HR function KPI’s are defined the same way as Human Capital KPI’s except that they are internally focused, rather than focused on the broader organization. One should not be blind to the large amount of overlap that the two types of indicators have on each other though. When looking at the performance of the HR function, it’s obvious that negative or positive performances will impact the workforce through engagement, productivity, or skills.
There are many metrics out there, but to be of most value, what you really want to use your KPI’s for is to focus on where the HR function adds strategic value to the organization. Taking an easy example, time to fill is a pretty standard metric that some people consider a recruiting KPI – and it sometimes is. However, time to fill as a recruiting measure within the HR function may also be closely linked to quality of hires and eventually productivity and profitability. If your time to fill has gone up (takes longer) then it’s possible that the job market has tightened and good candidates are harder to find. This might lead to lower quality hires and lower productivity. In this case, an HR Function KPI might be a leading indicator of future productivity. On the other hand, its also possible that your employer brand suffered major losses, for example after a scandal in senior leadership. Now that same HR Function KPI is a lagging indicator of your employee value proposition. Certainly there are more powerful examples of a KPI that supports your strategic mission more directly, but this is just an example.
After defining KPI’s that can be measured towards the value add to the organization, you’ll want to look at KPI’s that measure the effectiveness of the HR function. In another example, I’ve spent much time on systematicHR complaining about the performance management process. The employee performance score metrics are really not helpful here. What are more interesting KPI’s is the diagnosis of the process itself by tracking gains in employee productivity, advancement or engagement and correlating them to the performance process. You can also do this same correlation with other talent management processes. By doing this, you know which processes are currently impacting the employees both positively and negatively and act on them. You may find that the performance process does nothing but take time from employee’s jobs, that the performance score does not indicate real performance, or that the process actually makes a difference in the work lives of employees. Without understanding how the function works and knowing what the indicators are of effectiveness, you’re at a loss for running your HR function.
As HR becomes more “strategic” more of us are getting to understand how we can use metrics not only in every day work life, but also how it supports and advances our goals and strategies. Becoming familiar with KPI’s is critical to our support of the business.