Many Human resources (HR) key performance indicators (KPIs) have proven useful to track and measure consistently year over year. However, the last few years – dominated by the COVID-19 pandemic and social and cultural unrest – have changed the workplace in fundamental ways. This has pushed specific HR KPIs to the forefront in importance and significance.
HR KPIs are the workforce metrics that HR departments use to evaluate:
- How HR influences and contributes to the company, and impacts the financial bottom line
- How successful HR is at achieving HR strategy and overall organizational strategy
- Which initiatives and processes to maintain
- Where opportunities for improvement exist
The top HR KPIs that your HR department should prioritize right now – and why – include:
1. Recruitment costs
Before the COVID-19 pandemic, most employees worked in an office. For that reason, employers limited their recruiting activities to their local, immediate area.
Now, many employees work remotely, or at least on a hybrid schedule. Remote work has opened up the possibilities of recruiting top talent without regard for location – an exciting turn of events that has drastically broadened the pool of applicants. These workers may reside greater distances away – other cities, states, across the country and in different time zones.
In addition to recruitment costs, salary offsets for employees who live in areas with a lower cost of living could represent a savings on the balance sheet over time. For example, a hire in California may command a $100,000 salary, but a comparable hire in Tennessee may only cost $60,000. More geographical options for recruitment mean more opportunities to contain costs – though, companies will still need to assess local employment laws to capture the full cost picture of each new hire.
HR can track the location and cost of new hires to determine where and how to best focus recruitment efforts.
2. Employee productivity
When employees were based in an office, it was much easier to track productivity. All managers had to do was walk down the hall to check whether their employees were at their desks and engaged in their work.
Times have changed.
With employees working remotely and largely out of sight, it’s much harder to measure and improve productivity. Furthermore, the popularity of flexible schedules and a growing “work output and quality over hours clocked” mentality have really changed the fundamental definition of productivity.
Now, managers must be diligent about:
- Working with employees to set SMART goals
- Establishing clarity around baseline performance and production standards
- Holding regular one-on-one meetings and touchpoints with team members to discuss how they’re doing
Productivity can be harder for HR to measure directly or in real-time, since typically this KPI is measured by direct supervisors, with that in turn rolling up to department heads. To keep best track of any organizational-wide issues with productivity, HR should have regular meetings with department heads to identify any concerns or bottlenecks. If productivity concerns are identified, HR can recommend solutions such as:
- Coaching or counseling
- Performance improvement plans
- Additional training
- Assigning mentor/mentee relationships
- Reassignment or redefining job roles
- Discipline or if necessary, termination
Finally, it’s important that managers and supervisors know how and when to reach out to HR with any individual employee performance concerns or themes, so that HR can provide appropriate guidance and solutions.
3. Employee engagement
Post-pandemic turnover – also known as the Great Resignation – has led HR departments to zero in on employee engagement, satisfaction and retention. More than ever, HR professionals want to know how to encourage employees to commit to their company for the long term and, as a result, avoid the significant costs of replacing an employee.
Employee engagement is all about whether:
- Everyone on the team feels included and part of the company
- Employees understand their role and how it integrates within and contributes to the larger team and organizational strategy
- Employees know and align with the organization’s mission, vision, values and culture
- Feelings of responsibility, motivation, accountability and ownership of work are high
However, with the rise of remote work, many workers report feeling more isolated and disconnected from their teams. For this reason, HR teams should definitely want to keep a pulse on employee attitudes within their companies.
Unfortunately, employee engagement can be difficult to measure. An option for HR professionals is to distribute employee surveys – specifically, a culture or climate survey. These surveys aim to uncover how employees perceive the workplace culture and how connected they feel to their workplace.
If you decide to distribute a survey, here are a few items to note:
- Be mindful of the frequency of survey dissemination. Target once per year or, at maximum, every six months to avoid survey fatigue. People who receive too many surveys may simply start to ignore them and you’ll end up with an unsatisfactory response rate.
- Be mindful of the timing of a survey. For example, don’t send out a culture survey immediately following a negative event, such as lay-offs. A rattled workforce won’t provide the most accurate or positive feedback.
- Commit to reviewing the results carefully and taking action when feasible and appropriate.
- Be prepared to acknowledge instances in which the company is falling short.
- Perform a SWOT analysis.
- Identify short- and long-term actions to address employee feedback.
- Assure employees that their voices were heard and put to good use. But, communicate to them upfront that not every piece of feedback can be implemented – the company has to be realistic and focus on what’s achievable.
4. Employee satisfaction
Employee satisfaction is all about how happy employees are with their experience working for a company. In the post-pandemic paradigm, examples are:
- Is their individual role fulfilling?
- Do they believe they are paid well?
- Do they like the overall structure of the company?
- Do they agree with the mission, vision and values, and enjoy the culture?
- Do they believe that their benefits are valuable and useful to them and their families?
- Do they feel that their working arrangements and schedules support a healthy work-life balance?
- Do they feel supported, valued and trusted by their manager and peers?
High employee engagement and high employee satisfaction tend to go hand in hand.
For many employees, the last few years have been stressful. The lines between work and personal life have blurred. Burnout is prevalent. People are re-evaluating their priorities and many are eager to make a change. As a result, employee satisfaction is a major concern for HR professionals.
Much like engagement, HR can best measure employee satisfaction through surveys.
5. Employee retention
Employee retention is all about those workplace attributes that convince team members to stay for a long time. These are usually things that set a company apart, such as:
- An outstanding culture
- Workplace flexibility (including opportunities to work remotely or on a hybrid schedule, and enjoy more autonomy)
- Abundant opportunities for development and growth
- Potential to move throughout the company, through promotions, career pathing and succession planning
- Unique company benefits and perks
With greater numbers of employees on the move and more job openings available than active job seekers, HR professionals should be very interested in what makes their company attractive and competitive.
HR can monitor average tenure length in employee records and watch for changes in trends. However, to get the why behind retention, surveys and one-on-one interviews with tenured employees can be helpful.
6. Employee turnover
The flip side of retention is employee turnover – why employees choose to leave. What are organizations doing wrong to push valued employees away, and what actions can be taken to reverse turnover?
Losing employees can happen for a range of reasons, such as:
- Lack of support from their manager or team
- Not being challenged enough or granted sufficient autonomy
- Burnout and the desire for change
- Criticisms of the workplace culture
- Workplace changes that may be viewed negatively by employees, such as returning 100% to the office
- Perception of better opportunities elsewhere (more competitive pay and benefits, or greater opportunities for advancement)
In addition to exit interviews with employees and listening for common themes, HR can monitor the turnover rate in employee records and look for troublesome trends. For example:
- Have a large group of employees left within a defined period of time, and can this activity be tied to any specific events?
- Does a certain department or manager have higher-than-average turnover?
7. Diversity, equity and inclusion (DE&I)
In the last few years, these critical issues have been highlighted across the country and have become an increased area of focus for large and small businesses alike:
- Equal opportunity
- Anti-discrimination and harassment
- Avoidance of unconscious bias against those who are unlike us
The modern workforce expects their company to be more diverse – especially up-and-coming Gen Z. To be competitive and maintain a positive, forward-looking image, many companies are aligning with these expectations.
Furthermore, numerous studies have established that companies with diverse workforces are more innovative and profitable, and enjoy higher levels of employee engagement and satisfaction.
Widely reported and easily available demographic metrics for HR departments to track are:
- Racial/ethnic composition of the workforce
- Gender composition of the workforce
- The representation of these groups in leadership roles or in any other roles in which these groups are typically underrepresented
Additionally, HR professionals can evaluate their recruiting practices to couple hiring and DE&I strategies and enable a wider pool of job applicants to participate in the process.
Another consideration here is that financial organizations that provide funding to companies, such as startups and non-profits, are increasingly looking for evidence of diversity in the workplace across all roles, to commit to providing ongoing funding to those companies.
Given the newfound physical distance between employees and companies, it’s extremely important for new employees – or existing employees moving into new roles – to receive a proper foundation for their work with training that covers:
- All knowledge and skill requirements for the individual role
- Company systems and technology
- Workplace processes and procedures
This can be accomplished with a thoughtful, remote work-friendly onboarding program.
Additionally, companies may consider offering opportunities for job shadowing and mentoring.
To track the effectiveness and value of training, HR can survey employees – or interview them one on one – to find out whether gaps exist between their day-to-day experience at the company and the training they received.
Summing it all up
Following all the shifts in the workplace and cultural upheavals over the last few years, there are eight HR KPIs that stand out as most relevant and useful. Adoption of these KPIs and openness to making changes based on performance can help to control employee costs, enhance the workplace culture, prevent employee exodus, boost diversity and, ultimately, improve a company’s reputation.
Overwhelmed at the thought of tracking and analyzing all this data? A professional employer organization (PEO) can help companies hone in on their optimal HR KPIs, as well as monitor and evaluate these metrics. To learn more about how a PEO can reduce a company’s HR burden, download our free magazine: The Insperity guide to HR outsourcing.