What are HR KPIs?

As with any business data, the value of HR KPIs lies in the insights they can provide. Employee engagement and positive employee experiences naturally result in improved productivity, which feeds directly into increased business success. HR KPIs allow leaders and decision makers to pull back the curtain and develop a clear understanding of what elements are promoting positive experiences, which ones are creating employee pain points, and what areas may need attention. 
HR KPIs are essentially the regular checkups that a business must perform to remain healthy, and to catch any symptoms of potential HR issues before they grow into major problems.

There are many key performance indicators that may be applied to human resources, but the most relevant HR KPIs include the following:

Absenteeism describes a situation in which an employee is absent from work beyond a reasonable amount of time. When employees regularly miss work it puts additional strain on the employees’ managers and teammates to pick up their slack. That is a major issue in and of itself, but absenteeism can also be symptomatic of larger employee satisfaction problems

You can calculate absenteeism by taking the number of absences of an individual employee over a set period (such as one month), dividing it by the total days in the period, and then multiplying the resultant number by 100 to get an absenteeism percentage. Generally speaking, anything over 3% absenteeism may indicate a problem worth investigating.

Employees generate revenue for your business, but they also represent a major investment in terms of resources, recruitment, and training. Cost per hire is a KPI that measures this investment, so that organizations can better understand the actual value of bringing on new employees and how quickly they can expect the hire to begin producing positive revenue.

Calculating cost per hire can be a difficult prospect and requires that you take into account all internal and external costs associated with recruitment for all new hires over a specified period of time. Divide the sum of those costs by the total number of hires over the same period to get the cost per hire.

There are few HR KPIs as obviously connected to business success as employee productivity. This KPI measures how long it takes for employees to complete assigned tasks or accomplish performance goals and provides insight into employee engagement and other key elements of the broader HR mandate.

There are multiple ways to calculate employee productivity, but one of the most widely used methods is called the labor productivity equation. This equation takes the total output of goods or services (as represented by a dollar amount) over a period of time, and then divides that number by the total labor hours. The result is the average dollar amount your company generates for every hour worked.

Talent retention measures the percentage of employees who chose to remain with the organization. As previously mentioned, recruiting and onboarding new talent represents a major investment. When talent leaves, it not only results in the loss of the original investment of hiring the employee, but it also creates additional productivity costs as teams scramble to cover the lost employee’s responsibilities until a replacement can be brought onboard. Understanding turnover rate as a KPI informs recruitment, workforce planning, and many other aspects of business strategy.

Calculate talent retention by dividing the number of employees you have on staff at the end of a predetermined time period (such as 12 months) by the number of employees you had on staff on the first day of the period, and then multiply that number by 100. This will give you the percentage representing how many of your employees are choosing to remain with your company. You can then look at how your salary, culture, and policies may be affecting that number.

On the other side of the coin from talent retention, turnover rate tracks the percentage of your employees who leave your company—voluntarily or otherwise—over a period of time. Although turnover and retention measure essentially the same thing, they are worth tracking separately. A high turnover rate suggests you may have a problem with company culture or employee compensation and can have a demotivating effect on employees. On the other hand, low turnover can mean that your culture and compensation are where they should be.

To calculate turnover rates, divide the number of lost employees during a set time period by the number of employees at the beginning of that time period, and then multiply the result by 100 to get your percentage.

The right HR KPIs can provide your company with detailed insights into processes and factors that influence your success. But managing these KPIs accurately requires powerful, dependable tools. Put your HR KPIs to work for you, with ServiceNow.

ServiceNow Performance Analytics for HR Service Delivery gives you all the support and resources your team needs to identify and track the most relevant HR KPIs for your business—resolving problem areas, getting ahead of trends, and building a complete picture of your company. And, because Performance Analytics for HR Service Delivery is built on the Now Platform®, your teams will always have a centralized, single, reliable source of data truth.

Give HR KPIs the attention they deserve; demo ServiceNow today to get started.