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Understanding The Relevance Of HR KPI

Jan 13, 2008
Familiarity with the concept of HR KPI will help management and human resource department heads measure their performance in line with organizational goals. Moreover, these factors help them identify strengths and weaknesses of the organization's human assets.

HR KPI is actually an acronym for the words, human resource key performance indicators. Human resource refers to the people who are hired to perform certain functions for the company. Key performance indicators, on the other hand, are metrics or measures that are used to quantify organizational objectives that are in line with the organization's strategic performance. These figures are mostly used by management to evaluate the current state of a company vis a vis its organizational goals. These are also often referenced to when deciding what course of action to take. In essence, HR KPIs will determine how the human resource of an organization contributes to the organization's overall performance. The identification of relevant HR KPIs is very important as these will most likely influence how an organization performs. Moreover, these may vary year to year depending on corporate strategies implemented, corporate objectives and strategic planning.

It is an accepted truth that the workforce of a company is its most important asset. The productivity of each employee therefore, contributes to the overall performance of a company. Employee productivity is usually measured by HR departments by quantifying the value of each employee. Such criteria as initiative, teamwork, cooperation, quality of work and problem solving skills are also used to for this purpose. Identified HR KPIs may be disseminated to motivate employees to perform better and to develop necessary skills that would make them better at what they do. Aside from this purpose, these indicators also help the HR department identify which areas an employee excels and which areas he needs to improve at. Likewise, these indicators can be used to determine employee disposition as with regards to their jobs. By determining this, the HR department could institute activities that will help eliminate stress in the work place. Some of the most common HR KPIs are revenue per employee, training cost per employee, acceptance rate, average cost per hire, absence rate, turnover rate, human investment ration, resignation rate and average remuneration.

Some companies opt to implement an HR balanced scorecard in their organizations. This measurement tool considers several perspectives in measuring the productivity of the labor force. The perspectives considered in this scorecard are strategic, operational, financial and customer. The strategic perspective measures the ability of the organization to change organizational culture and structure in line with the implementation of certain business strategies. The operational perspective, on the other hand, focuses on the effectiveness and efficiency of HR activities such as turnover rate and attrition rate. The financial perspective, meanwhile, measures the worth of human assets and the expenses that companies need to shoulder in keeping them. Lastly, customer perspective looks at how effective the human resource department is from the viewpoint of internal customers which are the employees.

HR KPI may differ from organization to organization due to their inherent qualities like nature of operations and objectives. Nevertheless, HR managers could learn from each on how to improve the overall productivity of their departments and the employees as well.
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