What are KPIs and why are they important in HR?

I’m sure being in the world of business we have all come across a reference to KPIs in one way or another, but if not, let's demystify the idea and try to understand what KPIs in Human Resource management are and what value they bring to the business.

Key Performance Indicators (KPIs) are metrics used in human resource management that measure and track the overall progress and success of an organization's workforce, a fundamental importance of KPIs in HR is that they help organizations ensure they are making the best use of their most valuable assets – their employees. It’s not enough if you have great people, but no proper quality of work

KPIs provide the HR department with insight into the organization’s performance, identify problems and maintain accountability. Additionally, they aid in motivating employees, improve decision-making and align objectives with strategy.

While this may sound a little technical, it is important to have clearly set goals for the business when setting KPIs. Some of the indicators of a good KPI measurement for HR will include:

1. A clear and concise objective.

2. Detailed and accurate data collection.

3. Easy-to-use reporting facilities

4. Regular analysis and feedback.

The 11 HR KPI’s (link to LinkedIn profile) can be clustered into groups which give indication of how well the business is doing namely:

i. Productivity rates

- Efficiency is an important measurement in any organization, ensuring that the company is making the most out of their resources and capital to generate profit.

- This cluster shows the overall effectiveness of employees, it is made up of the following metrics: Rate of absentees, Absence rate per manager, employee productivity, company performance and employee performance KPI’s.

- By measuring and collecting data on productivity rates a company is able to track trends and identify areas for growth.

ii. Turnover rates

- Turnover rates show the percentage of employees that have left over a certain period of time. While the turnover rate can vary by industry it should stay below 10%. An organization with a high turnover rate should put in place fair compensation packages, create a conducive working environment and establish a healthy company culture.

- The metrics used include: Employee turnover rate, employee retention rate and retention rate per manger. These give an indication of satisfaction levels of the workforce.

- When talent leaves, HR spends time and resources recruiting to fill the position, the opportunity cost of the resources and capital which would have been channeled to other core activities, will ultimately impact the organizations productivity and efficiency.

iii. Employee engagement/satisfaction

- These KPI’s are a fundamental consideration for the HR department essentially due to the increased competition between recruiters for top talent. Some of the metrics used are: Employee satisfaction rate, Employee retention rate, Overtime expenses and Employee growth rate.

- This cluster shows the overall dedication of the workforce. Organizations need to ensure employees needs are met by conducting regular employee satisfaction surveys. This is fundamental because happier employees are overall more productive employees and produce better quality of work.

All in all it is essential that the HR department has great performance indicators in place in order to keep up with the times and maintain overall productivity and efficiency.

Africa Management Solutions limited

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Written by; Mary Wanjala