Key performance indicators


Figure 1: Key performance indicators

Key performance indicators (KPIs) are precise measurements of an organization's performance in crucial areas of its business that can be quantitatively or qualitatively quantified. KPIs can differ by project, department, or company; they can also be financial, nonfinancial, or each project, department, or business can weight both and them differently. KPIs are HR-related measures that have been examined to demonstrate a connection to the organization's long-term business objectives or essential success criteria (SHRM, 2023).

Characteristics of good HR KPIs



Figure 2: Characteristics of good HR KPIs

According to the diagram above, seven characteristics of good HR KPIs can be introduced. Let’s analyze those seven factors.

1.Sparse

Only concentrate on a small number of HR KPIs. For a reason, they are regarded as key performance indicators. Concentrate on the most important ones and disregard the others. The overall maxim still holds true: the less, the better.

2.     Drillable

You ought to be able to get into specifics. Why aren't we achieving our goal for recruitment costs? What populations require the most money to recruit? You can more accurately forecast your future performance and identify areas for improvement by digging deeper.

3.     Simple

The KPI must be understood by the users. Simple things are easier to express and concentrate on.

4.     Actionable

Because they have some control over them, HR only concentrates on KPIs that relate to HR outcomes. Sales and revenue achievement are not HR's responsibility. Only concentrate on the KPIs whose results you can influence.

5.     Owned

KPIs must have an owner, which is consistent with the aforementioned principles. If the owner hits the mark, they will be rewarded; if not, they will be held accountable. A senior member of the management team, such as a manager or department leader, is likely to be the owner of an HR KPI.

6.     Correlated

The KPI has to be connected to the intended result. The HR KPIs must be connected to these business results when discussing business aims. Hiring higher performers will not result in cost reductions in the immediate future. Although it is important to hire strong performers, this should not be your top priority when the business needs to make cuts to stay afloat. Without really lowering the quality of hiring, you might be able to minimize recruitment expenditures by 30%. This is more significant since it advances the company's goals.

7.     Aligned

Aligned means that KPIs should not conflict with one another (Vulpen, 2023).

 

Challenges of KPIs

·       Picking the right one

When choosing their KPIs, numerous companies make the mistake of giving best practices an undue amount of weight. Alternatively, they ask a consultant or their business intelligence program to make the decision for them. A thorough examination and understanding of the main operational procedures and business drivers are necessary for selecting the appropriate KPIs.

·       Locating and collecting the data needed

In an ideal world, a database would have all the necessary data and the data would be of high quality. If not, it will take some work to gather the data—possibly from a variety of sources, sometimes manually—and store it in a way that allows for easy access and querying.

·       Picking the right software to do the queries of the data, calculate and display the KPI

There may be an existing BI tool that many firms must use, but it is labor-intensive and difficult to use. When it takes a lot of resources, time, and money to provide, this might hinder management's willingness to measure and monitor KPIs (Dashboard Fox, 2023).

 

Benefits of Reporting KPIs to the employee

·       Improve employee engagement and morale

Individual KPIs may significantly increase morale, foster responsibility, and enhance performance. Having a goal to strive towards and knowing at the end of each month or year that they have achieved it may inspire staff. KPIs are frequently connected to rewards in some workplaces.

·       Help to set goals and plan

You must establish a target and work toward it if you want to achieve your overall company goals. Maintaining alignment and cooperation among various teams or divisions within a company may sometimes be challenging. KPIs will assist in dividing the overall goal into more digestible, attainable pieces once it has been established, allowing you to organize your tactics for achieving it. Once KPIs are established, they can still be altered. It could be important to examine and modify them if your reports show that the KPI is never fulfilled.

·       Close learning gaps 

Data is hard to disagree with, so if one person or department is not operating well, KPIs will highlight this and can assist in determining why. If an employee is having trouble accomplishing a goal, it can be a sign that they require further training or direction. This may occasionally be a sign that a worker is not performing up to par or is not suited for the position. When management and employees are fully aware of the expectations, dealing with an underperforming employee becomes a lot easier.

·       Measure performance

It should come as no surprise that one of the key purposes of KPIs is to measure performance. Reporting on KPIs will enable you to gauge how close you are to attaining the overall aim, regardless of whether it is a specific marketing campaign, a new company initiative, or a sales strategy. A good KPI should be quantifiable and trackable. Team leaders can choose the tactics they need to refine by identifying locations where things are not going as planned.

·       Help to make decisions 

KPIs are helpful in informing judgments, but they should not be used as a substitute for your own judgment. It might be tempting to focus just on one KPI when evaluating the success of a campaign. On the other side, since some KPIs do not provide the complete picture, it might be tempting to eliminate them. It is important to include others in order to fully grasp KPIs and use them to make knowledgeable judgments ( McCabe, 2022).

 

Benefits of Reporting KPIs to the Organization

·       KPIs to Analyze Patterns over time

You might start to see trends in your data if you measure the same KPIs from quarter to quarter. These patterns may benefit your business in a plethora of ways. Perhaps you can anticipate when business will be slow and utilize that period to do a system upgrade or company-wide training program. Perhaps it is obvious to you that your sales manager consistently predicts that you will close five transactions either above or below where you typically do at the end of the quarter. If you can identify team members who consistently perform below or above average on their KPIs, you may utilize this information to discuss any negative or positive repercussions.

·       KPIs to Make Adjustments and Stay on Track 

You should track your leading indicator KPIs in addition to your present performance to determine how close you are to attaining your objectives. You can determine whether you are on pace to achieve your goals using these measurements. Then, you may modify your plan as necessary. For instance, you can opt to prioritize marketing initiatives above product development if you see a decline in sales. Leading indicators have the ability to be measured and are subject to direct control. They are useful KPIs to have on your dashboard to maintain the progress of your projects.

·       KPIs to Monitor Company Health

KPIs serve as an indicator of a company's health. To monitor the vital indicators of your business, you only need a small number of KPIs. To direct energy where you want to bring about change, only measure what you wish to move. We have discovered that it is crucial to track a few KPIs for each of the four areas of revenue, processes, customers, and employees. The company strategy, customer satisfaction, business processes, and human resources disciplines cover these (Wishart, 2023).

Conclusion.

Any organization must set, measure, and analyze KPIs, but the process does not have to be laborious or time-consuming. Integrating your KPIs from your different tools into a cross-platform analytics dashboard may significantly improve your results, whether you are using a CRM or an Excel spreadsheet. Teams and individuals may increase progress and efficiency by having real-time measurements in one location that update automatically. You can save time and work more effectively if you have a high-level overview of which metrics need improvement and which ones are doing well.

 

References.

Dashboard Fox, 2023. Dashboard Fox. [Online]
Available at: https://dashboardfox.com/blog/what-is-a-kpi-benefits-challenges-examples/#:~:text=The%20biggest%20challenge%20related%20to,to%20pick%20it%20for%20them.
[Accessed 24 April 2023].

McCabe, A., 2022. Hurree. [Online]
Available at: https://blog.hurree.co/6-benefits-of-kpi-reporting
[Accessed 24 April 2023].

SHRM, 2023. SHRM. [Online]
Available at: https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/whatarekeyperfindicatorsandhowtheyrelatetothehrfunction.aspx
[Accessed 24 April 2023].

Vulpen, E. . v., 2023. AIHR. [Online]
Available at: https://www.aihr.com/blog/human-resources-key-performance-indicators-hr-kpis/
[Accessed 24 April 2023].

Wishart, J., 2023. Rythm systems. [Online]
Available at: https://www.rhythmsystems.com/blog/5-reasons-why-you-need-kpis-infographic#:~:text=KPIs%20are%20more%20than%20the,help%20you%20achieve%20results%20faster.
[Accessed 25 April 2023].

 

Comments

  1. Dear Mafaz,
    Good explanation,if u can insert KPI research data it would better.

    ReplyDelete
    Replies
    1. Thanks for your comment Mahinda

      Delete
  2. Hi Mafaz,
    its nice topic. KPI for HR is an important measurement that helps in measuring the progress and success of an organization's HR department. they can be used to benchmark HR performance and to identity areas where improvements can be made.

    ReplyDelete
  3. Hi Mafaza It is a Essential and Valuable Explanation

    ReplyDelete
  4. KPI is an important component of HRM. Thank you for sharing this with us

    ReplyDelete
  5. You Clearly explained about KPI ,KPIs are important for personal growth builds off of the idea of increased morale. Allowing employees to monitor their performance and respond in the moment means that they are more likely to achieve their goals and better understand how to do so in the future

    ReplyDelete
  6. Selecting the correct and effective key performance indicators will ultimately give positive outcome. Thanks for sharing your content with us Mafaz.

    ReplyDelete
  7. KPI one of stertegic move, KPIs help in Employee Engagement providing accurate and useful data to measure employee Engagement levels,as well as helping to determine how well I inclusion and diversity efforts are working and identifying causes of high rates of turnover and absenteeism

    ReplyDelete
  8. KPI is important to improve the performance , thanks for sharing useful blogs as always !

    ReplyDelete
    Replies
    1. I do agree with you Sameer. Thank for your comment.

      Delete
  9. KPIs are crucial in measuring and tracking the progress of an organization or team towards achieving its objectives. However, it's essential to ensure that KPIs are aligned with the company's goals and values, and not just focus on quantitative metrics.

    ReplyDelete
  10. well said, Any organization must set, measure, and analyze KPIs, but the process does not have to be laborious or time-consuming. Integrating your KPIs from your different tools into a cross-platform analytics dashboard may significantly improve your results, whether you are using a CRM or an Excel spreadsheet. Teams and individuals may increase progress and efficiency by having real-time measurements in one location that update automatically.

    ReplyDelete
  11. Thanks for sharing your information on KPI. Organizations fails to satisfy employees when they do not have a proper KPI sysytem.

    ReplyDelete
  12. Well explained. Organizations fail when they dont have a proper KPI system

    ReplyDelete
  13. Good content. It is very helpful to enhance organisational performance.thank you for new knowledge

    ReplyDelete
    Replies
    1. Thank you for the comment Madhumali.

      Delete
  14. KPI is crucial for achieving the organization's overarching goal.

    ReplyDelete

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