An indicator is a quantitative or qualitative factor or variable that offers a direct, simple, unique and reliable signal or means to measure achievements; reflect changes connected to an intervention, project, activity or task; or help assess the performance.
In the context of business or human resources (HR), indicators are an extraordinarily useful way to measure all important elements of an organization's performance. Indicators provide information that leaders, managers, teams, people and those who support them can use to make decisions and take actions to improve them.
Generally speaking, in the context of business operations, indicators can be classified into two broad categories: leading and lagging indicators.
Leading indicators are proactive, predictive measures that can signal future events. They give an organization an idea of what might happen in the future based on current conditions. For example, employee satisfaction surveys are useful as a leading indicator for employee turnover rates.
Lagging indicators are reactive (ex-post) and occur after the fact. They provide information about past events and performance, often used to evaluate the success or failure of a project or a strategy. In HR, lagging indicators include metrics such as the total number of employees who left the company in a given period.
Both types of indicators are valuable. They offer data-informed insights that can be used to drive improvements and make evidence-based, data-backed informed decisions.
In this post, we will focus on five relevant, valuable, and useful leading indicators.
Leading Indicators
Leading indicators in HR are proactive measurements that predict the future health of an organization's workforce and the impact in the business strategy and the achievement of business goals and priorities.
These kinds of indicators in HR offer critical, forward-looking insights that have the potential to shape future performance in two ways:
preparing the organization for existing trends (both internal and external to the organization)
and, hopefully, also by giving them information to act swiftly when confronted by data that tells a story that may negatively impact the business.
By evaluating these key performance leading indicators, HR professionals and business leaders can manage issues and opportunities even before they significantly impact the organization.
The truth is that the impact of leading indicators goes far beyond HR. They are touching every corner of the organization: strategy, performance, culture, leadership and more. Equipped with the insights offered by leading indicators, decision-makers across an organization can craft data-informed strategies, enhance operational efficiency, improve employee engagement, and, overall, focus on improving both people and business operations by addressing issues with culture and performance.
Ultimately, leading indicators are essential to drive sustainable organizational growth and competitiveness through both culture and performance. Understanding, embracing and acting on the information provided by HR leading indicators in real-time allow the strategic redirection of efforts, mitigating risks, and maximizing opportunities in a timely and effective manner.
HR Leading Indicators
There are many relevant HR leading indicators.
They include: Employee Satisfaction Survey Scores, Workload Capacity, Training Participation Rate, Internal Mobility Rate, Employee Pulse Surveys, Early Turnover Rate, Employee Feedback Frequency, Career Development Plans Completion Rate, Number of Employee Referrals, Employee Net Promoter Score (eNPS), Candidate Experience Score, Pre-Onboarding Engagement Rate, Diversity in Leadership Pipeline, Skills Gap Analysis, High-Performance Succession Rate, Percentage of Open Positions Filled Internally, Leadership Satisfaction Score, Employee Wellbeing Index, Frequency of Performance Check-ins, Talent Acquisition Cost Ratio, Upward Feedback Scores, Employee Empowerment Index, Cross-Training Participation Rate, Employee Innovation Contributions, Percentage of Performance Goals Achieved, Frequency of 1:1 Manager-Employee Meetings, Level of Job Postings per Open Position, Workplace Safety Incident Rate, Mentorship Program Participation Rate, and Employee Volunteer Program Participation Rate.
Five HR Leading Indicators
Among the comprehensive list above, five commonly used leading indicators stand out: Employee Satisfaction Survey Scores, Early Turnover Rate, Training Participation Rate, Employee Net Promoter Score (eNPS), and Percentage of Open Positions to be Filled.
Each of these provides a wealth of information on employee satisfaction, engagement, attrition, and advocacy. Understanding and acting on these leading indicators allows organizations to create a positive and productive work environment, fostering organizational success in the long term.
1. Employee Satisfaction Survey Scores
These surveys provide HR departments with insight into overall employee experience, engagement, satisfaction, and morale. They can be instrumental in identifying areas that need improvement.
Employee satisfaction is typically measured through confidential surveys conducted on a regular basis (annually, bi-annually, or quarterly, or even pulse surveys). These surveys usually contain a set of questions that help understand how satisfied employees are with various aspects of their job - their role, work environment, management, compensation, benefits, work-life balance, etc. The scores are typically averaged to create an overall employee satisfaction score.
High scores can result in increased employee engagement, higher productivity, better retention, and a positive company culture. Low scores can indicate disengagement, dissatisfaction, and potential turnover. This can lead to reduced productivity, a negative work environment, and potentially high recruitment and training costs.
A list of potential actions to improve negative scores, include:
From HR:
Regularly conduct employee satisfaction surveys and ensure the feedback is acted upon.
Implement programs for employee recognition and rewards.
Develop initiatives to improve work-life balance.
Foster a positive and inclusive company culture.
From senior leaders:
Develop a clear vision for the company and communicate it effectively to all staff.
Ensure that managers are well-trained in people management skills.
Support and encourage initiatives to improve the workplace environment.
Be open to receiving feedback and act on it to show employees their opinions are valued.
From direct managers:
Provide clear communication and direction to employees.
Address any issues or feedback provided through the surveys promptly and effectively.
Foster a positive work environment that encourages engagement and satisfaction.
Recognize employees' efforts and contributions to motivate and boost morale.
2. Early Turnover Rate
Keeping an eye on the early turnover rate can help HR identify issues with the onboarding process or overall job fit. This is typically calculated by dividing the number of employees who leave the organization within a specified short period (for example, one year) from their date of joining by the total number of employees who left during that same period. The result is then multiplied by 100 to get a percentage.
A low early turnover rate suggests successful onboarding and initial job fit, contributing to long-term retention and reduced hiring costs. A high early turnover rate is a strong indicator of issues with the hiring process, onboarding, or job alignment, which can lead to high hiring and training costs, as well as decreased productivity.
A list of potential actions to improve negative scores, include:
From HR:
Review and improve the onboarding process to ensure new hires have the support they need.
Implement a mentorship program for new employees.
Regularly review job descriptions to ensure they accurately reflect the role.
Gather exit interview data from early leavers and implement necessary changes.
From senior leaders:
Get involved in the onboarding process, such as welcoming new hires or being part of orientation sessions.
Encourage a culture of mentorship and peer support.
Show empathy and understanding if an employee decides to leave early, ensuring the exit process is handled smoothly.
Review job roles to ensure that they align with business needs and employee skills.
From direct managers:
Ensure new hires receive comprehensive onboarding and initial training.
Regularly check-in with new hires to address any early issues or concerns.
Foster a supportive and inclusive team environment.
Recognize the efforts of new hires to make them feel valued and reduce the likelihood of early departure.
3. Training Participation Rate
This is a key measure of how engaged and committed employees are to their personal development and learning new skills, both of which are crucial for business growth. This is calculated by dividing the number of employees who participate in non-mandatory and mandatory (separate measurements) training programs by the total number of employees in the organization. This can be done for specific training programs or for all training initiatives over a certain period. In addition, this can be analyzed further by weighing the quality of the programs measured in a rated scale and the impact it had on the behaviors and actions of training participants.
High participation rates can indicate an engaged workforce with a strong commitment to skills development and continuous learning. This can lead to improved productivity and innovation. Low participation rates can signify a lack of engagement or potential issues with the training offerings. This can result in skills gaps, decreased productivity, and low innovation.
A list of potential actions to improve negative scores, include:
From HR:
Offer a variety of training opportunities to cater to different learning styles and interests.
Schedule training sessions at convenient times and make them accessible remotely.
Promote the benefits of training to employees.
Regularly review and update training materials to ensure they are relevant and engaging.
From senior leaders:
Advocate for a culture of continuous learning and improvement.
Encourage managers to promote and support training among their teams.
Allocate resources and time for employee training and development.
Validate and acknowledge the importance of skills and knowledge gained from training sessions.
From direct managers:
Encourage team members to take part in available training and development opportunities.
Allocate time within the work schedule for training.
Discuss the benefits and relevance of training programs in team meetings.
Recognize and reward employees who actively participate in training sessions.
4. Employee Net Promoter Score (eNPS)
The eNPS measures how likely employees are to recommend their workplace to others, offering a snapshot of employee satisfaction and loyalty. eNPS is calculated using responses to this sample question, "On a scale of 0-10, how likely are you to recommend this company as a place to work?" Respondents are grouped as follows: Promoters (9-10), Passives (7-8), and Detractors (0-6). The eNPS is then calculated by subtracting the percentage of Detractors from the percentage of Promoters.
A high eNPS means employees are likely to recommend the organization as a great place to work. This can enhance the employer's brand and attract top talent. A low eNPS can harm the employer's brand, making it more difficult to attract and retain talent. It may also be an indicator of underlying issues that need to be addressed.
A list of potential actions to improve negative scores, include:
From HR:
Regularly conduct eNPS surveys and act on the feedback.
Foster a positive work environment and culture.
Regularly communicate with employees about their roles, expectations, and the company's strategic direction.
Offer competitive benefits and opportunities for career advancement.
From senior leaders:
Demonstrate leadership by living the company's values, and encouraging employees to do the same.
Show genuine interest in employee wellbeing and happiness.
Involve employees in decision-making processes where appropriate.
Regularly celebrate and acknowledge the achievements of individuals and teams.
From direct managers:
Foster a positive team culture that employees would recommend to others.
Regularly acknowledge and reward the efforts of your team members.
Address any concerns or feedback raised through the eNPS survey.
Strive to improve areas highlighted as needing improvement in the eNPS survey.
5. Percentage of Open Positions Filled Internally
This metric can tell HR a lot about the effectiveness of their talent development and retention strategies. High rates can indicate successful internal growth and development programs. This is measured by dividing the number of open positions filled by internal candidates by the total number of positions filled during the same period. The result is then multiplied by 100 to get a percentage. This reflects the effectiveness of internal mobility, talent development, and succession planning programs.
A high percentage signifies successful internal mobility and talent development programs. It can lead to increased employee satisfaction, improved retention, and reduced hiring costs. A low percentage can indicate a lack of career development opportunities, potentially leading to dissatisfaction and turnover, as well as increased hiring costs.
A list of potential actions to improve negative scores, include:
From HR:
Create clear career pathways within the organization.
Implement a robust succession planning process.
Foster a culture of continuous learning and development.
Regularly communicate internal job opportunities to employees.
From senior leaders:
Champion internal mobility and succession planning as part of the company's culture.
Encourage managers to identify potential successors and high-potential employees in their teams.
Foster a culture where learning, upskilling, and internal growth are valued.
Show recognition for employees who advance their careers within the organization.
Top Skills
These are the top five skills you can focus on to master the art of using leading and lagging indicators:
Data Analysis and Interpretation: It is the ability to examine, clean, and model data with the goal of discovering useful information, informing conclusions, and supporting decision-making. For example, using statistical tools to analyze employee satisfaction survey data to predict turnover rates, or interpreting changes in training participation rates and their impact on performance metrics demonstrates this skill in action.
Strategic Thinking and Planning: It is the capacity to envision future scenarios and develop strategies to achieve desired outcomes based on insights from data. This skill is crucial for aligning initiatives with an organization's long-term objectives. An example includes utilizing employee net promoter scores (eNPS) to inform employer branding strategies or using insights from early turnover rates to refine recruitment processes.
Effective Communication: It is the skill of clearly and effectively conveying information and insights derived from data analyses to various stakeholders. This involves presenting complex data in an understandable manner to inform decision-making. For instance, creating presentations for senior management that highlight the need for new employee engagement initiatives backed by data from satisfaction surveys exemplifies effective communication.
Problem-Solving and Critical Thinking: It is the ability to use logical thinking and analysis to identify solutions to problems. This skill relies heavily on quantitative and qualitative data to inform decisions. Identifying root causes of a spike in early turnover rates and proposing actionable solutions based on data analysis is a practical application of this skill.
Change Management: It involves the ability to lead and manage organizational change effectively, utilizing data to inform strategies and minimize resistance. This includes using leading and lagging indicators to anticipate shifts in the workforce or industry and preparing the organization accordingly. Implementing a new technology platform based on productivity metrics and ensuring a smooth transition by addressing employee feedback and concerns showcases this skill.
Key Insights
Importance of Indicators in HR: Indicators, both qualitative and quantitative, are crucial for measuring achievements, changes, and performance within HR. They provide valuable information for decision-making and actions to improve organizational performance.
Leading vs. Lagging Indicators: Leading indicators are predictive and proactive, offering insights into future events, whereas lagging indicators are reactive, providing data on past events. Both are essential for a comprehensive understanding of organizational health and performance.
Role of Leading Indicators: Leading indicators in HR predict the future health of an organization’s workforce and its impact on business strategy and goals. They are critical for preparing for trends and acting swiftly to mitigate potential negative impacts on the business.
Impact Beyond HR: The insights from leading indicators extend beyond HR to influence strategy, performance, culture, and leadership. They empower decision-makers across the organization to craft data-informed strategies, enhancing operational efficiency and employee engagement.
Key HR Leading Indicators: Five notable leading indicators include Employee Satisfaction Survey Scores, Early Turnover Rate, Training Participation Rate, Employee Net Promoter Score (eNPS), and the Percentage of Open Positions Filled Internally. These metrics provide insights into employee satisfaction, engagement, attrition, and advocacy, which are pivotal for creating a positive work environment and fostering long-term organizational success.
The Value of HR Leading Indicators
The ultimate value of HR leading indicators lies in their ability to provide comprehensive insights into the current pulse of the organization. These measurements signal a wide span and range of critical areas that need attention, allowing organizations to recognize patterns, identify strengths and weaknesses, predict future trends, and direct impactful interventions.
However, it is fundamental to say that indicators of any kind mean nothing when leaders aren’t willing to act on the information and insights that those indicators are providing.
The real power of all leading indicators (and even lagging indicators) becomes apparent when organizations act upon the information they provide. If organizations, business and HR leaders proactively address issues identified by these signals, they can prevent problems from escalating or even occurring in the first place. Conversely, ignoring these early warning signs can lead to reduced employee satisfaction, increased turnover, lower productivity, and ultimately, a negative impact on the organization's bottom line.
