Regardless of the type of industry you operate, it’s important to understand that the growth of every business is directly correlated to employee’s engagement. Leaders know that employee engagement is critical to business growth. True employee involvement plays a vital role in business success.
As employee engagement is an important business success, you may be searching for ways to measure it accurately. This is where industry KPI’s provide benchmarks provide opportunities to motivate your employees.
A KPI not only helps you in measuring employee’s engagement but also identify areas to focus on to boost employee morale, personal growth, client satisfaction, and more.
An Employee Engagement Key Performance Indicator (KPI) is a tool to measure employee’s engagement and analyze how well a business is meeting its goals. Firms apply KPI at various levels to assess their success. There are two types of KPI’s: high-level and low-level. High-level KPI centers around the complete performance of the organization, whereas low-level KPI focuses more on a particular process or an employee of different departments like the marketing or the sales department.
There are countless KPI’s to align with your business goals, so make sure the KPI’s you’re choosing are well defined.
1. Employee Net Promoter Score: It evaluates how likely an employee is to recommend their organization as a place to work. This is determined by calculating the difference between the percentage of promoters and detractors.
Net Promoter Score Formula:
Employee NPS= (promoters - detractors)/ total respondents
2. Retention/Turnover: The turnover rate helps to analyze the tenure of the workers who quit. By maintaining a turnover rate, the company can focus on departments that need more attention, especially where employees are not having a good time.
Turnover Rate Formula:
Turnover rate = (Total number of employees who have left the organization) / (Total number of employees at the beginning of the period)
According to market research, you should keep a target of 10% or less annual turnover rate for your organization.
3. Absenteeism: The absence rate is related to the employees' interest. A high absenteeism rate represents a low motivated individual in the workspace. (Check out our article What Is Presenteeism and How Does it Affect Workplace Productivity?)
Absenteeism rate = (Total number of absent days per employee) / (Total number of working days) x 100
4. Profitability/Production: When employees are not engaged with the business, it results in less business growth. If production is slow or sales are down, low engagement is the issue for sure.
The research conducted by Gallup shows how much more profitable and productive an organization can be if it takes care of employee engagement.
5. Glassdoor Rating: Glassdoor.com is a website where employees can give their reviews about their employers. The reviews help businesses to know what their current and previous employees think about their organization
6. New Hire 3 Months Failure Rate: Employee engagement is a mindset, and you can engage your employees with your business by providing proper training and tools. If new employees are leaving the company within the first 90 days, either they are not happy with the policies or they are not the right hire.
7. Client Happiness: Happy employees means happy clients. It determines your client NPS (Net Promoter Score). If your client NPS is low, low employee engagement is the reason that is affecting your customers' happiness.
Research shows that 48% of the employees are ‘unhappy’ or ‘somewhat happy’ at their workplace.
8. Rhythm Software Usage: Rhythm software helps to analyze employee involvement. It evaluates how much an employee is involved in office tasks like the problem-solving in weekly meetings. If the employees are not participating, then it means that they are not engaged, employees.
9. Use of Vacation Days: It evaluates the healthy work-life balance that boosts employee involvement and engagement. Vacation days used can also determine your work culture.
10. Employee Suggestion Box: Employee suggestion box lets your employees put their point of view in front of employers or management. Better employee engagement means they can give valuable suggestions and insights to enhance productivity.
A survey done by CareerBuilder demonstrates that 48% of the employees said that asking for suggestions and feedbacks and then putting them into action will automatically decrease the possibility of voluntary turnover.
11. Health Care Cost of Employee: It provides with a better understanding of all elements of an organization’s health care plan. It is evaluated by the total amount of health care costs divided by the total number of employees.
12. Productivity Rate of Employees: It helps to evaluate the productivity of an organization over time. It is calculated by the total revenue of the company divided by the total number of employees.
13. Return on Investment: A company should make sure that the money you are investing in training employees of some value. The ROI is determined by the profit per dollar invested in social compensations divided by the wages.
14. Retirement Rate: To evaluate the retirement rate is crucial for any firm which is building up a strategic workforce plan. It is determined by the number of employees who have retired as a percentage of the headcount.
15. The Average age of Retirement: It is calculated by the estimated age of all the employees retiring divided by the number of employees retiring. It is important to be aware of such trends as it helps to predict retirement and plan employee replacement in advance.
16. Diversity Rate: It helps to observe how successful an organization is when it comes to establishing an environment that supports an accepting and an open community.
17. The Total Number of D&I Initiatives Executed: The number of D&I initiatives executed evaluates the company’s dedication in establishing and keeping up with the culture of diversity and inclusion. D&I implemented in a company helps to hold up a diverse workplace and helps to achieve the goals of a competitive business.
PWC conducted a global diversity and inclusion benchmarking survey to see the commitment of various organizations towards implementing D&I. The survey focuses on how the organizations execute D&I strategies to see what programs are in place and the way they are influencing the experience of an employee.
18. The Diversity of Nationalities and Ethnicities in the Workplace: Diversity in the workplace helps to encourage innovation and to maintain the competitive edge. The diversity of nationalities and ethnicities can be evaluated by looking at the employee demographics. (Check out our article - What is Diversity in the Workplace and Why it Matters)
19. Evaluating the performance of new hires: The performance of the new recruitments can be differentiated with the performance of other employees of the organization. It is calculated by classifying the performance reports.
20. Satisfaction with the Hiring Process: This gives an outlook on how well the process of hiring works from the perspective of an employee. It also helps to reflect on the growth of an organization.
21. Cost per Hire: It helps to evaluate the amount of capital invested in obtaining the best talent. It comes into use when you are creating a recruiting budget.
Cost Per Hire Formula:
CPH= Internal Recruiting Cost+External Recruiting Cost
Total Number of Hires
A study by the Society of Human Resource Management (SHRM) discovered that the average cost per hire for companies is above $4,000. This value is the average number of all the organizations that SHRM surveyed.
A benchmark between the value $3,000 and $5,000 is considered to be good for the organization, depending on its size.
22. The Average Time Required to Find a Hire: It helps to track down the efficiency of an organization regarding the process of hiring.
23. Applicants Interviewed per Hire: It is calculated by taking the total number of applicants that have been interviewed and dividing them by the total number of hires in a specific hiring period.
24. The Rate of Acceptance: It is calculated by taking the number of acceptances and dividing it by the number of offers given by the organization. It helps to determine the success rate of the hiring strategies of the company. A comparison can be made by reviewing the industry benchmarks.
25. The Percentage of Job Applicants who meet the Job Standards: It helps to determine the success rate of job openings in reaching the top applicants.
26. The Percentage of Yield: It determines the percentage of applicants remaining after each elimination round during the hiring process. If the percentage is low, then it shows that there is a need to upgrade an unattractive job opening. And if the percentage is high, then it signifies a larger number of qualified applicants who are fit to be hired.
27. Percentage of Employees Trained in the Workplace: By calculating the total number of employees trained in the workplace, you get to understand and know the importance of company culture.
28. Training Effectiveness: It helps the organization to look at how comfortable the new employees feel after the training process has ended. It is evaluated via a post-training survey.
29. Cost of Training per Employee: It helps to evaluate the amount invested in training new employees. Calculating the cost of training helps to maintain the record of the amount spent in the training process.
30. Percentage of the number of employees trained: It helps to evaluate how quickly new employees are effectively integrated into an organization. The higher percentage will lead to better employee engagement and employee retention rate.
31. Knowledge Gained Through Training: It helps an organization to determine and focus on the effectiveness of a training process rather than on the cost of training. To evaluate the knowledge retained by the employees during the training process is crucial for the organization. It can be evaluated by conducting an exam and then monitoring the exam pass rate percentage.
32. Salary Competitiveness Ratio (SCR): This ratio is used to evaluate the competitiveness of compensation choices. It can be calculated by dividing the average salary of the company by the average salary offered from competitors in the industry.
33. Voluntary Termination Rate: It is evaluated by taking into account the number of self-led employee resignations in an organization over the total number of terminations in a given period.
34. Involuntary Termination Rate: It is calculated by taking into account the number of resignations led by the employer of the organization over the total number of terminations in a given period.
35. The Percentage of First-Year Voluntary Termination Rate: It helps to see how welcoming an organization is towards new employees. A higher percentage means that the right people are being employed but are not being embraced.
36. Average Time to Fill-up a Job Opening: It helps to keep tabs on how well-organized the hiring process is regarding the average time used to fill up an available job opening.
37. The Rate of Attrition: It evaluates the retention rate. It helps the company to find out how successful they are at preserving skills. It is calculated by dividing the total number of employees who have left the organization in a given period by the average number of employees in that particular period.
38. Internal Promotion Rate: It demonstrates the retention of employees by an organization and the growth of top performers. Can be calculated by dividing the number of employees promoted by the total number of employees. (Check out our article - The Spillover Effect and 14 Other Biases Associated with Performance Appraisals)
39. The Rate of Internal Job Hires: It helps to indicate the effectiveness of skills and talent development in the organization.
40. The Rate of Internal Employee Referral Hires: This rate helps the managers to identify the value added in the organization when the present employees help to recognize and obtain new skills and talent. Referral hires lead to higher job satisfaction.
41. The Internal Promotions and the External Hires Ratio: The ratio between the internal promotions and the external hires determines how many employees are currently working at an organization are being reviewed for internal promotion as compared to the number of external hires. It can be especially useful when considering the succession plan, which determines the future growth of the organization.
42. HR to Full-Time Equivalent (FTE) Ratio: The ratio is calculated by dividing the number of HR full-time equivalents by the total number of full- time equivalents. It helps to evaluate the capability of HR to deliver effective services to its staff. Larger firms report a smaller ratio as compared to the smaller firms, but they have more HR staff altogether. Calculating the ration helps the business owners to see if the HR department is understaffed or overstaffed.
The study conducted by the Society for Human Resource Management shows the HR human capital benchmarking report. It includes the research, perspective, and analysis of the responsibilities, influence, expenditure, and priorities of the human resource department.
43. Percentage of Employees Below Performance Standards: It keeps a track on the number of low-performing employees in an enterprise.
44. Satisfaction from Benefits: This lets the firm to analyze the satisfaction level of the employees from the benefits offered to them. Satisfaction of employees can be evaluated by breaking down each benefit and using surveys.
45. Percentage of Cost of Employees: The cost of the employees can be evaluated by summing up all the salaries of the employees and dividing it by the total costs of the company within a given period. It exclusively helps to keep a track on the cost of the workforce.
46. Employee Satisfaction Index (ESI): It measures the satisfaction of an employee in a particular situation. A survey is done to evaluate the ESI. In the survey, employees are asked questions which they have to rate on a scale of 1 to 10. The results may differ from 0 to 100; the higher score or index shows more satisfied employees.
ESI= [((question mean value ÷ 3) – 1) ÷9]*100
Research by Kimble shows that 75% of the American workers care about the wellbeing, productivity, and performance of their employees.
47. The Number of Regular Employees: Maintaining a record of the total number of full-time employees helps you to keep a check on the growth of the organization with time.
48. The Number of Part-time Employees: It evaluates the growth of part-time workers with time. To better understand the trend of the workforce, it should be compared to the total number of full-time employees.
49. Total Number of Employee Satisfaction Surveys: By maintaining a record of total number of employee satisfaction surveys helps to understand the effort being made to boost the employee happiness and satisfaction rate.
50. Average Term: The average term or length of time that an employee spends with the company helps to evaluate the employee satisfaction rate and skill retention.
51. Average Time to Process Payroll: It demonstrates timeframe or the cycle time of the process, it also gives an estimation if an updated process is needed. It evaluates the number of business days taken in the process of generating payroll from the beginning to the end.
52. Average Time to Resolve Payroll Errors: It determines the number of business days taken to fix the payroll error pointed out by the employees. If the days are higher in number, then it shows the requirement to review the payroll process.
While establishing the key performance measures for your organization, you need to review some questions for a productive workflow.
Asking the right questions can help you to discover which of the elements might be missing and what other employee engagement measures can be taken to meet the goals of the organization. (Check out our article - 100 Ways to be Productive at Work)
KPI’s help to manage the performance of the company. If your organization focuses on KPI’s, then your employees will adopt appropriate behaviors. Whereas, if you select the wrong KPI’s, then you will have to face the risk of odd behaviors.
Following are the two ways you can choose the right KPI:
KISS: It stands for “keep it simple, stupid.” This acronym perfectly relates to KPI’s. You should make it very simple and easy to understand so that your staff has the clarity about what they need to do.
SMART: It stands for specific, measurable, attainable, relevant and time-bound. You need to make sure you KPI’s consists of all these elements because these elements will decide the future growth of your organization.
KPI selection needs to be done carefully. Two common mistakes can occur during the KPI selection process, that you need to look out for:
Selecting KPI’s that you measure every time: By selecting the KPI’s that you have always measured, you may be missing on an opportunity of introducing something new that can make your business flourish.
Selecting KPI’s that are simple and easy to measure: Selecting KPI’s solely by simplicity may not help you achieve anything. Evaluate each KPI by keeping in mind the strategy and overall goals of the organization.
You should take into account that KPI’s help measures and define the objective of your organization. Two types of KPI’s can be applied to two different situations:
Outcome KPI (Lagging indicator): You should select an outcome KPI when you are not clear about what will help you get better results, which is a lagging indicator. For instance, if you don’t know what activity will help you to have higher sales in your business, first you may need to measure the sales and, then, later on, introduce other innovative ideas like promotions during off-hours, this will help you make an impact on your sales. Once you can assess what has the highest effect on your sales, then you can measure sales at the time of promotions.
Driver KPI’s (leading indicator): You should select a driver KPI when you know what KPI will give you better results, which is a leading indicator. For instance, if you know that the sales in your business have gone down due to a particular reason, you may be able to resolve that issue by including new activities or measures. These activities will help you to change customer behavior.
KPI’s help to evaluate the progress of an organization towards achieving strategic targets. It is used to measure employee engagement and setting up goals for your organization. KPI’s help to determine the qualitative and quantitative data points of employee engagement, which is necessary for every organization to get the necessary measures and feedbacks of the employees. You should note that without active employee engagement KPI’s, there is no way of knowing whether your efforts are working.
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