The most used HR metrics and KPIs for human resources departments

30 July 2018 Authored by Consultancy.eu

As the competition for talent continues to heat amid a shrinking workforce in many developed countries, the monitoring of HR policies has become essential. Effective metrics and KPIs can help to flag up areas of trouble, including high turnover and low staff engagement rates to help retain key workers.

According to a recent survey, 71% of the organisations surveyed give HR analytics a large priority. Looking at the current trends and developments in HR, this is not a surprise as HR processes are increasingly optimised and digitalised. Because of this, the role of HR is changing from an administrative and operational function to a more strategic and advisory one. HR professionals consider HR analytics to be a condition to successfully fulfill this new role and provide the organisation with data-driven advice – putting the consulting industry at the heart of HR transformations for most businesses.

In order to uncover relations between HR drivers and important business outcomes, thus predicting the effect of a strategic decision in HR on key organisation drivers, the Top Employers Institute and consulting firm Bright & Company have collaborated to produce a report measuring the HR impact of analytics. This includes how effectively organisations deal with their workforce and whether set goals are met regarding the management of the employee-lifecycle within an organisation.

Most used HR metrics and KPIs

With the rise of data analytics, the oportunities for more accurate and informed HR metrics are growing, potentially leading to more value-adding insights. These insights can in turn generate actions which can be undertaken to improve business effectiveness – and with a tightening jobs market seeing a growing number of firms competing for a shrinking talent pool, metrics which can improve retention in particular are a precious commodity.

Metrics use per HR KPI driver | Use of individual metrics

According to the study, metrics related to the HR KPI ‘Turnover’ are the most common at 65% of HR departments among the more than 200 companies polled. Within Turnover, 'Reason for Leaving’ (74%) and ‘Voluntary-Involuntary Turnover Ratio’ (71%) both score highly as often used metrics, helping employers work to locate weak points in their operations which are leaking staff rather than retaining much needed skill-sets.

HR KPI metric ‘Engagement’ follows at 54%, as the next most used metrics. Poor productivity from non-engaged staff is thought to contribute to a $7 trillion loss in the global economy. Metrics in engagement can help both by democratising a workplace to find areas for improvement, and by reducing stress by helping the workforce feel included in decision making. This can further improve staff retention, and so unsurprisingly, 71% of companies surveyed leverage a ‘Employee Engagement Index’.

Following this, ‘Career & Mobility’ is the next most popular category of metrics, at 53%. Again, this metric will likely feed into the potential to retain staff, as a firm which can illustrate a propensity for internal promotion and the reward of good work will ultimately show itself to offer employees opportunities worth hanging around for.

50% of those surveyed said they use metrics to monitor their ‘Compensation & Benefits’ offerings. With financial stress estimated to cost the economy billions in lost time, the importance of employee satisfaction in relation to pay is incredibly important, and metrics in these areas can help quantify employee satisfaction with regards to their salary. It can also help to show whether short-term incentive pay-outs work as a driver for employee retention, or if other measures, such as sales bonuses, need to be deployed, while also helping to measure the increase or decrease in client satisfaction after the tactics are used.

A further 46% of respondents told the researchers that they use metrics to weigh up the impacts of ‘Learning & Development’. According to the study, these can be used to explore which elements of a company’s L&D operations are good predictors for high flight risk, or for employee productivity for that matter.

Leadership metrics | Turnover metrics

A similar 45% leverage metrics to monitor ‘Recruitment’ as a driver. This can help to find which recruitment channels deliver the best candidates, meaning more can be done to emphasise recruitment techniques which yield employees that remain with the firm for a longer time, and which can fill the roles quickest. It can also find which methods end with the employment of candidates for sales positions which are most likely to attract new clients?

‘Performance’ monitoring methods are the last metrics to be used by more than 40% of respondents. The technique can demonstrate how the performance management process impacts upon internal and external mobility, as well as what effect the coaching and mentoring has on profitable revenue development.

38% of firms use ‘Succession’ metrics. These can reveal how outgoing management members are replaced, and the differing effectiveness of internal or external appointments, among a number of other variables. It can also demonstrate how well new managers perform, and areas in which they can be better supported for future successions.

With large numbers of staff coming under stress in the global economy, something which decreases effectiveness at work, and increases the number of productive hours lost to absenteeism, ‘Well-being’ metrics are also seen as important. 34% of those polled said they used them, as they are valuable predictors for stress-related absenteeism, as well as showing the effects of a company’s vitality programme to combat this.

Leadership metrics

Finally, ‘Leadership’ is a key metric at 32%. While the authors highlighted the importance of leadership and governance in the study, the measurement in the effectiveness of the leadership domain is not at the level one might expect. Further to this, only 38% keep track of their leadership development rate to plan for future generations of leaders and internal successions, while 36% measure the prevalence of leadership development plans.

Learning & Development metrics | Recruitment metrics

The least closely monitored of any leadership metric is the instability rate of managers. This is particularly surprising given it would inform all the other steps. If a managerial role is particularly unstable then efforts would need to be made to ensure that succession and support mechanisms were improved and monitored, should a change at the top be needed. At present, the CEO role in particular is noted as being volatile, with a recent report by Strategy& suggesting those in the big job are unlikely to survive beyond the five year mark.

Among the metrics organisations measure the least, are ones that can help organisations define their data models and perform analyses that potentially have major business impact, such as ‘Peer Review Rate’, in the ‘Performance’ category, at 12%; ‘Stress-Quotient’, in Well-being at 15%; ‘Time to Productivity’, in ‘Recruitment’ at 18% and ‘Cross-Function Mobility of Managers’, a measure from ‘Leadership’, at 21%.

Related: HR departments are not showing their business value to executives.

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