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Most Important KPIs for HR Leaders in 2021

by Rebecca Symmank on January 26, 2021
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There's been a major evolution in the workplace over the past year. As it has transformed, so has the role of HR leaders and the human resources metrics and KPIs that matter most.

HR professionals are hiring and onboarding employees remotely more than ever before. They’re concerned about whether their workforce has the right skills to compete in the future workplace. And with teams more distributed, it can be difficult to manage and train them from a distance.

Here’s a closer look at what has changed and how HR leaders can continue to add value to their organizations this year.

What are top priorities for HR leaders in 2021?

Human resources metrics and KPIs are sometimes used interchangeably, but they are distinct. Key performance indicators are broader business goals. HR metrics are individual data points that help leaders determine whether they’re on the right track to achieve them.

While every leader will have unique HR metrics and KPIs based on their organization’s goals, there are some big focus areas almost everyone has in common.

A recent Gartner survey of 800 HR leaders identified six top priorities:

  • Building critical skills and competencies (68%)
  • Organizational design and change management (46%)
  • Developing current and future leadership (44%)
  • Preparing for the future of work (32%)
  • Employee experience (28%)

Workplace employee experience score

Building critical skills and competencies

Over a third of survey respondents said they don’t know what skills gaps their employees have, which means they don’t know where to start when it comes to training.

Even if they’ve identified the most critical skills, it isn’t always easy to incorporate training into day-to-day operations. Another problem, according to the report, is the fact that the business landscape is changing so quickly, it’s difficult for professional development programs to keep up.

Thirty-three percent of the skills that were present in an average job posting in 2017 won’t be needed in 2021, according to Gartner.

Add in the fact that most training is happening remotely for at least the first part of the year, and HR professionals are met with what may feel like an impossible challenge.

Organizational design and change management

Many HR leaders, department managers, and employees are all feeling the effects of a year of rapid change. It has been particularly difficult for large enterprises with more traditional hierarchies and processes to adapt quickly enough to meet the needs of their customers.

Only 38% of HR leaders believe their workforce can effectively detect when they are working on the right things for customers, according to the report.

And over half of respondents said they expect their organizations to shift from designing for efficiency to designing for flexibility.

Developing current and future leaders

After a year of nationwide protests calling for racial justice, more organizations have publicly committed to improving diversity and inclusion in the workplace.

Yet nearly half of HR leaders said their leadership bench is not diverse, according to the survey. Many said the path to advancement at their organization is unclear, while others cited a lack of mentorship or career support.

Gartner recommends creating “growth-focused diversity networks” to help organizations better develop underrepresented talent.

Preparing for the future of work

The future of work is a top priority for nearly a third of HR leaders. Yet 62% said they don’t have a clear “future of work” strategy.

More specifically, they are struggling to align their hiring and talent development processes with the changing business landscape. They’re also struggling to prepare for the ways in which some employees will be displaced by artificial intelligence and other emerging technologies.

Improving the employee experience

The employee experience has been on the minds of many HR leaders for years, but the COVID-19 pandemic may have brought it to the forefront even more.

The physical work environment is one of three key elements of the traditional employee experience, according to author Jacob Morgan. Without a place to gather with others, many employees say it’s harder to collaborate and focus.

The top four reasons employees want to return to the office all have to do with spending quality time with their colleagues, according to a recent Gensler survey.

They want to get back to attend face-to-face meetings, socialize, and be part of a community.

Meanwhile, HR professionals are trying to keep employees engaged from a distance and determine how they can support them in a more holistic way. In addition to planning virtual team building activities, many are updating employee benefits to include stipends for childcare and implementing scheduling policies to help reestablish the boundaries between work and home.

They’re also looking at employee wellness in a new way. Instead of just providing healthy snacks, they are having more conversations about mental health, offering access to counseling services, and providing training to managers so they can spot signs of burnout sooner.

They are also redefining flexible work arrangements. Rather than requiring every employee to work the same hours, executive teams may task HR departments with creating policies that allow for flexible scheduling. Expanded remote work policies are likely to continue after the pandemic, but a hybrid workforce requires active management.

If it’s left completely up to individual employees to decide when to come in, workplaces may have overcrowding on some days and a nearly empty office on others.

What human resources metrics and KPIs are most important?

1. Employee absenteeism rate

Because the lines between home and work have become blurred, it’s not unusual for employees to find themselves working more hours than they would if they were in an office. Combine this with the “always on” expectation often associated with remote work, and employee burnout becomes more common.

In offices that have reopened, HR leaders have a responsibility to help employees protect themselves from COVID-19 by implementing workplace safety features such as physical distancing, employee wellness checks, and contact tracing.

That’s why it’s important to pay attention to employee absenteeism rates in the coming year. While HR leaders may see additional absences due to employees caring for a child or a loved one even though the federal Families First Coronavirus Response Act (FFRCA) has expired, they should also monitor absences unrelated to COVID-19.

A noticeable uptick in this human resources metric could indicate your workforce is struggling with increased stress or impending burnout.

2. Employee engagement level

Despite being tied to popular human resources metrics and KPIs for decades, an employee’s level of job satisfaction doesn’t necessarily tell you how likely they are to go the extra mile. A better measurement of how an employee feels about their role at the company is their level of engagement.

A satisfied employee may perform adequately and stay at the company for a few years, but it’s unlikely they will be inspired to go above and beyond. An engaged employee sees value and purpose in their work and is more likely to be an exceptional contributor.

While employee engagement has been an essential human resources metric long before COVID-19, it will be particularly important this year. That’s because remote work can make some team members more prone to becoming isolated and disconnected, which impacts how invested they feel in the company.

3. Employee net promoter score (eNPS)

An employee net promoter score (eNPS) measures the workforce’s perception about the organization. It’s calculated by asking a simple question:

“On a scale of zero to 10, how likely are you to recommend this company as a good place to work?”

The scoring model categorizes responses into three groups:

  • Promoters (scores of nine or 10)
  • Passives (scores of seven or eight)
  • Detractors (scores of six or lower)

Subtracting the percentage of detractors from the percentage of promoters yields a company’s eNPS score (a value between -100 and 100). Companies can use this human resources metric to determine how much employees enjoy working at the organization.

The uncertainty of the pandemic has made some people more reluctant to change jobs, which makes eNPS one of the most important HR metrics to measure. An employee referral can go a long way toward encouraging someone to apply.

4. Diversity metrics

The degree to which an organization emphasizes diversity and inclusion in the workplace is a deciding factor for many job candidates on whether or not to apply.

Measuring your company’s level of diversity can be complex, but like all human resources metrics and KPIs, you can’t improve it unless you do.

In a recent podcast, McKinsey senior partners Celia Huber and Vivian Hunt discussed some important metrics related to diversity.

They include:

  • Whether underrepresented groups as a percentage of the workforce are increasing
  • Representation of women and people of color in management and senior leadership
  • Women and people of color who experience microaggressions, such as being addressed in a less than professional manner or having someone question their expertise or judgement

The increasingly distributed workforce means companies have access to a more diverse talent pool than ever before, but unconscious bias in their hiring practices could keep them from making more progress in this area.

HR leaders should commit to diversity and inclusion in every aspect of the organization, from recruiting and hiring to training and leadership development. It should be deeply ingrained in the company culture.

In addition to supporting and contributing to a culture of equity, focusing on diversity has been shown to improve profitability and performance.

5. Talent retention/turnover rate

Every company experiences attrition, and not all turnover is bad. However, if there is a higher rate of turnover among the best employees, there’s a potentially serious, fundamental issue at the company that needs to be addressed.

To ensure the best and brightest aren’t being driven away, the HR team should specifically measure talent retention and turnover rate. This goes beyond total turnover to measure the attrition for high-performing and high-potential employees in particular.

It’s one of the most important human resources metrics and KPIs this year, especially since widespread remote work has eliminated geographic restrictions. That means passive and active jobseekers have even more employment opportunities.

6. Early turnover

Another key metric is early turnover. Early turnover represents the number of employees who leave a company within a set period of time, usually their first year.

If new hires consistently put in their notice before their first anniversary, a company is losing tens of thousands of dollars annually. In addition to the high costs of recruiting, the average employee takes six to 12 months to reach full productivity.

Since recruiting has been particularly challenging during the pandemic, making the right hiring decisions will be even more important this year.

How can HR leaders strengthen the workforce?

With many companies likely to have a hybrid workforce of on-site and remote employees as well as a mix of temporary and contract workers, an HR leader’s role has become more complicated. Knowing where to concentrate the HR team’s efforts will help them make sure every employee, regardless of location, is receiving the support they need.

In addition to measuring key HR KPIs, leaders should focus on identifying skills gaps within their organization. They need to keep a close eye on how the future of work is changing demand for certain roles and skill sets.

And they need to be proactive about providing employees with the technology, resources, training, and benefits they need to stay engaged and advance their careers.

To help them achieve these goals, more companies are investing in what has been dubbed the employee experience platform — a single system that offers a variety of workplace services.

Those services could include internal communications, IT support, mail and food delivery, and reservations, among other things. Ideally, these services should be connected to the systems your company uses to manage your buildings and assets.

We believe the quality of the employee experience will be so crucial to HR leaders’ future success that these systems will become standard. Our integrated experience management system (iXMS) combines all the essential elements of facilities management and human resources into one.

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