In the past decade, human resources (HR) and human capital has evolved from a being a solely service-oriented benefits management department to a more strategic organizational asset. Managers seem to recognize that it is now (more than ever) vital to have the right team executing company strategy. Well-known organizations and enterprises from all over the world regularly discuss how important it is to hire and retain the right talent, and this ability is often regarded as one of the greatest predictors of organizational success.
While many organizations recognize this shift in thought, not all of them are correctly measuring success with updated HR key performance indicators (KPIs). These strategic tools can help you understand whether you’re accomplishing your HR objectives in a way that is in line with your strategy. In our opinion, managers need to be thinking about both traditional HR measures—like sick days, absenteeism, and employee satisfaction—alongside strategic human capital measures—like employee performance and culture. Take a look at 48 of our favorite human capital KPIs that you may want to consider implementing.
Note: We’re not suggesting nor advocating for you to begin measuring all of these KPIs. Rather, you can use this extensive list to get an idea of what like-minded organizations may be looking at, research KPIs from other lists, and then decide upon the critical few KPIs that are in line with your unique strategy.
- Percentage of Cost of Workforce: The cost of the workforce as compared to all costs can be measured by summing all salaries and dividing by the total company costs within a given period.
- Salary Competitiveness Ratio (SCR): Used to evaluate the competitiveness of compensation options. Can be determined by dividing the average company salary by the average salary offered from competitors or by the rest of your industry.
- Health Care Expense per Current Employee: Provides an understanding of the comprehensiveness of a company's health care plan. Can be determined by taking the total price of health care costs divided by all employees.
- Benefits Satisfaction: This allows a company to see how satisfied an employee is with specific benefits they are offered. Can be determined through surveys, and can be used to break down each benefit individually.
- Employee Productivity Rate: Helps to measure workforce efficiency over time. Can be determined by taking the total company revenue and dividing it by the total number of employees.
- Return on Investment (ROI): As an organization, you want to ensure that the dollars you are putting into training your employees is paying off. Can be defined as the profit per dollar invested in social compensations/wages.
- Employee Satisfaction Index: This is a key metric underlying talent retention. Using a company-wide survey can be helpful in gauging employee happiness.
- Number of Employee Satisfaction Surveys: Helps understand how much effort is being put into maintaining and improving employee happiness.
- Percentage of Employees Trained in Company Culture: Evaluates the importance and understanding of company-wide organizational culture.
- Percentage of Vacation Days Used: Helps show the company attitude toward a healthy work-life balance. Determined by observing the number of vacation days used as compared to those unused.
- Net Promotor Score: Measures how likely an employee is to recommend their organization as a place to work. This is determined by the difference in percentage of promotors and detractors.
- Absenteeism Rate: Gives perspective on the amount of labor and productivity lost due to sickness and otherwise unpredicted leave. Formula: (Total number of lost workdays due to absence) / (Number of available workdays in an organization) = (Absenteeism rate)
- Number of Full-Time Employees: Keeps tabs on the growth of the company workforce over time.
- Number of Contractors: Examines the growth in associated workers over time. Can be compared to the number of full-time workers to better understand workforce trends.
- Average Tenure: The average length of time that an employee spends with the company helps determine employee satisfaction and talent retention.
- Voluntary Termination Rate: Determined by taking the number of employee-led resignations from the company over the total number of terminations in a given time period.
- Involuntary Termination Rate: Determined by taking the number of employer-led resignations from the company over the total number of terminations in a given time period.
- Retirement Rate: This metric is particularly important for any organization developing a strategic workforce plan. Can be calculated by looking at the number of employees who retired as a percentage of the headcount.
- Average age of Retirement: The summed age of all retiring employees divided by the number of retiring employees. Being aware of these trends aid in forecasting retirement and planning for workforce replacement.
- New Hire 90-Day Failure Rate: Helps determine how successful the talent acquisition process is at finding the right fit for jobs.
- First Year Voluntary Termination Rate: Reflects on how welcoming the company is to new hires. A high percentage suggests that the right people are being hired, but not embraced.
- Average Time to Fill a Job Vacancy: Tracks how efficient the hiring process is in terms of time resources used to fill a vacant spot.
- Hiring Process Satisfaction Rate: Provides perspective on how well the process works from the employee’s perspective.
- Cost per Hire: Acknowledges the amount of resources invested into acquiring the best talent. Can be determined by averaging the total marketing, hiring process, and referral (if necessary) costs per hire.
- Effectiveness of Training: Helps the company understand how comfortable new hires feel after their training vs. before. Typically determined through a post-training survey.
- Training Cost per Employee: Helps to measure the amount invested in onboarding new hires.
- Percentage of Employees Trained: Helps a company see how quickly new hires are being onboarded.
- Diversity Rate: Keeps track of how successfully the organization is creating an environment that fosters an open and accepting community.
- Number of D&I Initiatives Implemented: The number of D&I initiatives implemented measures organizational commitment to establishing and maintaining a culture of diversity and inclusion.
- Attrition Rate: Helps a company figure out how successful they are at retaining talent. Determined by dividing the number of employees who left the company in a given period by the average number of employees in that time period.
- Turnover Rate For Highest Performers: Turnover of top performers in particular is negative and comes at a higher cost. This metric helps indicates the success of retention efforts and aids planning for talent replacement. Can be determined by dividing the number of high performers to leave in the past year by total high performers identified.
- Average Time to Find a Hire: Helps track the efficiency of the hiring process.
- Candidates Interviewed per Hire: Determined by calculating the total number of candidates interviewed by the total number of hires in a particular hiring period.
- Yield Percentage: This is the percentage of candidates remaining after each round of elimination in the hiring process. A low percentage might indicate the need to update an unclear or unattractive job posting, and a high percentage indicates a larger number of qualified candidates with whom to continue the hiring process.
- Knowledge Achieved With Training: Helps the company see not specifically the price of the training, but whether it was effective. Seeing if the individuals retained knowledge well enough to apply it is critical. Can be determined by creating an exam, and monitoring exam pass rate %, average score %, and pre/post training %.
- Diversity Numbers/Nationalities In The Work Force: Workplace diversity helps to cultivate innovation and competitive advantage. Diversity of nationalities and ethnicities can be calculated by noting the differences among employee demographic segments.
- Acceptance Rate: Dividing the number of acceptances by the number of offers allows organizations to get a sense of how successful their recruitment strategies are. Industry benchmarks can then be a helpful comparison.
- Percentage of Job Candidates Who Meet Job Criteria: Helps in evaluating the effectiveness of job postings in reaching top candidates.
- Rate of Internal Job Hires: Shows the effectiveness of organizational talent development.
- Rate of Internal Referral Hires: Allows managers to see the value added when current employees help to identify and acquire talent.
- Performance of New Hires: The performance of new hires can be compared to that of other employees. Typically done by evaluating performance reports.
- Internal Promotions Vs. External Hires: This ratio measures how many people already working at a company are considered for internal promotion versus the number of externally attracted people. Can be particularly effective when looking at organizational succession planning.
- Internal Promotion Rate: Internal promotions indicate successful retention and growth of top performers. Can be determined by dividing the number of promoted individuals by the total number of employees.
- Suggestions per Employee: Evaluates employee engagement in improving business processes, and reflects on the openness of a company to employee input.
- HR-to-FTE Ratio: The number of HR full time equivalents divided by the total number of full time equivalents. Helps determine HR's ability to provide services. Larger organizations typically have a smaller ratio, but more HR staff overall, than small businesses.
- Cycle Time To Process Payroll: Shows timeframe of process, giving projection if assistance/updated process is needed. This is the number of business days in the payroll process from start to finish.
- Cycle Time To Resolve Payroll Errors: The number of business days it takes to resolve payroll error reported by employees. A high number of days could indicate the need to review your payroll process.
- Percentage of Workforce Below Performance Standards: This measure keeps tab on the amount of low-performing employees in an organization.
Turn your HR KPIs into action.
Once you’ve defined your human resources KPIs, it’s time to start implementing them by creating a Balanced Scorecard. A scorecard is a cluster of data that helps your leadership team critically analyze the effectiveness of your HR strategies in relation to developing a competitive advantage, improving skills, managing your culture, reducing costs, etc. It provides the means to monitor workforce indicators, analyze workforce statistics, diagnose issues, and calculate financial impacts.
Important note: You don’t need to use all of the above 48 KPIs in your scorecard. Take time to identify which HR metrics will bring the most value to your organization and department.
Learn everything you need to know about Balanced Scorecards in this article.
Your HR scorecard is important...really important.
An HR Balanced Scorecard is a tool to keep your staff focused on activities that not only support the department, but also the company’s overall goals. Specifically, HR departments are often responsible for controlling costs by eliminating inefficiencies. Using one of the HR metric examples from above, minimizing employee turnover frequently appears on scorecards. When an HR department successfully lowers the turnover rate, it saves the company from the considerable expense of recruiting, interviewing, and training new employees. This clear outlining of KPIs in a scorecard makes it easy to see how short-term KPIs such as reducing turnover can “accrue” value, and are actually an important part of achieving the organization’s long-term financial goals.
The other primary benefit of a scorecard is that it demonstrates the strategic value of human resources to the leadership team. Since HR departments typically aren’t included in the strategic planning process, creating an HR scorecard is a way to expose the department’s contributions in concrete, clearly understood metrics at the executive level. Having an informed and invested leadership team has been proven to increase HR budgets and department support.
Your job’s not done yet.
Once you’ve successfully aligned your human resources KPIs with the organization’s goals in a scorecard, you’ve still got work to do. Don’t forget to make these steps a routine part of your job:
- Conduct regular meetings to review HR KPI progress at both the department and organization level. Consistently looking at the scorecard will ensure it stays relevant and top of mind for the HR department.
- Review your HR Balanced Scorecard with the leadership team to ensure progress is aligning with the company’s strategic plan. You’ll be able to quickly identify performance gaps and make necessary shifts to maintain that alignment, while also sharing your thoughts and new ideas.
- Evaluate scorecard metrics periodically to ensure they are still valid. It’s almost inevitable that your measures will change at some point and it will benefit you to get out ahead of this.
- Share your HR metrics and progress with the entire organization to demonstrate the department’s contribution to the strategic goals. It doesn’t have to be complex or take a gargantuan effort to create—it could be something as straightforward as an HR KPI dashboard. But what is important is that you share both positive and negative results. Your department’s efforts will generate employee goodwill, even if outcomes are different than expected.
You now have nearly 50 HR KPI examples and know how to put the metrics into play with a balanced scorecard. Your next step is to choose the KPIs that will bring the most value to your organization and create your scorecard.
Want to take this KPI list with you? Click below to download all 48 KPIs in an Excel document.