Most business owners can recite important numbers like revenue and margins from memory. However, if you ask about turnover, time to fill, or training results, you’ll likely get a shrug. Yet your people are typically your largest expense and your biggest growth engine. HR key performance indicators turn questions about how your team is doing from a hunch into numbers you can manage.
When you use them wisely, HR KPIs are levers. You can pull them in the right direction and lower overhead while fueling growth. Here’s what you need to know.
The KPIs That Move Your Costs
Employee turnover and retention are some of the most important metrics, especially if your goal is to cut costs while promoting long-term workforce stability. Turnover is a quiet budget killer, especially when you account for recruiting, training, and onboarding new hires. Every time someone leaves, it costs your business thousands of dollars and countless hours of lost productivity.
According to some estimates, it will cost you anywhere between one-half and twice an employee’s annual salary to replace them. If you multiply that by a few dozen employees per year, the costs quickly balloon to unsustainable levels.
Recruitment costs and time to fill vacancies are other critical metrics you should be watching. Tracking where your best hires come from tells you which channels deserve more budget and which are quietly draining it.
You should also be paying close attention to employee engagement and satisfaction. These are hard to measure, but they strongly influence retention and performance. Conducting a simple annual or semiannual survey of your culture can reveal problems before they lead to attrition. Addressing turnover proactively can be a great cost-cutting measure while preserving institutional knowledge.
Finally, you need to be monitoring productivity and training effectiveness. Upskilling your employees to make them more productive and efficient can reduce turnover while strengthening the business as a whole. However, you must track whether those training investments are translating to meaningful performance gains or not.
Where to Spend
If you’re facing a tight budget, it’s tempting to cut anything that doesn’t look urgent. Here are some areas that you should look at closely before putting them on the chopping block:
- Onboarding and training
- Manager development
- Compliance
- Reliable HR and payroll technology
Despite the cost, these investments typically yield short- and long-term benefits. The trick is figuring out how to measure these gains so you can justify the upfront commitment. For example, upgrading your HR and payroll tech stack may not yield immediate value, but you will see improvements in productivity, a decrease in errors, and a happier HR team.
Where to Save
Smart cost control isn’t about cutting benefits or freezing growth. It’s about eliminating waste. Here are some areas to begin your cost-cutting measures:
- Underperforming recruiting channels
- Manual administration
- Reactive hiring
- Unused programs that don’t fit your culture
Making massive cuts can cause culture shock that’s detrimental to morale and workforce stability. Identify which of these areas is going to deliver the biggest benefit while minimizing risk. Meet with your team to determine which cuts are going to be the easiest to sell.
Start Small and Stay Consistent
You don’t need to start tracking everything all at once. If you try to do too much, it can lead to information overload, leaving you bogged down with too much data. Pick three to five KPIs tied to your highest cost or growth concerns. For example, you may decide to start with turnover, engagement, and cost per hire.
Establish a baseline, review those KPIs quarterly or monthly, and look for trends. Avoid knee-jerk reactions based on a single data point. Over time, you’ll find ways to move the needle and make progress toward your savings goals.
Turning HR Data Into Savings
AssetHR pairs enterprise-level human capital management technology with real people who know your business. Our team can help you identify the right KPIs, clean up your data, and build a plan around what the numbers reveal.
Contact us to learn how AssetHR can unlock savings for your business.