HR’s success in finding loyal, talented candidates. A low score could indicate an ineffective selection process or the wrong recruitment channels are being used.

Quality of hire is often measured using a number of indicators: retention metrics, manager satisfaction ratings and performance metrics. You can also use performance reviews and manager feedback to gauge the quality of hire. If an employee is performing well, it stands to reason that they were a quality hire.

Time to hire

Similarly, another crucial KPI for growing businesses: the time it takes from a candidate applying for a role or being sourced to making a hire. This HR KPI is a measure of how long it takes you to identify the best candidate for a role.

Time to fill

Using this metric is helpful if you are forward planning for a growth phase. Time to fill tells you how long it takes you to fill an open position. This KPI is useful to plan your hiring and can help you to understand any lengthy stages in your recruitment process that are slowing down your time to fill.

Recruitment channel conversion rate

This KPI can help you to understand which of your recruitment channels (job boards, recruitment ads, sourcing tools, professional social networks, for example) are the most effective in sourcing candidates. Analysing the performance of the channels you use to fill your candidate pool, and comparing these to other HR KPIs such as quality of hire can help to develop a recruitment strategy that focuses on the best channels for quality candidates.

Internal vs. external hiring ratio

Of course, hiring internally is significantly cheaper and often quicker than hiring externally. Although external hires often bring fresh perspectives and experience that internal hires.

This HR KPI can also highlight areas where employee progression is most common and where your people aren’t ‘growing’ internally. Understanding your ratio of internal/external hires can help your HR team to develop succession plans.

Employee turnover rate

This is a commonly used HR KPI that can highlight any problematic areas in your hiring process, management styles, lack of career progression and so on.

Turnover rate calculates the proportion of employees that have left their job as a percentage of all of your employees in the same period. This may be due to termination, resignation or job abandonment, etc.

For a deeper understanding of employee turnover, analyse your turnover rate by department, site or time of year to understand the precise reasons why higher turnover rates may be occurring.

Employee NPS score

Many businesses use Net Promoter Scores (NPS) to understand customer loyalty and satisfaction. It asks how likely they are to recommend your product or service to a friend on a scale of 0 – 10.

You can use a similar sliding scale to ask your employees whether they would recommend working for your company to their friends and acquaintances. This can help you to understand which employees would advocate their friends apply for your open roles and allows you to understand the difference between your happiest employees (known as ‘promoters’) and you least happy employees (known as ‘detractors’).

Absence rate

Absenteeism can be costly; in fact, a survey in 2017 found that sickness-related illnesses are costing the UK economy £77.5 billion a year. While some absenteeism is normal in a business, we all get poorly or have an unexpected emergency crop up after all.

Monitoring your absence rate is helpful to identify any problems in your business in cases where it is higher than expected. Absence rate can be measured by individual, team, department or your entire business to understand any issues that are specific to one area of your business. It can also help to flag any underlying health and safety issues that are causing your employees to take more time off work.

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