Key Performance Indicators (KPI)
Table of Contents
KPIs, which stand for Key Performance Indicators, which are performance measurement metrics used to assess the performance of employees, groups, departments or organizations relative to pre-set objectives. In other words, KPI is a performance measurement tool that can help us find out if we are moving in the right direction.
In human resources, KPIs are commonly applied in various aspects like recruiting, attendance, payroll, learning, performance, employee engagement, turnover, and workforce productivity. Some of the HR examples of KPIs include time to hire, turnover rate, absenteeism rate, completion of training, payroll accuracy, or completion of appraisals.
Why KPIs matter in HR
The use of KPIs ensures that there isn’t subjectivity in performance evaluation. In some cases, the manager will simply say that a certain team is performing well or is underperforming; however, there isn’t necessarily any evidence to support such claims. KPIs ensure that there is evidence for such decisions.
For HR departments, KPIs also enable HR professionals to detect any areas where process gaps occur. Where absenteeism levels have been on the rise, the reason could be shift scheduling, working conditions, engagement, or supervision. When payroll problems are common, the reason could be incorrect attendance records, delayed approval, or payroll adjustments.
This makes KPIs useful not only for measuring outcomes, but also for improving processes.
Examples of HR KPIs
Common HR KPIs include:
- Employee turnover rate
- Absenteeism rate
- Time to hire
- Cost per hire
- Offer acceptance rate
- Training completion rate
- Payroll error rate
- Employee engagement score
- Internal promotion rate
- Overtime hours
- Appraisal completion rate
- Leave utilization rate
The appropriate key performance indicator will depend on the objective of the business. For example, a manufacturing enterprise may be more concerned with factors such as absenteeism, overtime, shifts, and production. A services organization would have more concern with retention, recruitment, training, and employee performance.
KPI vs metric
Every KPI is a metric, but every metric is not a KPI.
Metric refers to any quantitative data being measured. KPI stands for key performance indicators and refers to metrics that are significant enough to indicate progress towards a particular objective. “Number of resumes received,” for instance, would be considered a metric but not necessarily a KPI. “Time to hire,” on the other hand, could be considered a KPI.
Key takeaway
KPIs aid HR departments and business managers to assess their performance with greater precision. They enable organizations to translate goals into quantifiable metrics, allowing them to pinpoint areas that require action. In large companies, KPIs take on increased value when they are integrated with accurate workforce information.
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