What are the most common measures for HR? Which KPIs should we use to assess the current state of our HR function? We are creating an HR dashboard, what high-level performance measures should we include?

Working for an organization that specializes in benchmarking, the Which HR measures should I track? question is one that I regularly receive. But today, the answer to this question is especially important. Why?

Because for most HR functions, it’s a time of transition. 85 percent of HR leaders who participated in APQC’s Current State of HR survey told us that they are changing or planning to change the structure of their HR function. Their HR transformation objectives include:  

• Better leveraging HR technology,
• Improving HR agility,
• Better leveraging HR automation,
• Increasing the productivity of HR staff, and
• Increasing the speed of HR delivery.

To guide HR transformation efforts and achieve these objectives, HR leaders need measures.
HR leaders need measures to:

• Establish a pre-transformation baseline of HR performance,
• Benchmark against peer organizations,
• Set performance targets,
• Track performance changes at transformation milestones,
• Identify the need for course corrections,
• Demonstrate ROI to stakeholders at the end of the transformation journey, and
• Monitor HR performance on an ongoing basis.

Each HR function will have a unique mix of measures depending on the unique mix of objectives that they have for their HR transformation. There are, however, five measures that all HR functions will want to track. These are key performance indicators that assess at a high level, the overall health of the HR function—whether it’s being transformed or sustaining performance over time.   

1. HR cost per $1,000 revenue: Total cost to perform the HR function per year normalized by revenue for that same period—a measure of HR cost effectiveness.

2. HR cost per employee: Total cost to perform the HR function per business entity employee—another measure of HR cost effectiveness.

3. Number of employees per HR FTE: Number of business entity employees per HR full-time equivalent (FTE) employee—a measure of HR staff productivity.

4. Number of HR FTEs per $1 billion revenue: Number of full-time equivalent employees (FTEs) that perform the HR function per $1 billion revenue—a measure of overall HR function efficiency.

5. Number of HR administration FTEs per $1 billion revenue: Number of full-time equivalent employees (FTEs) who perform HR administration activities per $1 billion revenue—measures the efficiency of HR administration.

In selecting additional measures based on their unique mix of HR transformation objectives, organizations will want to consider cycle time measures such as HR inquiry response time and outcome measures such as HR customer satisfaction scores. Organizations may also include measures that drill-down and asses the performance of specific HR processes such as managing employee information and analytics or attracting, recruiting, and selecting employees.

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For a limited time, APQC is offering our HR Function Key Benchmarks to both members and nonmembers. Prepared using APQC’s Open Standards Benchmarking® portal, this article provides median metric values for HR function KPIs. The article also describes the HR function processes that these KPIs measure and defines key terms such as business entity and full-time equivalent employee.

After comparing your HR metrics, find out how your HR function practices—chosen operating model, use of technology and analytics, and development of HR staff—stack up, using APQC’s complimentary Current State of the HR Function: Survey Report.