Top 15 HR KPIs that matter in 2022
One of the most valuable assets of the organization is people. That is why the effectiveness of the recruitment process, as well as talent retention, are gaining importance. But is it enough? Of course not. In a world driven by data, there is no turning back from applying quantifiable measures that give valuable insights. Let's check which key performance indicators, HR managers should measure in 2022.
What is HR KPI?
KPI stands for a key performance indicator. This is a quantifiable measure that demonstrates how the organization meets the specific business targets over a specific period. KPIs align with the development strategy and help to focus on what's the most important for the company. They act as a guide for managers and teams to make the most impact.
KPI metrics are being applied in more and more areas of the organization. They are the most popular in the sales and marketing departments. But not only. Taking into account the challenges in the labor market, they arouse interest also among HR professionals. And the main challenges for HR managers are as follow:
- employee turnover,
- employee retention,
- employee satisfaction,
- employee engagement,
- employee productivity,
- pay gap,
- diversity and inclusion.
HR metrics are very powerful. They are used to check how human resources contribute to the company's growth. They give valuable insights on, for example, how to improve the recruiting processes, lower the turnover rate, raise the retention rate, estimate training costs or improve social corporate culture. However, we can only talk about those benefits, once the KPIs are well-defined, measured, and thoroughly analyzed in terms of conclusions for the company's performance.
How to define HR KPIs?
Before we skip to an overview of key HR KPIs that will matter in 2022, let's have a look at what the process of establishing the HR metrics should look like. Here are some useful tips.
KPIs are strategic metrics. They should be aligned with specific business goals. It means that the first step is to define the organizational strategy and HR strategy that will follow it. Human resources key performance metrics should reflect how the HR department is effective in implementing the strategy.
The best-case scenario is when defined KPIs align. However, it may occur that they are mutually exclusive and the HR manager has to face a difficult choice. Referring to the organizational strategy will help to decide which KPI to choose.
Well-defined KPIs are simply SMART, i.e.:
- HR managers can Measure them,
- Relevant to the organization's business goals,
- there is a specific Timeframe to achieve them.
Only metrics that meet these conditions are noteworthy. It means that only then, they can give valuable insights that can be used to improve the company's performance and achieve the strategic goals.
Less is more
You will see from the rest of the article that there are plenty of human resources metrics. It doesn't mean that you have to follow them all. On the contrary! As it was already stated, they have to be aligned with the specific business goals. Each organization has its own strategy so KPIs have to be established individually.
The second aspect is about tracking KPIs on regular basis. Once you establish too many metrics, you may not be able to fully make use of the insight they provide you with. Too many HR KPI measures, also lead to the risk of obtaining mutually exclusive conclusions.
Roles and responsibilities
KPIs need to have an owner who will take responsibility for them. In practice, it means that such person is responsible for the following actions:
- communicate the KPIs,
- make sure they are understandable,
- extract valuable insights,
- apply conclusions and appropriate measures.
It's good when the owner is ready to drill into the details. Such an attitude will definitely help to understand the real reasons for a given state of affairs and implement improvements. It is very helpful for the owner when KPIs are as simple as possible. It makes it so much easier to communicate, track, and analyze them.
Leading KPI or lagging KPIs?
It's good to differentiate two types of KPIs:
- lagging KPIs - refer to the effects/outcomes of a given KPI (to the past), give more precise conclusions after a fact,
- leading KPI - refers to the cause of a given KPI (to the future), gives less precise conclusions on the ongoing performance.
Let's see it in an example.
Business goal: improve retention rate
Lagging KPI examples: measure employee satisfaction (the higher the level of employee satisfaction the lower the retention rate).
Leading KPI examples: employee turnover, employee productivity (retention has an influence on the lower turnover rate and higher productivity).
While defining KPIs it's recommended to take into consideration both leading and lagging metrics. Only a mix of them will enable us to track historical achievements and predict the future.
Top HR KPIs in 2022!
No.1 Employee turnover rate
The lower the turnover rate the better. It gives insight into how many people leave the organization. If the metric is high, the organization is in trouble (loses on productivity and cost-effectiveness). To minimize the harmful impact of the high turnover rate, it's necessary to investigate the reasons for which people are leaving the company. And the reasons can be very different: starting from low salary to unpleasant work environment.
Provides conclusions on: how to improve employee engagement/ employee satisfaction, how to improve the culture of the organization, how to estimate salary and plan non monetary benefits.
No.2 Talent turnover rate
This metric is similar to the previous one. The difference is that it focuses on those positions that are the most difficult to fill. It applies mainly to highly qualified specialists and C-level executives. Why this HR KPI requires special attention? Because recruiting for such positions is much more time and cost-consuming. As these are mainly positions of strategic meaning, benefits will be seen over time. It's good to track if they're worth the effort.
Provides conclusions on: effectiveness of the recruitment process, the competitiveness of work conditions.
No.3 Absenteeism rate
Tracking the absenteeism rate is crucial for the organization for numerous reasons. First of all to ensure smooth business processes and the ability to provide services/ products. High absenteeism rate influences not only lower productivity and cost-effectiveness but also the motivation and opportunities to scale business operations. It's very important to understand the roots as it helps to plan corrective steps (for example if the metric varies seasonally or if the metric is extremely high in a particular department).
Provides conclusions on: how much time employees spend working, how to plan work schedule, what is the level of employee engagement, how is the particular department managed.
No.4 Retention rate
This HR metric gives information on how the company is successful in its retention efforts, i.e. if the company:
- understands the employees' motivators,
- undertakes actions to maintain the employees' satisfaction,
- creates a nice place to work,
- offers competitive financial and non-financial benefits,
- creates remote work opportunities,
- is effective in hiring the right people for the right jobs.
All these aspects may decide whether the employee decides to stay or to leave the job. It is in the company's interest to keep the retention rate as high as possible. The more stable the level of employment is, the better the organization will grow.
Provides conclusions on: quality of work environment and recruitment process, employee satisfaction.
No.5 Employee satisfaction
The success of the organization depends on happy and highly motivated employees. Understanding of the term "employee satisfaction" has changed a lot. It's not only about financial aspects. A good salary is not the main motivator anymore. There are numerous non monetary benefits that matter, including work-life balance, career path, flexible work hours, and many more. For retaining talent, especially highly sought after specialists, it's crucial to understand those motivators. Why? If the employee is not satisfied with the job, he/she will look for another. For the company, it creates challenges to find talent for replacement and ensure smooth business operations. It also has a huge impact on the company's budget as the recruitment process can be very expensive. Therefore, in order to avoid losing talents, it's recommended to use employee satisfaction surveys on regular basis.
Provides conclusions on: how to organize work culture, how to plan monetary and non monetary benefits, what technologies to implement that can support employees in their daily tasks.
No.6 Employee engagement
Employee engagement has a direct impact on the productivity of the organization but also on the quality of delivering the services to the clients. The more engaged the employees are, the better outcomes the company achieves. This KPI can be measured through observation of the attitude as well as surveys. If the employees don't achieve their targets, the level of engagement can be low. Again, it requires deeper investigation. It may occur that people are simply tired and bored with tedious tasks. Supporting them with adequate tools (like for example our BOTWISE that can save even up to 90% time of searching and gathering information) can have a huge impact on the engagement level.
Provides conclusions on: how to shape the policy of motivators and benefits, what tools to introduce to support employees, how to plan the career path.
Learn more on how to boost employee engagement on our blog.
No.7 Employee productivity
This HR metric is crucial from the perspective of the company's success. It answers two very important questions:
- how much time does it take for employees to complete their duties, and
- how well do they perform the job.
Each company should strive to improve employee productivity as it has an impact on everything, including sales. It determines whether the company is able to deliver products/ services according to the market demand.
Provides conclusions on: how to improve employee engagement, what actions need to be undertaken to improve the work conditions (for example automation of tedious tasks), how to plan employees' workload, how to estimate the products' prices.
No. 8 Training costs
Development opportunities are one of the most important motivators. People want to work for those companies that understand that the investment in qualifications matters. However, often the training costs are the first ones to cut. Therefore it's good to track them and observe what implications the training has on employees (both on the new hires and the ones with seniority). Such KPI can give human resources arguments why the training policy is important.
Provides conclusions on: training effectiveness, quality of training providers.
No.9 Cost per hire
The company's success depends on the high quality of the workforce. However, it is expected that investment in talent will pay off. It cannot be checked right away. The costs must be borne immediately, while the benefits will be seen in the future. Despite this fact, the costs the company spends on new hires, have to be measured on regular basis. It refers to the cost of advertising the job offer, time of HR manager engagement, onboarding, etc.
Provides conclusions on: the cost-effectiveness of the whole recruitment measures as well as individual parts of the process.
No.10 Quality per hire
This metric gives insights into how HR professionals are effective in recruitment measures. In particular, if they hire the right people for the right jobs. Although it can be hard to quantify, it's a very important key performance indicator as the company's growth depends on these aspects. If the human resources make wrong choices, it has a bad impact on both productivity and cost-effectiveness. But it's not necessary HR department to blame. Problems with the quality of new hires may be caused by a lack of communication between HR and other business units or they can result from the inability of the business unit to define its recruitment requirements. Quality per hire can be measured for example after the onboarding process or during the 360-degree annual evaluation.
Provides conclusions on: whether the company understands what qualifications it needs, effectiveness and quality of the recruitment process, HR managers' engagement.
No. 11 Time to fill
This key performance indicator measures time from when the job announcement is posted to when the job offer is accepted by the candidate. It helps to understand how effective is the whole recruitment process and whether there are any steps that can be optimized. If the HR metric is very high it's good to check which part is the most time-consuming. It can bring human resources to the conclusion that maybe they use the wrong channel to advertise the job or give too much time for candidates to accept or reject the offer.
Provides conclusions on: effectiveness and engagement of HR department.
No.12 Pay gap
According to PayScale: "in 2021, women make only $0.82 for every dollar a man makes". The pay gap is an issue that is related not only to gender but also nationality, race, etc. It has a direct impact on the employee turnover rate. People with equal qualifications want to be treated equally. Rising awareness makes it easier for employees to leave and look for a new job where the salary will be adequate for their skills. The pay gap is a challenge for HR but also an opportunity to introduce transparent policies influencing numerous aspects like satisfaction, engagement, productivity.
Provides conclusions on: planning financial aspects and non monetary benefits, implementing inclusive work culture.
No. 13 Salary average
This HR metric helps to identify the pay gap. It's crucial to track if the company wants to create diverse and inclusive work culture. By investigating what is the salary average in different groups, HR will be able to identify those groups of employees that are undervalued. On the other hand, this KPI helps to identify how salaries compare with the competition. If they are lower, it can be a potential threat of losing talents.
Provides conclusions on: the effectiveness of the remuneration system, the level of competitiveness in the labor market.
No.14 Diversity ratio
This ratio is used to measure the representatives of different groups in the company and in particular departments. It has a huge impact on employer branding. By tracking diversity and undertaking measures aimed at creating equal opportunities, the company gives a signal that it cares about the general well being of employees no matter where they come from or what are their views.
Provides conclusions on: what needs to be done to introduce inclusive culture.
No. 15 Female to male ratio
This ratio can give interesting feedback on how the company adapts to the new trends in the labor market, in education as well as the need of creating inclusive workplaces. Comparing the ratio year by year can show whether for example IT companies open more for female candidates or large corporations create more places on the board for women. There is much evidence of positive results of mixed teams. Men and women can use their individual characteristics and perspectives in order to work out the best solutions.
Provides conclusions on: how to adapt the work culture to mixed teams, what criteria are applied during the recruitment process.
The benefits of HR KPIs are simply endless: improving the work environment, optimizing the recruitment process, increasing the organization's productivity, optimizing the company's budget. All of these aspects are crucial for the company to maintain in the very competitive market and face future challenges. And there is no future without data.
But the numbers alone mean nothing. It's crucial to analyze them and try to understand the reasons for such a state of affairs. And then act. HR KPIs should not stay only on paper. They have to be transformed into corrective measures that will lead the organization on the path of sustainable growth. Good luck!