KPIs for Human Resources

Key Performance Indicators (KPIs) are inextricably linked to human resources. We look at how scorecards can be implemented, as well as some useful HR KPI examples.

Analytical data enables HR professionals to make data-driven decisions that attract, manage, and retain employees. This significantly improves business profitability and ROI.

The trend to focus on people portends the potential for 40% growth in talent and workforce by CEOs and entrepreneurs.

As part of the Entrepreneurial Operating System that we run in our business, we have targeted measurable outcomes of certain KPIs. Letting employees refine their own KPIs and processes is important. They also have to track their own outcomes.

This is part of ensuring accountability in your team.

Instead of a manager trying to understand what the nitty-gritty of their work entails, they decide together what their goals are and what they want to achieve in numerical terms. They then have to take the score of their outcomes every week and discuss this with their HR manager or line manager.

HR KPIs and scorecards play a key role in:

  • predictive analytics
  • employee accountability
  • talent growth
  • simplifying management
  • streamlining duties
  • creating structure in meetings

HR KPI Examples

Human Resources departments have become a veritable clearinghouse for data generation. For businesses with a large workforce, HR KPI data is the foundation of reinforcing workforce productivity and advancing workforce talent. This results in optimal product and service functions on a consistent basis.

We have divided the KPIs into three main areas of business, namely operations, sales & marketing, and finance.

1. Operations

HR KPIs in Business Operations

To understand the importance of KPIs in businesses of all size ranges, it is essential to know the comparative analyses of how business owners and entrepreneurs view KPIs in Human Resources.

For example, in a graphical comparison, the breakdown can include:

  • Customer data - For business operations, approximately 58% is the current average investment for customer analytics. This includes customer profitability, history, and buyer behavior in the past three years.
  • Financial and accounting analytics - In the past three years this metric averaged around 51% in terms of investment related to forecasting and working capital optimization.
  • Workforce and talent - This HR scorecard was found to carry approximately 41% investment with regard to behavior, performance, and workforce retention.
  • Risk, assurance, and fraud analytics - Note that risk, assurance and fraud analytics over the past three years was found to be at 39% in relation to company vulnerabilities, responses, and events.
  • Marketing analytics - surprisingly, was 37% as it relates to promotions and campaigns.

2. Sales and Marketing

KPIs for HR manager operatives are also a mechanism by which cumulative sales and marketing data illuminates key performance of the sales force, as well as for products and services offered.

  • Research and development - provide analytical data on the status of a company's sales and marketing performance. In this way, they can determine if every person in the workforce is the right person for the job. KPIs for HR managers help them maximize sales talent.
  • Product and service marketing techniques - these are taken stock of on scorecards to measure the amount of time they consume and eventually also their impact on the business.
  • Success of recruitment and hiring - this KPI for HR managers one of the crucial elements to base the company's talent acquisition metrics on. This function opens the door to expediency in hiring, quality of new hires as well as the costs of recruitment and hiring.
  • Cost effectivity - Another feature of a KPI for sales is the ability to define hiring sources with greater cost-effective scrutiny.

3. Finance

As a measurable value, KPIs provide proof of profitability and fiscal health. KPIs for finance also measures the revenue-generating capacity and achievement of long term business goals.

The profit margins a business sets forth in business planning is a crucial factor in attracting investments and investors for financial stability. KPIs or scorecards function as the data-driven record of fiscal profit margins and the highs and lows the business has experienced over time. All of this data should be analyzed by HR.

It would seem that many savvy business owners come to the realization that maintaining optimal scorecards is fundamental to their financial planning.

There are three vital financial plans for HR to consider as the business moves from startup to entrepreneurial enterprise. All three are the crux of a well-conceived business plan. They include:

1. Execution of a business value enhancement plan that includes KPI tracking

2. Construction of a business success plan that allows buy-ins from stakeholders to create a smooth transition to retirement for the business owner.

3. Option to sell the business for maximum sale value, such as through purchase by company management, ESOP (employee stock ownership), third party acquisition, or a buyout by a private equity firm.

Creating the Best KPI Model for Your Business

If KPI has not been previously considered due to a new startup or a sudden growth in an existing business, it is necessary for the business owner or entrepreneur and HR to know the basic structure of a KPI plan.

Although there are HR KPI examples found in software applications, such HR KPI examples may mistranslate when attempting to implement them into your business.

There are several KPIs for HR to consider when creating the best KPI Model for your business. These should include:

  • Gross profit margin
  • Net profit and net profit margin
  • Accounts receivable aging
  • Current and quick ratio
  • Customer acquisition ratio
  • ROI for research and development

Human Resource KPI Strategies

As the engine that drives business operatives, HR is responsible for accurate, actual, cumulative, and projected data for operations, sales and marketing, and finance.

To begin a KPI profile the embodiment of the data should be sourced cumulatively and predictably. For example, KPI data may be collected on a daily basis by each employee to result in useful weekly KPI information for business owners, management, and others on their team.

However, this data should also relate cohesively to daily financial transactions in order to show the effects of a well designed KPI in total sequence.

KPIs and Best Practices

Some business owners prefer to embed their KPI data with best practices modality. This is usually the purveyance of companies who offer a continuum of training for their workforce to keep their KPI state-of-the-art in their particular industry.

Training and retraining play an important role in KPI data and as an HR function. As each phase of training and retraining is completed, KPI measures the levels of workforce understanding, as well as the ability of the workforce to adopt new changes in their daily performance of their duties and responsibilities.

How KPI Affect the HR Industry

The basic features of a well designed KPI for HR use include three key points:

  • Strategy
  • Specification of objectives
  • Plan of Action

Each of these are linked to business ownership, HR, management, and workforce. Business owners should have a formalized business plan that outlines not only corporate structure but also long term goals to be shared with HR, management and workforce.

Management needs to understand business strategies and specific business objectives in order to more effectively manage and advance business goals. The workforce becomes part of the strategy proactively and encapsulates specific objectives on a daily basis.

Implementation of a State-of-the-Art Scorecards and KPIs

The implementation of a SOTA KPI is relatively simple. It can be done on a department by department basis where applicable or it can be implemented over the full range of the business.

How HR Implements KPI

Keep in mind that the most useful KPIs are directly linked to company objectives. To implement KPI include the following:

First, identify the specific area of business performance to be measured. Next, establish a target to be measured. Then, compare the actual KPI recorded by an employee with your defined target on a scorecard. Review all KPI changes to date for a clear assessment of actual and projected KPI.

The main goal of KPI data developed by HR should be to formulate continually advancing organizational development. KPI data becomes the root of highly informed decisions - not only for business owners and entrepreneurs, but HR, management, and the rest of the workforce.

When KPI metrics are defined, articulated, and understood as provided by HR, the end result is a smoother daily business operation as well as high workforce morale. When KPI is proactive and reactive, it reduces the cost of recruitment and hiring and enables business owners to retain an experienced, talented, and skilled workforce.

This translates into a continuously developing management and increased profitability.

How to Choose a KPI Expert for HR

No doubt you may find the details of KPI to be complex. However, when you choose experts like Fusion CPA, you minimize the KPI complexities for your HR workforce. We provide business expertise in a diverse range of functions for custom business needs.

Fusion CPA is your source for assistance with a state-of-the-art KPI design and planning. We aim to keep our services cost-effective, timely, and of the highest quality. Let us help you meet and exceed your business goals.

For more details, contact us. We are ready to serve.

We are experienced in helping businesses choose their KPIs wisely

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