Back To CourseSenior Professional in Human Resources - International (SPHRi): Exam Prep & Study Guide
10 chapters | 86 lessons
Julie studied English and Spanish for her Bachelor degree and also has a Master's degree in Human Resources.
When people think about how successful a business can be, they often assume success is how much profit the company makes each year. People often forget that along with profits, key performance indicators are another way of measuring a company's success. Key performance indicators (KPIs), are business metrics used to evaluate performance factors for a given business. Most KPIs are about the business's products and services, but having HR-related KPIs is just as, if not more, important as having measurements around sales of goods.
The role of the human resources (HR) department is to offer guidance on how to strategically manage people. This includes managing employees, recruiting, employee benefits, and coordinating training and development strategies. Given their wide involvement in an organization's day-to-day affairs, HR needs to establish KPIs to measure business decisions and to determine if alternative actions should be taken. Some important KPIs that an HR department should implement include outsourcing data, cost per hire, scorecards, and trend analysis. Although there are many other indicators that can be incorporated into a business, these KPIs serve as main indicators and can provide a good starting point for HR.
Outsourcing data refers to when a company utilizes outside companies to help handle workloads instead of the internal workforce. This initiative is becoming more popular in the working world. As part of an HR's KPIs, outsourcing data can save costs, help with strategy approaches, lessen errors in data entry, provide faster turnaround times, and allow more time to focus on other initiatives. This is a great approach for organizations, but HR departments need to have strong measurements around how well this approach is working. If an organization is spending additional costs but not seeing benefits, the HR department must revisit this approach for its organization.
The HR department should keep close track of their cost per hire, since they're directly responsible for recruiting candidates. This cost per hire KPI deals with the cost around filling open positions and helps to determine the amount spent to hire a new employee. This also includes the resources needed to attract good talent to fill any open positions. A high cost per hire will get the attention of executive management in a negative way while low cost per hire is always more attractive to the leaders within the organization. Also, a low cost per hire frees up additional costs for other uses in the business.
Having scorecards within a business is crucial to the overall success. Scorecards, within the HR department, are like a progress report that HR offers on its own operations. HR scorecards can look at various factors to provide a visual representation of how successful HR operations have been in this department. Some of the items that are measured within the HR scorecard include how long it takes to fill open positions, turnover rates, worker's compensation related to injuries and time away from work, and other metrics that support overall success within the organization.
Trend analysis is another important KPI around HR functions. Trend analysis uses quantitative data methods to capture the number of employees the organization may need currently and in the future. This method takes historical patterns into account to understand future impacts on an organization's performance and development. Without this trend analysis, HR departments may either under plan or over plan a company's budget. HR departments must also be aware that this is more of a forecast based on previous historical patterns. Trend analysis is not 100% accurate but will help to lead an organization in the right direction when making decisions.
Having strong key performance indicators (KPIs) to evaluate performance factors is vital to an organization's growth and overall success. HR needs to have a strong presence with their own internal metrics in order to measure the company's success in terms of cost, employees, and strategy. Outsourcing data, cost per hire, scorecards, and trend analysis are important HR-related KPIs. These KPIs need to be established in order to ensure the company is utilizing outside resources for overall success, filling positions in a cost-efficient way, and ensuring the organization is fully staffed to carry out day-to-day business needs.
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