- Recruitment: attracting key talent
- Productivity & performance
- Retention: reducing turnover rates & increasing satisfaction
The Human Resources (HR) department of companies have a tough job. In a company full of individuals it is challenging to find one size fits most approaches to managing and meeting everyone’s needs. In short HR is responsible for hiring, firing, compensation & benefits, safety, general wellness and work place culture in general. One of the ways that HR is able to perform its role in the organization and measure how the company is doing is through the use of key performance indicators (KPIs). The three important HR KPIs to know include recruitment, productivity and performance, and retention.
With the Great Resignation, there have been major obstacles in meeting these expectations for a lot of HR departments. In particular, this phenomenon has made it difficult for HR to meet its KPIs for recruitment and retention. This is definitely not good as meeting these KPIs is crucial to the company’s survival.
At Upstock, we believe in the power of equity rewards to foster and develop both worker-company alignment and identity formation. In this blog post, we’ll get into just how these two important elements can help meet important HR KPIs.
1. Recruitment: attracting key talent
People want to associate with things they identify with and are passionate about. Addressing this human need will significantly improve HR’s success in attracting the necessary talent for the company. For instance, people who are environmentally conscious tend to gravitate towards companies that advocate and support their beliefs. This is something that recruitment efforts could target.
However, this is not that easy for companies that do not have an existing brand or reputation. Hence, startups and newer companies have to find alternative ways to do it and we think this could be done through stock compensation. By offering workers and employees the opportunity to become part-owners of the company, you facilitate identity alignment with the company through collective ownership.
How does this specifically help with recruitment KPIs? Equity plans are very attractive, especially in industries where they are not usually offered. You are, therefore, making a compensation offer that’s not ordinarily made and which is very enticing to a majority of people. Moreover, offering equity may help lower the upfront cost in cash of talent acquisition which is especially helpful for newer and smaller companies with low funds.
2. Productivity & performance
Workers and employees who are satisfied and engaged perform better than those who are not. Compensation has always been a key factor that has been taken into account in predicting the level of performance of an employee.
A lot of studies show that employees who are compensated well tend to have a better performance compared to their less-compensated peers. This shows tha when people feel like they are being properly rewarded and appreciated for doing their jobs well they have more motivation to do so. As such, pay-for-performance compensation plans and other similar incentives have been a go-to HR strategy for improving employee productivity and performance KPIs.
In a previous blog post, we talked about how equity rewards can boost HR compensation strategies by facilitating worker-company alignment. We believe that equity plans are more effective in helping achieve these KPIs since it manages to directly tie the success of the company with an employee’s performance. Instead of an arbitrary performance figure, employees are motivated to go above and beyond what is required by their role to ensure that the company succeeds. When it comes to equity, when the company succeeds, the employees also win, as the value of their equity shares also increases.
3. Retention: reducing turnover rates & increasing satisfaction
Another major KPI for HR is ensuring that turnover rates are low and that key employees stay with the company for as long as possible. Failing to achieve this KPI has a ripple effect that could also adversely affect the achievement of other related KPIs.
For example, having a high resignation rate is demoralizing to the remaining workforce which could negatively affect their productivity and performance. No one likes it when a well liked friend and team members leaves. On the other hand, high turnover rates also generally increase the costs of recruitment as you will have to devote more time and resources to fill and train new workers or existing team members to fill the vacancy created.
Equity compensation is one of the few long term benefits that a company can offer its workers. Payroll, health, wellness, and flex work all meet a worker’s immediate needs. Only equity gives a worker long term plans in line with the company’s future. Workers who identify with the company and are aligned with its goals are more likely to stay and less likely to leave. In this way, equity rewards help keep employees satisfied and motivated while incentivizing them to remain loyal to the company.
The concept of "Cultural Capital"
"Cultural capital" refers to the collective ethos, values, and brand reputation that a company holds. It is an intangible asset, yet profoundly impactful in attracting and retaining top talent. Essentially, cultural capital serves as an emotional and intellectual anchor for employees, influencing how they perceive their role within the organization and their long-term commitment to it. Companies with strong cultural capital often have employees who are not just technically competent but are also deeply aligned with the company's mission and values. This alignment tends to create a more engaged and dedicated workforce, thereby positively affecting key HR performance indicators like recruitment, productivity, and retention. By investing in the development of a rich cultural environment—whether through employee training, corporate social responsibility initiatives, or transparent communication—a company can significantly enhance its attractiveness as an employer and its overall competitive edge.
Importance of Data-Driven Decision-Making
Data-driven decision-making in HR involves the systematic collection and analysis of key metrics to guide strategic choices. This practice empowers HR departments to tailor their KPI strategies with precision, thereby maximizing effectiveness. For instance, regular employee surveys can yield quantitative insights into job satisfaction, work-life balance, and other variables that influence KPIs like retention and productivity. Advanced analytics tools can also identify patterns and trends in employee behavior, allowing for proactive interventions. Using data to track the success rates of different recruitment channels can also refine talent acquisition strategies. In essence, adopting a data-driven approach elevates HR from a purely administrative function to a strategic partner in organizational success, providing actionable insights to achieve and even redefine KPI targets.
Diversifying Compensation Plans
A diversified compensation plan is crucial for addressing the varied needs and motivations of a diverse workforce. While salary and equity options are essential, adding other elements like health benefits, retirement plans, learning and development opportunities, and performance bonuses can make a compensation package more appealing. This multi-faceted approach not only attracts a broader range of talent but also improves retention and job satisfaction. For instance, younger employees may value skill development and work-life balance, while more experienced staff might prioritize retirement contributions and healthcare. By offering a diversified compensation plan, companies can meet the needs of a heterogeneous workforce, thereby positively influencing multiple HR KPIs such as recruitment, retention, and productivity.
Future of HR KPIs and Real-Life Examples
The future of HR KPIs is expected to be shaped significantly by the evolving nature of work and technological advancements. With the rise of remote and hybrid work environments, new KPIs focused on employee engagement, mental well-being, and digital proficiency may gain prominence. The traditional metrics surrounding productivity might also shift to incorporate qualitative aspects like creativity, adaptability, and collaboration, especially as automation takes over repetitive tasks.
Case Studies/Real-life Examples:
- GitLab: A pioneer in the remote work model, GitLab has been tracking KPIs around 'remote work satisfaction' and 'virtual collaboration effectiveness.' They conduct regular employee surveys to gauge the success of their fully remote work model and adapt accordingly.
- Salesforce: Known for its diversified compensation plan, Salesforce offers not just competitive salaries and stock options, but also invests in employee wellness and continuous learning. As a result, they have been consistently ranked among the "Best Places to Work," signifying the effectiveness of such a holistic approach in achieving HR KPIs related to employee satisfaction and retention.
- Microsoft’s Performance Review Model: Microsoft shifted from a forced ranking system to a more collaborative and growth-oriented performance review model. This change had a positive impact on employee morale and productivity, highlighting the need for KPIs to adapt to modern management philosophies.
By studying the likes of GitLab, Salesforce, and Microsoft, HR departments can gain actionable insights into how to evolve their KPIs for a changing work landscape. These companies exemplify how embracing new KPI metrics and adopting a diversified compensation approach can significantly influence organizational success.
Upstock can help achieve HR KPIs
Between COVID and the Great Resignation, it has been a major challenge for HR practitioners around the world to meet their KPIs. But with the right tools in place, we believe that these KPIs become easier to achieve. At Upstock, we believe that one of those tools is a good equity compensation strategy. Hence, we have made it a goal here in Upstock to help HR achieve its KPIs through effective and high-quality equity plans.
We’ve been looking to talk to companies and organizations as to how Upstock can help address some of their KPI-related issues. If you are an HR professional thinking about how this can be done by recalibrating your compensation strategy, we’re here to walk you through it. Book a demo or get in touch with us through this link.
1. Why are HR KPIs important for businesses?
HR KPIs serve as critical metrics for evaluating the effectiveness of human resources initiatives. They offer quantifiable measures that help businesses align HR activities with organizational goals, thereby enabling better decision-making and resource allocation.
2. How can HR KPIs help in improving recruitment and hiring processes?
HR KPIs related to recruitment—like time-to-fill and quality-of-hire—provide valuable insights into the efficiency and effectiveness of hiring practices. By analyzing these metrics, businesses can identify bottlenecks, optimize recruitment channels, and improve overall hiring quality.
3. What are some common challenges in measuring HR KPIs?
Common challenges include data inaccuracies, lack of standardized metrics, and the difficulty in quantifying qualitative aspects like employee satisfaction or company culture. These challenges make it essential for HR departments to use reliable data sources and rigorous analysis methods.
4. How can HR KPIs contribute to employee engagement and retention?
HR KPIs related to employee engagement and retention, such as turnover rate and engagement survey scores, provide actionable insights for improving workplace culture. By monitoring these metrics, HR can implement targeted initiatives to boost employee satisfaction and loyalty, thereby reducing attrition rates.