HR KPIs – Identifying and Using Important KPIs in Human Resources

What are HR KPIs? 

With the help of HR key performance indicators, companies can quantitatively record a wide variety of personnel-related information. Based on this data, appropriate measures can then be taken or strategies decided upon.

The following information can represent important HR key figures:

• Period of employment
• Average productivity
• Turnover rate
• Cost per hire
• Diversity ratio (per department)

These key figures enable companies and HR managers to determine whether predefined targets have been achieved across the company or within individual departments. They also provide information on whether further control measures are required in certain areas. It is essential that these figures are evaluated correctly.

At the same time, HR managers must be clear about what they are collecting and why they are collecting it. Ultimately, the collection and evaluation of various key figures in the HR area always serves to review or optimize a specific area of the company.

What Makes HR KPIs (And Tracking Them) so Important 

It stands to reason that HR managers receive important information when certain personnel-related key figures are collected within the company. But to what extent do such HR controlling key figures provide concrete added value for the HR department and the company? We have compiled some of the most important advantages:

• Make strategic HR decisions based on data: HR key performance indicators enable HR decisions to be made on a solid, objective basis - rather than based on gut feeling. Among other things, this facilitates strategic planning of human resources and the targeted implementation of personnel development measures throughout the employee lifecycle. Based on concrete data, HR departments can simulate scenarios, better assess needs, and make long-term planning more reliable.
• Early warning system for HR processes and organizational development: By tracking certain HR KPIs, HR managers can, in the best case scenario, identify negative developments at an early stage. Rising turnover rates or an increase in sick days, for example, can indicate structural problems. Leadership issues, such as conspicuous results in employee surveys, can also be systematically identified. Based on these key figures, HR managers can detect signs of risks such as burnout, overload, or a toxic corporate culture and address them - ideally at an early stage.
• Keep an eye on efficiency and costs: By collecting and evaluating personnel-related key figures, companies maintain control over important HR cost centers. These include, for example, the costs of new hires or the “time to hire.” Such an overview of the costs incurred can help to analyze and improve internal processes, for example by saving unnecessary expenses or by (cost-efficiently) automating individual procedures/processes.
• Making progress and trends measurable: HR KPIs play an important role, especially when it comes to strategic changes within the company (e.g., increased digitalization/reorganization of departments). They document long-term developments, provide a “snapshot” of employee sentiment, and deliver objective data for measuring the success of measures. By comparing these HR key performance indicators, HR managers can also check how their own workforce performs against direct competitors in terms of industry-relevant KPIs.
• Transparency towards management and stakeholders: HR metrics provide a uniform data basis for management decisions. In reports and presentations, they provide fact-based support for arguments - for example, for investments in recruiting measures, further training, or health management. At the same time, these key figures enable HR controlling to easily visualize complex issues, for example in dashboards. This simplifies communication and traceability, especially in regular key figure reporting.

The necessity of tracking (relevant) key performance indicators in the HR sector is underscored not least by McKinsey's HR Monitor. Companies today continue to invest a great deal of time and money in acquiring new talent, while at the same time internal potential often remains untapped. Furthermore, too little time and energy is invested in the training and development of existing employees. As a result, more than a third (37%) of all respondents could imagine resigning in the next 3-6 months.

Determining Relevant HR KPIs – What to Consider

When collecting and evaluating KPIs, HR managers must bear in mind that not every key figure is equally relevant for every goal or target group. The focus should always be on a small number of truly meaningful KPIs. To determine these with certainty, we recommend the following approach:

• Focus on target groups: The question of who the HR KPIs are presented to influences the approach. For management, for example, the turnover rate in key departments is of interest, while in controlling the focus is usually on cost efficiency (of processes), and for managers, the objective performance of their own team is of particular interest (e.g., the degree to which targets are achieved). The presentation of KPIs must take these perspectives and priorities into account.
• Define the level of analysis: The HR KPIs to be analyzed should be based on the respective “level of analysis.” Are you looking at operational metrics for current day-to-day business? Do you want to compare tactical metrics for medium-term employee scheduling? Or do you need strategic KPIs for long-term planning projects and forecasts?
• Think along the employee lifecycle: The employee lifecycle is a good starting point for recording and evaluating relevant key figures in human resources. The phases help to structure the process in a meaningful way, from recruiting (time to hire/number of applicants per position) to retention (average length of service) to the offboarding phase (employee referrals). This ensures that no KPIs are forgotten.
• Quality over quantity: When selecting HR controlling metrics, it makes sense to limit yourself to the most relevant KPIs. Good metrics are characterized above all by the fact that they can be reliably collected, can be meaningfully compared over long periods of time, and can be clearly influenced by concrete measures.

Speaking of quality: Although HR metrics primarily focus on quantitative KPIs, HR professionals must not forget that qualitative factors also play an important role in the work of employees. Aspects such as satisfaction with managers or employee engagement are much more difficult to measure, but they are equally relevant KPIs for employees and companies.

Visualizing Key Figures Effectively – HR Dashboards and Other Tools

As already mentioned, it is important to prepare personnel key figures both for the relevant target groups and with a view to the corporate objectives themselves. However, the type of presentation itself is just as important - for example, using practical tools such as an HR dashboard that all relevant stakeholders have access to.

This form of presentation offers several advantages:

• Clear presentation: All (relevant) data is available in an easily understandable form. With the help of a dashboard, even complex information can be presented clearly and concisely.
• Real-time information: Thanks to the connection to feedback tools and similar software solutions, all important data is available in real time.
• Centralized data management: Modern systems enable the automated collection and evaluation of HR data. This means that all data is collected centrally in one place, ensuring consistent data quality.
• Self-service functionality: In addition to simply presenting relevant data, it is particularly interesting for managers to be able to access existing personnel data and use it for their own KPI analyses.

With the right tools (BI tools with HR interfaces/workforce management software), HR metrics can be interpreted better, faster, and more accurately than ever before. From automatic recording of attendance and absences and simple calculation of FTE to intelligent linking of operational and strategic data sets, the combination of KPIs and powerful tools creates a new level of data-driven transparency within the company.

Important HR Key Figures at a Glance

When it comes to their own employees, there is obviously a huge range of key figures that HR managers can collect and evaluate in a context-specific manner. We have compiled a few examples of HR KPIs here: