Economics/Business

HR indicators/Benefits of managing/How to choose/11 main HR indicators

HR indicators are metrics to measure the actions of the sector, identify weak points and define strategies to improve processes, management and direct their impact on the company’s results.

Do you know the idea that says that it is not possible to analyze or improve what cannot be measured? Well, that’s why we need to talk about HR indicators.

Sectors that want to occupy strategic positions in a company need to measure events and results, something that has more and more to do with Human Resources.

Over time, HR is evolving from a merely bureaucratic sector to one that can be a protagonist in the organization. This depends, among other factors, on the ability to collect data to guide decision making.

As you read this post, you will understand what HR indicators are, why and how to use them properly. 

What are HR Indicators?

Perhaps you already know something about key performance indicators or key performance indicators (KPIs) and have a good foundation for understanding what HR indicators are.

Regardless of your prior knowledge though, we have a simple definition that will be our starting point here.

HR indicators are metrics that help to present an overview of the actions and results of the actions of the sector in a certain time interval.

We are therefore talking about data that quantify and qualify processes in the HR sector so that management can assess its performance and make strategic decisions.

Indicators and strategic HR

What comes to your mind when you think of strategic HR ? In general understanding, something that is strategic is based on logical decisions that, preferably, are tied to data .

Aside from issues such as payroll closing, outsiders don’t always imagine that HR can handle numbers and analysis on a daily basis.

It’s just that people management focuses on a very human component – ​​people – and this removes the idea that there is something to measure or how to measure. But the truth is different from that.

Employers who want more strategic HR are those who have already understood that people are one of the most valuable assets an organization can have.

Therefore, they are willing to invest so that the Human Resources sector has what it needs to impact the company’s results more significantly.

For this to make sense, however, both top management and HR itself need data to verify whether the actions taken by the sector are leading to a positive response.

Benefits of managing indicators

The importance of performance indicators in HR translates into the ability to understand what the challenges are and find out if the actions to overcome them are generating results .

As a result, its main benefit is its potential to help HR design the scenario, define how to act and promote necessary adjustments over time.

These are the HR indicators that allow management to discover whether the sector, and the company as a whole, is close or not to achieving its goals and what needs to be done.

This leads us to point out two main purposes of indicators that represent what they have to offer HR and the organization:

  • provide an overview that encompasses the current circumstances of the company;
  • provide conditions for these circumstances to be analyzed in detail.

The main HR indicators will lead your company to know what are the obstacles to the evolution of the business. We are therefore talking about problems that, once identified, can be corrected.

Even with the indicators, it is possible to verify if the correction actions are having an effect and adjust them for even better results.

There are several HR indicators. Later, we will present the main ones, but we have already said that others will be left out of this post.

We are saying this to emphasize that it is not worth just deciding to apply the indicators.

A company needs to know what to measure, for what reasons, and for how long. The management of indicators is necessary so that HR can collect useful data to align its performance with the company’s objectives .

How to choose the best indicators

Taking the hook from what we’ve just said, it’s only fair that we guide you on how to choose the best HR indicators.

The first thing we need to say about this is that the best indicators are those that fit the HR strategy defined for the period.

With that in mind, know that indicators can be divided between drivers and outcomes .

  • drivers (or medial): are those that integrate stages of a process and measure its causes;
  • Outcomes (or final): are those that measure the consequences or results of a process.

In a basic example, the organizational climate indicator can be a driver and the turnover indicator can be an outcome .

We say that an indicator can be one or the other because variations are possible. An indicator that is a driver in one situation can be an outcome in another, and vice versa.

What we mean by all this is that your HR needs to identify which indicators establish the proper cause-and-effect relationship within the context of analysis.

This changes based on industry strategies, on what you want to measure. Thus, HR indicators that make sense for another organization may not be the most suitable for yours.

Tips when choosing HR indicators

Keep in mind that you need to choose HR metrics that have a specific purpose .

It doesn’t make sense to keep track of something you don’t know why you’re measuring it, don’t you think?

This is the typical mistake of those who understand that it is important to define indicators and do so without thinking strategically. Something that results in a waste of time and translates into a new bureaucracy for the sector.

Consider that what is sought with indicators is to promote performance improvement .

Knowing this should help you assess which indicators to choose based on the reality of your organization.

As we have said, the idea is to identify problems or weaknesses and understand where HR needs to turn its attention.

Also, study the ideal moment and period to apply HR indicators . Shorter time intervals tend not to be sufficient for realistic analyses.

Despite this, not all indicators should be analyzed for the same period. Again, remember that the process needs to make sense within the HR strategy.

Finally, evaluate the possibility of having technological solutions that help in data collection. There are several tools that can be useful in this regard.

The 11 main HR indicators

Knowing about the importance of HR indicators and all the details that we have shared so far, we can move on to the main examples.

We emphasize that your company does not need to apply them all and that it may not make sense to try to measure everything at once.

1. Turnover

One of the main concerns of companies is the high turnover of employees.

If many resign and the company constantly faces new selection processes even though it is not expanding, it could be a sign of a problem.

To assess the situation, it is necessary to resort to one of the main HR indicators, turnover .

A high turnover rate indicates high costs thanks to the payment of severance pay and other expenses related to new hires.

In an ideal scenario, the turnover rate is below 5%. Something greater than that demands attention from HR to understand what is causing so many employees to leave the company.

2. Turnover costs

As we said, turnover generates expenses and it may be necessary to see this through the numbers to understand why the company needs to act to lower turnover .

For this HR indicator, it is necessary to consider all expenses related to the payment of contractual terminations, including taxes and possible fines.

Still, it is necessary to add the investment related to the replacement of the terminated worker. That is, expenses with recruitment and selection, in addition to the costs of training and qualifications.

3. Average time in the company

And since we are talking about turnover , another important HR indicator is the average time with the company. Something that helps to understand the period when employees usually stay on the job.

For this analysis, it is interesting to consider age, marital status, education and progression in the company.

These other factors will help HR to understand the profile of those who leave quickly and those who stay for long years .

Having this data can even guide recruitment and selection strategies, in addition to indicating any weaknesses in the organization to maintain certain professional profiles.

4. Absenteeism

Absenteeism is nothing more than the “unjustified absence of employees” from work .

You should know that the CLT presents a series of situations in which a professional can miss work without prejudice to salary or any penalty. These are called excused absences.

There are also those absences that have no legal justification and that sometimes indicate that a problem is happening and can result in loss.

Employees who decide not to show up for work may be unmotivated, having problems with their colleagues or leadership, and so on. It is something to be investigated.

5. Punctuality

Still with regard to the presence or frequency of employees, another important HR indicator is punctuality.

Frequent delays can show that the company needs to have more flexible hours or invest in employee motivation and engagement, for example.

6. Organizational climate

The organizational climate is an HR indicator that is linked to the level of employee satisfaction.

Satisfaction, in turn, has an impact on motivation, productivity and the results obtained by each professional .

To assess the situation, HR can prepare a questionnaire whose answers are based on a scale of 1 to 10. Questions such as:

  • Do you identify with the tasks you perform?
  • Do you believe we have a good working environment?
  • How satisfied are you with your teammates?
  • How satisfied are you with your team leader?
  • Do you see opportunities for growth in the company?
  • Do you believe that the remuneration is adequate for your responsibilities?

As it should be, it is possible to transform this questionnaire into numbers, that is, transform the climate survey into an HR indicator.

As it is a formula that is less commonly addressed, we will share it below:

Formula for calculation: Weather = {[(sum of all answers / 3) – 1] / 9} x 100

In an ideal situation, the account result should be greater than 66.

7. Headcount

The headcount is an HR indicator that at first appears to be nothing more than a simple count of the number of employees.

However, there is more to this count that provides HR with data for analysis and strategic decision making for the organization .

Assessing whether the number of employees has increased or decreased over time, for example, allows you to know if the company is following the right path based on its demands, objectives and budget.

8. Training and development

Creating training and development programs for people is among the duties of the Human Resources department.

In this regard, different aspects to be analyzed through HR indicators.

Investment in training

The HR indicator on investment in training measures the productivity of teams that received some type of training from the company.

The idea, therefore, is to know if the training is generating responses in the daily lives of professionals and if this response is adequate to expectations.

ROI in training

In turn, ROI in training is the HR indicator that allows measuring the financial impact of training actions.

Processes that are better executed thanks to investment in training actions generate fewer errors and less financial losses.

Thus, the idea is to calculate the relationship between investment and training and the losses that were avoided as a result of them .

Knowing how much money the company did not lose is a good argument in favor of developing training programs.

learning assessment

Furthermore, there is an indicator that allows the assessment of learning, that is, verifying the efficiency of the training actions adopted by the company.

With duly prepared forms, managers can discover, together with their teams, the level of professional evolution of each one .

Based on this, actions can be better directed towards achieving increasingly assertive results.

9. Overtime and hours worked ratio

Linked to productivity, this HR indicator relates the amount of overtime , whether paid or computed in the hour bank, and the amount of hours worked.

It is assumed that a professional only stays at work beyond his normal working hours when he needs more time to complete his tasks.

Thus, the relationship proposed by the indicator helps to understand if there are unproductive people or if there is too much work .

Depending on the outcome, HR can think of strategies to reallocate employees or review organizational capacity and avoid overload.

10. Productivity

Speaking of productivity, this is also an important HR indicator that needs to be known. After all, what every employer wants is to have employees deliver their peak performance.

The productivity calculation can consider elements that vary based on the activity performed. However, it is based on three factors: time, quality and costs.

The objective is to find out how much revenue the company can generate from the work of each employee , to seek more efficiency.

This indicator directs HR towards analytics that can lead to more productivity and lower costs. We emphasize, however, that there are other issues to be analyzed from the point of view of people management.

Low productivity can be linked to problems such as lack of motivation, teams that do not work well together or even inadequate leadership.

11. Payroll

Payroll is a very common element in the routine of HR or the Personnel Department, and can be an important indicator.

When evaluating the sheet, it is possible to verify if the amount paid to the employees is in accordance with the company’s cost expectation .

When HR studies the market and the organization’s possibilities to define a job and salary plan, it creates an expectation regarding how much the company would like to pay its employees.

If the payroll reports too many discounts or too many additions, you may need to investigate what’s behind this situation.

So, even if it doesn’t seem like it at first glance, this is another HR indicator that every organization benefits from using.

Implementing metrics in HR

Earlier, we told you how to choose the best indicators and gave you some tips in this regard. We still have something to say about the implementation of the main HR indicators.

To do so, we turned to tips from Wayne Eckerson, a recognized leader in business intelligence, and his list of 10 characteristics linked to high-impact KPIs.

  1. Sparse : The fewer HR indicators, the better.

Less is more. Establishing a limit of KPIs, choosing them strategically, facilitates the measurement work and the analysis of the collected data.

To avoid exaggeration, keep in mind the proposal to define indicators that have to do with the company’s objectives.

Within a well-defined scope, there are a small number of KPIs that can, in fact, generate some impact;

  1. Drillable : KPIs that can be broken down into detail.

Throughout the text, it should have become clear to you that a single HR indicator can point to several situations. Although this is a bit complex, it is quite interesting.

When a KPI allows for detail, it also allows for a more comprehensive analysis. Something that can be decisive for diagnoses and decisions;

  1. Simple (simple): indicators that users understand.

KPIs need to be easy to understand. People need to be clear about what is being measured and what each outcome represents.

Is a high index positive or negative? This is something that varies according to the HR indicator and each situation needs to be properly known;

  1. Actionable : Indicators that HR can actually affect or impact.

In other words, it is useless to measure something that is not related to HR actions;

  1. Ownership (owned): KPIs that have an owner

According to Eckerson, every HR indicator needs to have an owner, that is, someone responsible for applying and monitoring it;

  1. Referenced : HR indicators that can be viewed based on their origin and context.

Indicators need to be reliable. The people who will work with them on a day-to-day basis need to be clear that they are safe data from a “clean” KPI.

For this, it is interesting to ensure that the indicator is referenced, that it is possible to consult the details of its origin, how it is being used and calculated, and in which contexts;

  1. Correlated : KPIs that are related to the desired outcome.

We have listed several among the main HR indicators and there are still other possibilities. It is necessary to avoid the impulse to want to measure everything and to do it all at once.

For the implementation process, HR must consider what kind of result it is looking for, what change it wants to promote. The KPIs will serve to verify this need for change and direct it;

  1. Balanced : indicators that consist of financial and non-financial metrics.

It is always good to remember that a more strategic HR impacts the success of the business and this has to do with its profitability.

However, this same strategic HR takes a closer look at people management, considering its human side. Therefore, it is necessary to balance the choices;

  1. Aligned : KPIs that do not undermine other indicators.

Some HR indicators have similar elements. Therefore, it is necessary to choose them strategically so that one index does not interfere in the measurement of the other;

  1.  Validated : in addition to being balanced and aligned, the chosen HR indicators cannot be “cheated”.

This means that you need to choose them wisely to prevent measurements from being contaminated by malicious employees who find ways to trick the system.

The scenario indicated by the indicators

If the HR indicators show a positive scenario for the company, great. It is possible to draw up plans to take advantage of the good potential or even move on to other analyses.

Now, what to do if the scenario is negative? Of course, it is preferable not to have to deal with problems, but keep in mind that indicators serve precisely to indicate whether the company’s strategies are having the expected effect.

With this, understand the results as an opportunity to analyze the realization of possible changes , either to prevent problems or to correct them.

Hardly the HR indicators will lead to a totally positive scenario, especially because improvement can be a constant.

Therefore, rely on the data collection that the use of indicators makes possible.

Based on them, it is possible to create a history and make the analyzes increasingly grounded and assertive.

Something that only tends to help the organization make the necessary decisions to achieve its goals.

 

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