How does a COO set their HR KPIS for success?
In order to understand how HR metrics and HR KPIs can help your small business, you need to first understand what they are.
I’ve worked at Charlie from the very early days, and built all our HR processes from scratch — so I know how important it is to track HR metrics, but I also know how much mixed information is out there! I’ve written this guide to cut through the jargon and empower you to set up HR KPIs for your own business. And not after doing a load of other research, but straight off the back of this guide.
If you’re just getting started with HR KPIs, this is the guide for you. (And if you’ve looked into HR KPIs in the past and decided they sounded like too much hard work, then it will likely help you too.)
HR KPIs provide invaluable insight for small businesses. They’ll help you understand what people love about your company and what they feel needs improving, and identify any underlying HR issues before they become a problem.
As a fellow small business, at Charlie we know how important it is to track HR metrics. Our HR software comes with built-in reporting, so it’s ready to use out-of-the-box as your own HR KPI dashboard. (I use it to track and analyse our own HR metrics.)
So let’s get started..
I’ll define what we mean by HR metrics and HR KPIs, explain how to use them, and give you some HR KPI examples that you can start using from today.
What are HR metrics?
HR metrics are measurements that you can use to understand the effectiveness of your own HR. HR metrics include turnover and retention, employee performance and engagement, cost-per-new-hire, diversity and inclusion, and even things like training.
HR generates a lot of people-related data. Data which is hugely useful to a business, and can be used in all sorts of ways. But unless you identify and understand the data, it’s likely to go untapped.
With HR metrics, you can quantify the impact, cost, and success of your own HR processes and initiatives.
What are HR KPIs?
HR KPIs are used to measure the impact and success of HR at your small business. And they can tell you a lot.
KPI stands for ‘key performance indicator’ and by setting HR KPIs that are aligned to your business goals, you can see what’s working and what’s not, and make improvements where necessary.
For example, for a HR KPI of cost-per-hire:
- You’d calculate all costs associated with recruitment and divide that by the number of new people you’ve employed.
You can then see exactly how much it costs your business to employ someone new, and identify any areas where you can save money.
HR KPIs are strategic metrics: calculations to better understand how successfully HR is contributing to your business and your business goals.
Why is it important for small businesses to have HR KPIs?
HR KPIs help small businesses solve problems and make better decisions. Which is vital, because your people are your most valuable asset.
Through HR KPIs, you can identify what’s working in your HR and what’s not, and make changes and improvements based on real data.
Common HR KPI barriers for small businesses
Despite their usefulness, small businesses can encounter all sorts of obstacles when trying to put HR KPIs in place:
1. Limited HR expertise - without formal HR training, it can be difficult for small businesses to identify and understand the HR KPIs relevant to them.
2. Resource constraints - limited resources and personnel means that it’s more difficult to dedicate enough time and people to the analysis of HR metrics.
3. Unclear business goals - it’s a challenge to align HR KPIs with objectives at any business, but smaller companies are more likely to struggle to define what they want to achieve with HR metrics, or understand exactly how they’ll contribute to their goals.
4. Technology limitations - manually tracking KPIs is time-consuming and prone to errors (typically, small businesses don’t have advanced HR technology systems that automate data collection and analysis).
5. Balancing quantitative and qualitative metrics - finding the right mix of quantitative metrics (turnover rate, for example) and qualitative metrics (such as employee satisfaction or engagement) is a challenge — especially if you’ve never used HR KPIs before.
6. Determining relevance - small business owners may grapple to understand which metrics provide the best and most holistic view of their HR performance. (And will probably need to sift through many different metrics to find the ones that really matter.)
7. Communication and education: explaining the importance of HR KPIs to the broader team, and ensuring everyone understands them, can be a job in itself!
Ring any bells?
What HR KPIs should you track?
Every small business is different, so you might choose different KPIs to another business in your network. But to get you started, here are some HR KPI examples that are universally relevant, and how to calculate them:
Cost per hire
The average cost of hiring a new employee.
- All costs related to recruitment (divided by) Number of new employees hired
Time to hire
The average length of time it takes to hire a new employee.
- Date job offer was accepted (minus) Date job was first advertised
Absenteeism
The average number of working days members of your team are absent from work.
- Total number of absent days (divided by) Total number of working days x 100
Employee engagement
Your employees’ commitment and connection to their job and to your business.
- Use employee engagement metrics or your Net Promoter Score to calculate this
Training cost per employee
The average cost of training an employee.
- Total cost of all training (divided by) Total number of employees
Turnover
The percentage of employees who left your business (over a period of time).
- Number of ex-employees (divided by) Total number of employees x 100
Pro-tip: start with these as your basic HR KPIs, and then grow to be more specific and targeted.
Easily collect and analyse data with Charlie’s HR KPI dashboard
Charlie makes HR effortless. And that includes setting you up for success with your HR KPIs!
Charlie will help you source all the data you need, pull it into reports, and track your key metrics.
Charlie comes with the following built-in reports as standard, which pretty much deliver all the data you need for the HR KPI examples listed above:
Time off
- Time off (daily)
- Holiday used this leave year (daily)
- Sick leave (month and year)
- Work from home stats
- Leave types (what and when)
Team members
- Headcount (including joiners and leavers)
- Average tenure
- Employee Retention rate
- Employee attrition
- Diversity reports
- Contact information
- Emergency contacts
- Work anniversaries
Retention
- Joiners
- Leavers
- Tenure
Salary
- Salary changes report
