Today's companies' success and growth are no longer solely linked to a good product or distinguished service. The human element is the primary driver of any success. What distinguishes one company from another in effectively managing its human capital is the ability to develop strategies that contribute to measuring performance and evaluating them periodically.

This is where the modern HR system comes in. It is no longer just a tool for storing employee data, but has become an integrated platform and system that helps analyze each employee's performance indicators and evaluate their performance. This is done to invest in human capital and develop it in line with the company's objectives.

The most important question here is: What are the most important key performance indicators (KPIs) in the HR system that companies should rely on? How can these indicators reflect the company's success and reveal weaknesses that need improvement? This is what we will explore in this article.

What are KPIs in HR?
They are measurable indicators used to evaluate employees and assess the effectiveness of the HR department in achieving the company's objectives. These indicators measure many points, such as employee efficiency, employee satisfaction, return on investment from training, and many others.

In general, performance indicators can be divided into four main categories. They are as follows:

Recruitment and hiring indicators.
Performance and productivity indicators.
Employee retention and satisfaction indicators.
Training and development indicators.
The most important key performance indicators in a human resources system
Recruitment and hiring indicators
The first step in any HR system is the selection and hiring process. It is important to ensure that measurable performance indicators are established before starting the recruitment process to ensure its effectiveness and avoid wasting time and money without achieving the desired objectives. Key performance indicators that can be adopted at this stage include:

Time to hire
Time to hire here refers to the average number of days from the date the job advertisement is posted until the candidate accepts the offer.

Measuring time to hire is important because a long recruitment period can mean your company loses talent to competitors. This can also create a gap in work and impact productivity.

However, by establishing measurable performance indicators through an effective HR system, you can achieve the following:

Identify weaknesses in the recruitment process.
Reduces the length of interviews.
Control the slow response time to candidates.

This is achieved by streamlining the recruitment process and utilizing modern, automated systems that contribute to enhancing the efficiency of the process.

Cost of Recruitment
This is the total cost of hiring a new employee, which may also include advertising costs, recruitment agency costs, and other costs.

By identifying performance indicators related to the cost of recruitment, you will be able to obtain comprehensive data on the following:

A comprehensive view of the efficiency and effectiveness of your recruitment budget.
Are you spending too much money without securing qualified candidates?

Are the recruitment channels used effective or ineffective?
By measuring these indicators, you will be able to evaluate the effectiveness of each recruitment channel and determine the most cost-effective and profitable.

Offer Acceptance Rate
This refers to the percentage of candidates who accept a job offer compared to the total number of offers received.

The importance of this indicator lies in the fact that if it is low, it indicates a problem, for example:

The salary may be uncompetitive.
The company culture may be unattractive.
The interview process is negative.
By measuring these indicators, you can contact candidates who declined offers to understand their reasons and then work to improve any weaknesses to avoid them in the future.

Performance and Productivity Indicators
Evaluating and measuring employee performance helps you understand the efficiency of your workforce and identify areas for improvement. This can be tracked through the following indicators:

Employee Productivity Rate
This indicator may vary depending on the nature of each department's work. For example, in sales, the performance indicators might be the sales generated by each employee. In manufacturing, it might be the number of units produced by each employee.

This indicator gives the company insight into the impact of employees on the company's financial goals. It can help determine the following:

Identify the top-performing employee.
Identify weaknesses in executive skills.
Identify required training indicators.
By activating and measuring these indicators in the HR system, you can easily evaluate employees, determine their individual performance, assign rewards, and address weaknesses through training.

Absenteeism Rate
This is the percentage of time an employee is absent from work due to unforeseen circumstances, such as illness.

It is an important performance indicator, and by tracking it, the following data can be obtained:

Direct impact on productivity.
Extent of increased workload on others.
If any of these indicators are present, they must be quickly addressed by developing alternative plans to implement in the event of sudden employee absences. This is to avoid negatively impacting work.

Employee Retention and Satisfaction Indicators
Providing a positive work environment contributes to employee happiness, stability, and enhanced productivity. Therefore, efforts must be made to maintain this environment in order to retain the talents that companies possess. This is achieved by measuring the following performance indicators:

Employee Turnover Rate
This is the percentage of employees who leave the company within a specific period of time.

The importance of this indicator, especially when it is high, is as follows:

The company loses many talents and expertise.
Increased recruitment costs.
Recurrent training.
When these indicators are present, measured, and analyzed, you will be able to determine the following data:

Are new employees leaving the company quickly?
Is there a department experiencing high turnover?
Answering these questions will provide data on the cause of the high turnover rate, allowing immediate action to be taken to resolve it.

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