KPIs for Measuring the Success of Human Resources Practices

Introduction for Human Resources KPIs

The human resources department in any organization is as imperative as the sales or the marketing department. Human resource management ensures that an organization has the right cultural fit working for an organization with the right levels of engagement and determination. However, in the enormously growing competition between organizations to gravitate top talents, HR managers have to embrace the challenge of hiring the best talents and retaining them in the long run. To measure the performance or success of human resource practices in an organization, the following key performance indicators can play a critical role.

List of human resources KPIs with calculators

1. Employee Productivity Rate

Measuring the efficiency of employees in quantifiable terms is a key concern for all business organizations. In order to measure the Employee Productivity Rate in an organization, the total revenue of an organization in a fiscal year and the number of employees are taken into consideration.

Employee Productivity Rate as a KPI

Employee Productivity Rate can be used as a key performance indicator for a business objective such as increasing employee morale. Let us say a company has taken some key decisions like rewards, motivation, and training sessions to boost the productivity of employees. The performance of these strategies can be measured in terms of Employee Productivity Rate to ascertain if the productivity has increased or not. An increase in productivity will mean that the objective has been achieved otherwise some more efforts are required in this regard.

2. Return on Investment

Return on Investment in terms of human resources parameters is a computable measure of the return on the business capital that goes into the training and development of employees. Needless to say, all businesses would want that each penny of their investment in employee training pays off well. Return on Investment would be calculated in scenarios where expenditure has been made on either training or any type of development-related activity for the employees.

Return on Investment as a KPI

Return on Investment in the case of human resources can be a highly relevant KPI. Let’s suppose a company is having an objective to increase sales and for that company is investing in employee skill development programs and the company can measure the success of these programs by calculating the Return on Investment.

3. Absenteeism Rate

In a given period of time in terms of workdays, the Absenteeism Rate is a measure of lost work efficiency of the workforce because of sick leaves or other unprecedented leaves availed by employees. It is essential for all business leaders to measure the Absenteeism Rate and find ways to pull it down for enhanced organizational productivity. An Absenteeism Rate of 1.5% is considered good and any number greater than 1.5% is considered bad but companies need to consider many factors before deciding on their good or bad numbers.

Absenteeism Rate as a KPI

The Absenteeism Rate can be a KPI where companies are investing money for employee engagement or other activities that make employees feel like a part of the ecosystem in general. For instance, if a company has taken a few measures for increasing employee satisfaction, the company can the measure success of those measures by calculating the Absenteeism Rate. If there is a downfall in the Absenteeism Rate, it means the measures have been successful.

4. Cost Per Hire

Cost Per Hire is a quantitative measure of the average investment that goes into the various processes and the best practices for acquiring a new employee. The total costs of hiring for an organization will be inclusive of the costs that go into the marketing of a new role, costs in the hiring process, and also the costs for incentivizing referrals (if any)

Cost Per Hire as a KPI

Cost Per Hire can be used as a KPI where the company wants to bring efficiency in HR operations and thus, can measure the Cost Per Hire to know the effectiveness of the policies in relation to the operational efficiency of the human resource processes.

5. The Turnover Rate for High Performers

Employee turnover or attrition rate depicts the number of employees that quit an organization in the due course of a given time period. Speaking of the turnover rate for the top performers, in particular, it is negative and comes at an exorbitant cost for enterprises. It also gives quantitative insights into the success of the retention efforts invested by a company and facilitates talent planning for talent replacement.

The Turnover Rate for High Performers as a KPI

The Turnover Rate for High Performers can be a KPI in case the company is investing in measures that are directed towards increasing the retention rate of the top-rated employees. For example, If a company is having an issue with retention, it can introduce measures such as rewards, membership programs, perks, and other measures directed towards employee happiness and satisfaction. For measuring the success of these measures, the turnover rate would be the ideal KPI.

6. Training Cost Per Employee

This KPI is a computable measure of the amount invested in the onboarding process of each new recruit. It can be calculated by taking into account the total expenses incurred on employee training in a period of time and the number of new hirings corresponding to that period.

Training Cost Per Employee as a KPI

Training costs per employee can be used as a KPI in case an organization is trying to bring efficiency in training by using measures such as microlearning, online training, and scaling activities. The success of these measures can be measured in terms of the metric of Training Cost Per Employee. If the Training Cost Per Employee reduces, it means the measures had a positive impact on cost.

7. Attrition Rate

Gives a computable measure of the effectiveness of an organization’s strategic effort to retain its employees. The employee attrition or turnover rate indicates the number of employees that quit an organization during a specified period of time.

Attrition Rate as a KPI

Attrition Rate as a KPI can be used to measure the impact of the policies that the company is having on board. If in a given timeframe a company is making a change in the employment policies then the success and failure of these policies can be measured by Attrition Rate. As per industry experts, the ideal employee turnover rate for an enterprise should be less than 0.10 or 10 percent if you are looking at it in terms of percentages.

8. Voluntary Termination Rate

The Voluntary Termination Rate in a business organization is the ratio of voluntary resignations or employee retirements and the total number of terminations in a time frame.

Voluntary Termination Rate as a KPI

Voluntary Termination Rate can be used as a KPI to measure the impact of the company policies on employee relations. If the employees feel the policies are in adherence to the industry standards and the company can provide a career road map, the Voluntary Termination Rate should be low. Otherwise, the Voluntary Termination Rate can be on the higher side. So, the success rate of the new policies in relation to employee relations and engagement can be measured using the Voluntary Termination Rate.

9. Involuntary Termination Rate

The Involuntary Termination Rate gives a quantifiable measure of the number of employees terminated by employers in a specific period of time. It is the ratio of the employer initiated terminations in a period of time and the total number of terminations (involuntary terminations + voluntary terminations) in that period.

Involuntary Termination Rate as a KPI

Involuntary Termination Rate can be used as KPI to measure the impact of the hiring process, onboarding process, and training process. If there is a glitch in any of these processes, the employees may have to be terminated and it will increase the employee termination rate. Thus, the impact of the processes can be measured using the KPI, Involuntary Termination Rate.

10. Percentage of Job Candidates Meeting Job Criteria

This is another key performance indicator that assists organizations in evaluating the success of their strategies for posting and marketing their vacancies to attract hirable and top-performing candidates.

Percentage of Job Candidates Meeting Job Criteria as a KPI

Percentage of Job Candidates Meeting Job Criteria can be used as a KPI for measuring the effectiveness of the job advertisements or hiring communication. Companies invest huge amounts of money for communicating job vacancies. To measure if the communication medium and the message are effective, job candidates meeting the job criteria ratio can be used as a KPI. If the percentage is high, it implies that the message is clear otherwise the medium or communication style needs to be optimized for better results.