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HR Metrics: How to Define Your KPIs for Organizational Success

HR Metrics: How to Define Your KPIs for Organizational Success

Metrics are invaluable tools organizations utilize every day to make their business as successful as it can be. However, when it comes to these metrics, it can be tricky to determine exactly how to measure your data against your supposed success. Beyond this, simply determining the correct metrics can be a challenge. Read on to learn exactly how to best isolate the necessary metrics for your team, and create more success for your organization. 


What are KPIs?

Key Performance Indicators (KPIs) refer to any metric, which has a direct correlation to your team or organizational strategies. These metrics should always demonstrate how your efforts relate to your HR-specific mission statement, as well as your overall organization-wide mission statement. 

These KPIs assist in determining the number of metrics, all of which are analyzed to further the progression of your organization. They offer a glimpse into effective measures that may benefit your current strategies. 


How to Keep Track of KPIs?

KPIs will differ depending on the team and the needs of the organization, and keeping track of the necessary metrics can at first seem overwhelming. Keep in mind that you will not need to keep track of these by hand. When it comes to calculating and tracking KPIs, an HRIS platform, such as BerniePortal, will make your job so much easier.

Essentially, a quality HRIS platform can manage a large amount of information. Chances are you will only be using bits and pieces of it, but this is where a reporting system will really come in handy. All-in-one systems can allow you to create custom reports and export all relevant information as needed or view dashboards with key information within the system. 

These reporting options should be quite robust and easy to understand. They can include everything from benefits deduction and compliance notices to recruiting and retention

Rather than pull these numbers from multiple locations and reports, HRIS systems like BerniePortal can include all of this information within a single location. Not only does this greatly decrease the time it takes for you to input and export these metrics, but an HRIS streamlines your access to the necessary data that helps you monitor trends in various aspects of your HR processes. 


How to Determine Your Team’s KPIs?

When determining which KPIs are correct for your team, consider your mission statement as well as your SMART goals. These factors can help you to pinpoint which metrics will matter most for your strategy moving forward. Consider the following as you dive in:

  1. Start With Your Priorities: If your mission statement’s priorities are to recruit, enrich, and retain your organization’s talent, then it makes sense that your KPIs would focus on recruitment, training, and retention. This is a great example of capitalizing on what the focus of your mission is. Leverage your priorities when choosing KPIs

  2. Where Could You Improve? If in your HR audit, you learned that you aren’t conducting annual compensation reviews, then it would only make sense for you to consider adding KPIs for compensation or employee satisfaction to improve within your given timeframe. 

  3. Follow Goals: Your goals should ideally determine what you track. For example, if one of your goals is to increase the employee retention rate from 65% to 75%, you’ll want to be tracking those metrics specifically. This is one of the most crucial aspects of choosing your KPIs. It may seem obvious, but going back to the beginning can often provide clarity when determining important metrics such as KPIs.


Retention & Recruitment

Recruitment and retention are two of the most common KPIs, which are valued by nearly every organization. It makes sense as these are both crucial to organizational growth and success. Strong company culture and employee satisfaction are the backbones of an organization's productivity. 

Recruitment is all about finding the right candidates to join your team. When it comes to this measure, there are several metrics that can be used to determine success:

  • Average Time to Hire: This measures how long it takes you to hire a candidate for an open position. 

  • Average Time to Fill: This measures the amount of time you need to fill a position. It differs from time to hire because you start calculating the time to hire when a candidate submits an application, whereas you begin calculating the time to fill before the job is posted. 

  • Average Cost per Hire: This metric determines the resources you invest in finding and hiring candidates. 

  • Recruiting Source Conversion Rate: Tracking Recruiting Source Conversion Rate will help you determine which recruiting sources are yielding the most offers and most-qualified candidates. 

  • Job Offer Acceptance Rate: Keep an eye on Job Offer Acceptance Rate if you want to track how many of your offers are being accepted. 

We can now take a look at retention, which measures the overall effectiveness of your team when it comes to maintaining employees. Much like recruitment, we can measure this in several different ways:

  • Absence Rate: This metric gives you insight into the amount of lost labor and productivity as a result of sickness and other types of leave. 

  • Turnover Rate: Measuring staff turnover can help you determine if your retention strategies are successful. 

  • Involuntary Turnover Rate: How many of your employees are being asked to leave? Tracking this metric can give you insight into the quality of candidates you’re hiring. While similar to the turnover rate, the involuntary turnover rate requires HR to factor in employees who were specifically asked to leave.

  • Voluntary Turnover Rate: How many of your employees leave without being terminated? A high voluntary turnover rate can indicate issues with retention and employee satisfaction. 

  • Average Employee Tenure: On average, how long do your employees stay with the company? Do you have a high churn rate? 


How to Calculate Hiring Metrics

By taking a look at these measures more closely and identifying their formulas, we can determine the overall calculations for each metric. 

Time to Hire can be calculated by first marking the date the job was posted online with the number 1. This reflects day number 1. If an employee was hired on day 30 but applied on day 15, we will subtract 15 from 30. This tells us the time to hire was 15 days. The time between the applied date on day 15, and the hire date, on day 30. 

Time to Fill can be determined by first determining a start date. Is it once the hiring manager submits the job for approval? Or is it after finance and HR approve the position? Once this has been established, the time to fill can be calculated by taking the starting point, or 0, and adding the number of days until the most qualified candidate accepts the position. If a candidate accepts the position 45 days after the start date, or 0, then the time to fill is 45 days. 

Cost per Hire can be calculated by tallying all of the expenses HR contributed to hiring and then dividing that number by the number of hires for the year. When calculating expenses, HR should include items like recruiters’ salaries, money for referral programs, as well as advertising.

Recruiting Method Conversion Rate is calculated individually depending on the recruiting method utilized. For example—if an organization had 75 candidates submit applications via LinkedIn, and the hiring manager offered 10 of those candidates positions, then 75 divided by 10 would be a recruiting method conversion rate of 7.5% for LinkedIn.

Job Offer Acceptance Rate is calculated by dividing the number of offers you made over a given period of time, by the number of offers accepted.

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