The Most Important HR Metrics And KPIs For 2022
The shift toward hybrid work over the past few years has transformed the employee experience and human resources. But the role HR leaders play in recruiting, training, and engaging the workforce remains as crucial as ever. And because it’s so important, we need ways to set goals and track progress using reliable analytics. So, when it comes to measuring success, which HR metrics and KPIs matter most?
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What are HR KPIs?
The shortest, simplest answer is that human resource metrics and KPIs are how you measure success.
But there’s more to it than that, starting with the important differences between a metric and a KPI. Many use the terms interchangeably, but they are different. Key performance indicators are tied to broader business goals. HR metrics are individual data points that leaders look at to determine whether they’re on the right track to achieve them. And while every leader will have some unique HR metrics and KPIs based on their organization’s overall goals, there are also ones almost everyone shares.
So, if HR metrics and KPIs are how we track progress toward goals, it’s important to first have a sense of what these goals are. Basically, if we want to know which HR metrics and KPIs are the best, we need to know which goals are the most important.
A 2022 Gartner survey of 500 HR leaders identified their five top priorities:
- Building critical skills and competencies
- Leading organizational design and change management
- Developing current and future leadership
- Preparing for the future of work
- Supporting diversity, equity, and inclusion (DEI)
Because they’re so important, let’s look at each one a bit more closely.
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. People are stuck trying to prepare right now for a future they can’t predict. It’s a long-standing challenge. In fact, 33% of the skills in an average job posting in 2017 weren’t needed by 2021, according to Gartner.
But even if HR managers knew exactly what they needed, they would still have challenges delivering it. With so many employees still working remote, meeting “face-to-face” now just means talking over a video call.
Leading organizational design and change management
Many HR leaders, department managers, and employees are feeling the effects of years of rapid change. It has been particularly difficult for large enterprises with more traditional hierarchies and processes to adapt quickly. The result is that 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
With increasing awareness of inequalities and growing calls for social justice, more organizations have publicly committed to improving diversity and inclusion in the workplace.
But wanting to do something is not the same as being able to do it. Nearly half of HR leaders said their leadership bench is still 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.
When it comes to what many see as widespread systemic challenges, there is no silver bullet for organizations. But Gartner does recommend some concrete steps, including 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.
Supporting diversity, equity, and inclusion
Many company leaders recognize the importance of going beyond statements and policies and taking proactive steps to promote diversity, equity, and inclusion. That includes hiring a more diverse team, creating mentoring and professional development programs so there are well established pathways that both nurture and reward success, and increasing diversity on their leadership team.
Now that we have a sense of the goals, we can start to look at examples of the more common HR analytics, the metrics and KPIs that show us if we’re moving in the right direction.
What are examples of HR metrics and KPIs?
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.
Which is why it’s important to pay attention to employee absenteeism rates. A noticeable uptick in this human resources metric could indicate your workforce is struggling with increased stress or impending burnout. Remember, it’s likely rare for an employee to suddenly leave without first starting to miss many days of work.
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 that extra mile when it comes to hitting deadlines and delivering their best work. A better measurement of how an employee feels about their role in 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 for a long time, it’s set to grow in importance because remote work can make some team members more prone to becoming isolated and disconnected, impacting how invested they feel in the company. Because they’re missing out on everything from in-person meetings to casual-but-critical relationship-building conversations around the water cooler, they’re less engaged overall.
Employee net promoter score (eNPS)
An employee net promoter score (eNPS) measures the workforce’s perception of 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 lingering uncertainty created by the last few years of overall upheaval 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.
The degree to which an organization emphasizes diversity and inclusion in the workplace is a deciding factor for many job candidates on whether 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.
- 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.
Talent retention/turnover rate
Every company experiences attrition, and not all turnover is bad. However, if there is a higher rate of turnover among your best employees, there’s a potentially serious, fundamental issue at the company that you need to address.
To ensure the best and brightest aren’t leaving, 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 currently one of the most important human resources metrics and KPIs, especially since widespread remote work has eliminated geographic restrictions. That means passive and active jobseekers have even more employment opportunities. In the past, your top performer might have only thought about leaving to work in the smaller pool of local competition. But now, because they can work remotely, they have an ocean of opportunity.
Another key metric is early turnover. Early turnover represents the number of employees who leave a company within a set period of time, which is usually the 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. When they leave early, the company never sees a return on its investment. In fact, you’re likely helping the competition if the employee moves to a new company but stays inside the industry. Everything you taught them, they’re putting to good use somewhere else, possibly against you.
What are the best HR metric and KPI tools?
With the rise of the hybrid workforce of on-site and remote employees as well as a mix of temporary and contract workers, every HR leader’s role has become more complicated. Knowing where to concentrate the HR team’s efforts helps them make sure every employee, regardless of location, is receiving the support they need so they can deliver the value that drives the company’s success.
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 skillsets.
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 even food delivery, and reservations. Ideally, you should connect these services to the systems your company uses to manage your buildings and assets.
The quality of the employee experience is so crucial to HR leaders’ future success that these systems will quickly 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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