Why HR KPIs still matter but why they still fail to deliver

25/07/2012 at 11:43 7 comments

How to use KPIs in HR

Key Performance Indicators – or KPIs to everyone these days – continue to be a hotly debated topic in HR. There are those who are simply against them. They see no use of them. This group is divided into two sub-groups; those who simply don’t belive that you can or should attempt to put figures, numbers or monetary value on people. Figures and charts say nothing about people is the argument. To them, it does not matter  how well they are formulated or how they are used – they simply don’t like numbers, metrics and KPIs on people related matters at all.

The second sub-group in this first group is a mix of some HR analytics, some senior HR executives and some top management executives. Their argument against KPIs is that it just doesn’t work in practice. The senior HR executives have used KPIs for so long without success that they now disregard them. The top management has seen HR use KPIs but still feel that HR has not delivered over the years. And some in HR analytics believe that it is analytics and not metrics and/or KPI’s which is the answer.

The second group of people believe KPIs can add significant value.  This group also have two sub-groups; one believe that KPI’s are they answer to all and everything and use them as much as possible. In fact, their departments are almost entirely run by KPIs.

The second sub-group of this second group also believe that KPIs can add significant value but with a caveat namely that they should be used very carefully, only in small doses and if in doubt not at all. I admit that I belong to this group . I believe that in 95% of all organizations, HR KPIs are truly ugly (see definition) – non-strategic, there are too many of them, they are poorly measured and with no real impact and frankly they have not been given the attention they should. So I am left with a strange admission; I belief HR KPIs are a great and effective tool but I have very little evidence to back up this claim as I see as many if not more evidence in practice of the opposite.

I don’t think you can come up with clear definitive rules as to how to make good KPIs. They simply have to be adapted to each organization – what may work in one may not in another. However, I do believe that the best HR KPI’s I have seen follow these rules of thumb:

  • 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).
  • Few.  It is better to meet the target of three or four  KPIs than to meet six of ten. When you have too many KPIs 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 KPIs 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.

So why are most HR KPIs so bad? I think it is down to three things; 1) Some just copy from other organizations, consultants or books. As I stated above – it simply doesn’t work. 2) Some don’t think strategic. Only strategic KPI’s will ever have the chance of being good. Unfortunately, creating strategic KPIs is more difficult than non-strategic ones. 3) They don’t matter. If there is no consequence of meeting the KPI target they will not have any effect.

My conclusion about HR KPIs is that it is a powerful tool to manage an HR department. However they still fail and do not deliver their promise and consequently are increasingly getting a bad reputation because they are poorly formulated and used. In practice this happens in most places. I believe that bad HR KPIs are a lot worse than not having any at all. Take the time to formulate a few really outstanding ones or don’t use them at all. The problem is that KPI’s do work in as much as people tend to follow them. If they are badly formulated employees will behave equally bad.

Entry filed under: Measuring HR. Tags: , , .

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