Monday, February 15, 2021

How to Measure HR Effectiveness: Developing Effective HR KPIs

Let's take a look at how to track pre-defined organizational goals of human resources management and how to identify the most important indicators and metrics for measuring HR effectiveness.

HR Key Performance Indicators

 How to Measure HR Effectiveness: Developing HR Key Performance Indicators (KPIs)

 

Processes of Human Capital Formation

Human capital formation is the process of adding to the human capital stock over time. Human capital can be developed by creating a skilled, trained and efficient workforce and providing better education, healthcare facilities, etc.

In order to properly manage human capital, it is essential to develop actions that enable the growth not only of organizations but also of professionals under the strategic, tactical, and operational spheres. Highly skilled people can create new ideas and production methods.

 

Indeed, the processes inherent to human capital contribute significantly to the fulfillment of internal goals and objectives, in the same way, they make it possible to optimize the company's positioning in local, regional and global markets.

 

There is no good or bad employee, but there is the right employee for the right position in the company.

Employees are successful in their work if they have the skills and motivation to perform all of their duties. Assessing the employee's innate abilities and motivation is a good start in ensuring that the right candidate is in the right position.

Employees do not leave your company simply because they are offered better working conditions elsewhere; they usually leave their boss.

Train your managers to become better "coaches" or trainers, so that they help your employees to discover and develop their full potential. In this way, they will be able to give clear instructions, encourage good behavior, share their knowledge, give constructive feedback, focus on solutions rather than problems, develop trust, etc.

 

There is still one important aspect that is missing: the team! Many companies have a disjointed work team and do not guarantee equal treatment and opportunities.

How an employee fits into the team is just as important, because it is through teamwork that we maximize performance.

Human capital management guarantees the use of all possible means to obtain the best from the employees, as well as considering the adequacy of an individual with her team.

If your human resources department wants to maximize your company's human capital and to ensure that it recruits and develops the right people for the right positions, they must have a vested interest in helping managers learn to manage human capital.

 

How can we expect to get the most out of our employees and ensure optimal human capital management without mutual trust and transparency? It is simply impossible! Those who sow trust and transparency reap it in return.

You want to get the most out of your employees: give them the opportunity, through trust and security, to be themselves and reach their full potential!

 

How Do You Measure HR Effectiveness?

Several criteria can be used to measure the effectiveness of a human resource department.

Top indicators for measuring HR productivity and performance include: HR costs, HR metrics, measuring internal efficiency and effectiveness of human resources, and auditing HR compliance.

Key performance indicators are ideal metrics that companies can apply to measure the performance of HR processes.

 

Key performance indicators (KPIs) are a set of metrics that focus on the aspects of organizational performance that are critical to current and future success.

KPIs are rarely new to the organization, they are either not previously recognized or are in a place neglected and unknown to the current management team.

 

There are very few organizations realistically monitoring their performance indicators. The reason for this is that these organizations, business leaders, accountants and consultants know very well what performance indicators mean.

 

HR key performance indicators must be tangible and meet a specific objective. They must also be measurable, accessible data that provides relevant results.

 

To measure the quality of Human Capital and HR effectiveness, the following could be taken into account:

 

Employee Retention:

A good indicator of job stability within a company is the retention capacity of staff.

The fact that there is little rotation in the work team and that people decide to keep their jobs, not only shows that the employee is comfortable with their work but other factors, such as satisfaction with the remuneration they receive or the organizational climate.

 

Investing Time and Money in Recruiting:

Losing a talent within the work environment will always force you to invest time and money in recruiting a new employee.

The average time taken to manage a new hire is measured from when an employee resigns or is fired until his replacement is selected.

This process can be optimized over time, but for this, it is advisable to have an updated database of potential new candidates.

 

Training and Education:

Courses and training in which employees participate to improve their attitudes and work tools could also help improve productivity levels in the company.

Developing an effective training strategy generates gratitude on the part of employees, reinforces their levels of institutional commitment and therefore their satisfaction with the work they perform in the company.

 

Key Result Indicators (KRIs)

A key result indicator (KRI) is a financial and non-financial measure used to help companies track progress and reach organizational goals.

Key result indicators (KRIs) are the result of a number of actions, and give a clear picture of whether we are heading in the right direction or not, and they are not useful in knowing what should be done to improve the results, so, they are useful in giving information to senior management or boards.

Key result indicators summarize activities, and financial performance measures are also KRIs (for example, a daily or weekly sales analysis is a very useful summary, but it is a result of the efforts of many teams).

KRIs cover a longer period of time than those of the KPIs, as they are reviewed at monthly or quarterly (quarterly) intervals rather than daily or weekly as is the case in the KPIs.

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