HR Performance: Definition
HR performance reflects the quality and effectiveness — operational, administrative, and economic — of the human resources function. It encompasses all the means deployed to improve HR productivity and efficiency.
It is evaluated using several criteria or indicators such as the turnover rate, absenteeism rate, employee satisfaction (eNPS), or more broadly the company’s workplace climate.
Three types of HR performance are generally identified:
- the administrative performance: efficiency of administrative task management such as payroll;
- the operational performance: quality of HR practices and managerial relationships;
- the strategic performance: contribution of the HR department to company strategy, business, and growth
HR performance is essential in any organization. The HR function manages human capital, a core pillar of company value. Effective HRM (Human Resource Management) leads to engaged, high-performing, and loyal employees.
Effective people management is the starting point of a virtuous cycle for the company. Happy and motivated employees will be more efficient, more productive, and will contribute to the attractiveness and overall success of the business.
Conversely, poor HR management can trigger a vicious cycle.
Measuring HR performance is essential for identifying levers for improvement and innovation.
Measuring HR Performance
Key Performance Indicators (KPIs) for HR Performance
A high-performing HR department relies on measurable data. This requires implementing performance indicators (HR KPIs) that enable quantitative tracking. These HR performance indicators are organized across three dimensions:
KPIs related to administrative performance:
- Recruitment: recruitment costs, recruitment failure rate, number of employees hired over a defined period, number of interviews conducted, acceptance rate, time-to-hire, etc.
- Training: number of training hours completed, training cost per employee, training cost vs. hiring a new employee, etc.
- Administrative: request processing time, employee satisfaction rate when making an administrative request, etc.
KPIs related to organizational performance (HRM):
- Employee satisfaction: eNPS measurement, internal surveys, etc.
- Absenteeism rate
- The turnover rate / new employee turnover
- Promotion rate / internal mobility rate
KPIs related to strategic performance: these indicators are not solely related to HR performance; however, they provide an overall view that should be considered alongside other indicators.
- Company revenue
- HR contribution to results (e.g., link between HR and sales performance)
- Overall productivity rate
- Quality level
-
HR/business strategy alignment
Measuring HR performance through a dashboard or HRIS provides a clear view of how indicators evolve. This facilitates the analysis of results and therefore supports decision-making.
How to Use These KPIs to Measure HR Performance?
Defining the right HR KPIs enables precise management. An initial HR audit establishes the diagnosis: an assessment of the company’s HR performance, the actions implemented, and the measures to be taken to improve it. Then, regular monitoring through HR measurement tools highlights progress and, conversely, identifies warning signs. This feeds the HR optimization process by comparing data against set objectives and providing a snapshot of HR performance at any given time.
Concrete Case Study of HR Performance Measurement
A time-sharing HR Director from Boost’RH intervened at a client company, a supply chain optimization consulting firm, facing a retention problem. The 60-employee firm recruits easily thanks to its reputation and the renown of its clients but struggled to retain staff.
The time-sharing HR Director first conducted a qualitative HR audit to understand the reasons behind the low retention rate of new hires. The audit consisted of conducting interviews with management and representative employees. After analyzing the interviews, the HR consultant proposed an action plan and recommendations on onboarding new employees, as well as broader measures:
- structured onboarding program to be implemented with a newcomer feedback report
- strengthening close managerial relationships and increasing delegation of responsibilities to employees
- expanding the skills development plan
- internal communication on company projects and the firm’s development strategy
After implementing these actions, the firm saw a decrease in new employee departures (the HR indicator that had been identified as needing improvement) as well as better overall employee involvement. Employees became more proactive, more motivated by the firm’s projects. This also contributed to improving the work atmosphere. All of this contributed to improving the firm’s HR performance.
Analyzing and Optimizing HR Performance
Analysis and Action Plans to Improve HR Performance
Analyzing HR indicators is a first step toward improving HR performance. Interpreting HR indicators enables awareness of current HR performance levels and helps determine which indicators need improvement.
To improve HR performance, it will be necessary to implement an action plan and measure its effects using performance tracking dashboards.
For example, the following decisions may be considered:
- Rethinking work organization: management, working hours, work environment, team adaptation;
- Improving internal communication and communicating more about the company’s values, giving greater meaning to work;
- Reviewing recruitment policy, compensation, training, and career mobility policies.
Strategies to Improve HR Performance
Effective Communication
Once the action plan with key levers has been defined, the company must communicate HR objectives to all employees. To drive change or improve behavior, communication is always key. Communicating objectives helps align employees around a common direction, engages them, and broadly disseminates the company’s culture and strategy.
Automating HR Processes
Time-consuming, low-value-added tasks are a barrier to the company’s HR performance. Every company should start by improving administrative performance by automating and digitizing the most time-consuming HR tasks (payroll, administration, onboarding, etc.) or by outsourcing certain functions.
Engaging HR Consultants
Sometimes HR teams simply need to step back and gain perspective in order to implement a new policy or action plan to improve HR performance.
To achieve this, engaging the skills of a time-sharing HR Director or HR professional is an ideal solution. The consultant brings a fresh perspective on a situation or challenge and, thanks to their expertise, is able to quickly propose action plans.
Case Study of a Company That Successfully Optimized Its Strategic HR Performance
A Boost’RH HR consultant intervened at a distributor of components for industrial equipment manufacturing. The client was looking to increase its revenue and generate better results. Here we are addressing strategic performance!
After discussing the objective, the consultant proposed an action plan to implement. In this situation, they recommended introducing a new compensation policy that was more motivating for the sales team.
A variable compensation system based on objectives was implemented instead of the year-end bonus. The objectives were clearly defined and communicated to employees.
Thanks to the implementation of this new motivating compensation system, the company’s sales representatives increased their individual revenue from the very first year while maintaining profit margins on sales and even developed their portfolio of qualified prospects.
Conclusion
HR performance is a genuine value-creation lever for the company. By linking administrative, operational, and strategic performance, HR Directors can strengthen the impact of the human resources function on the organization’s overall results. HR performance and human resources optimization are no longer optional: they are strategic for business competitiveness.
Solid HRM performance, well-leveraged data, and continuous management are the keys to a modern and efficient HR function.
