HR KPIs: The good, the bad and the ugly
This week I have had meetings with two HR executives about their HR KPIs (Key Performance Indicators). They both complained about two things I hear a lot; 1) we have too many and 2) they are not very good. While recognising that they have too many they both found it hard to actually get rid of any. At the same time, while they felt that they were not pushing the business in the right direction, they didn’t know what the difference between a good and a bad HR KPI is.
The problem with KPIs is that they actually work most times. That is, if you start to measure people in certain ways and you link their pay to meeting those measures they will in most cases try to meet these goals (KPIs) at the cost of other things. This is a problem because there is always a consequence with any KPI and if they are the wrong ones the consequences may be dire.
This can be simply illustrated here:
- If you are in the recruitment department and your KPI is ‘Time To Fill’, you will be focused on filling a position with a person who may not be right for the job as long as it is done fast. The right person may have a three month notice period whereas another (not fitting the job as well) may only have one month notice period.
- If your KPI is ‘Performance of the new employee after 6 months’ you will want to spend (a significant) extra time and money on finding the right person who can deliver performance fast, which means that the position may be vacant for many months thus disrupting the workplace in the meantime.
- If your KPI is ‘Cost Per Hire’, you may use the cheapest channels, the fastest processes with the cheapest personality-tests because this will make you hit your target. The result may be that is the not the right person but it is the cheapest hire. Maybe you need to buy out the right person but this will ruin your KPI
- Aligned with the strategy and business plan of the organisation. The targets of the HR KPI should be linked directly to the strategy of the organisation
- Personally owned. The HR KPI should be owned in two ways; firstly it should be linked to one person who is accountable for its success. This means that it is not falling between roles and people can argue about fault etc. Secondly the HR KPI should be meaningful for that person.
- Actionable. Every HR KPI should have a project or a set of actions which will lead to meeting the target. It should be within the circle of influence.
- Well defined. Every KPI should be precisely defined. An exact definition, which data are involved, where the data is collected from and delivered by whom. It should be formulated in a way so an outsider will be able to look at it and find the result.
- Relevant. It must be relevant in the specific context of this HR department in this particular company.
- Timely. There must be a specific time when the target should be met.
- End KPIs (compared to Mean KPIs). Consider a KPI which is about the number of people who had an annual review. This is a classic ‘mean’ goal. It is not an end in itself to hold annual reviews. It is the desired results of the annual review which are interesting. All HR KPI targets should be end-goals not mean-goals.
- Predictive (i.e. leading indicators). Meeting the target of the KPI should lead to meeting business goals.
- Few. It is better to meet the target of five of five KPI’s than to meet six of ten. When you have too many KPI’s you tend to select the ones you feel are the ones to meet and consciously or unconsciously not even try to meet the others. This subjective section of KPI’s are bad for an organisation. Better select a few and meet them all.
- Linked to bonus. It should make a difference to the person if he/she meets the HR KPI target or not.
The Bad HR KPI
Bad ones are the ones which appear good because they follow the characterises of good KPI but they are not strategic and relevant. So at the end of the year you and the rest of the organisation congratulate yourself on meeting your targets only to discover that you failed to deliver on your strategy.
You may have a really well defined KPI on recruitment, but if your issue is a high turnover of talented employees your KPI may be well defined, actionable, personally owned etc. but it is not relevant nor strategic.
The Ugly HR KPI
The truly ugly ones are the ones which are not strategic, relevant or cannot even be measured. An example could be:
- Title: Most managers perform annual reviews
- Description: % of managers who perform annual review
- Target: Higher than last year
The trouble with this one is that it is a mean-KPI (see above), it is poorly defined and most likely not relevant. This is an ugly HR KPI.
It is not difficult to find HR KPI’s (see for example this library). It is a little more difficult to define them well and have processes in place to meet them . But this is certainly something most can do. But it requires work to make the to be one of The Good ones.