KPIs for Different Roles and Ways to

Measure Them Quantitatively

1. KPIs for HR:

 Turnover Rate: Turnover refers to the percentage of employees that have left
over a certain period of time. Having a high turnover rate is tough on company
culture and usually leads to a less motivated and productive workforce. While it
can vary by industry, turnover rate should stay below 10%.

Turnover rate can be measured using the formula below:

Turnover rate (%) = (Number of Leavers/Avg. Number of Employees) x 100

If the turnover rate is high, we may want to make sure that we’re providing fair
compensation, a good work environment, and a healthy company culture.

 Retention of Talent: Retention of talent is closely related to the turnover rate.

However, rather than measuring the number of employees who left, this KPI
measures the number of employees who stayed, or were retained by the
organization. Understanding the average employee retention rate in an
organization is important for workforce planning, recruitment, and overall
business strategy. Like turnover rate, retention rates may provide insight into
other factors such as the remuneration rate or the labor climate. When talent
leaves, HR spends valuable time and resources recruiting to fill the position.

Further, the lost productivity from a position that is left open can have serious effects on
the business’s bottom line. High staff turnover implies high costs for the employer.

The retention rate can be measured using the below formula:

(Remaining headcount during  a set period ÷ Headcount at the start of the period)
x 100

 Absenteeism: Measure the absence rate of employees due to delays, sick leave,
or excused or unexcused absences. This indicator can help plan for future
absences or adjust the business strategy to prevent them.

HR managers can calculate the key HR KPI by calculating the average value of the
hours worked. This will show the impact of absenteeism on the company’s costs. Once
the cost of absenteeism is apparent, it will be easier to create a budget for a
preventative strategy.

The absenteeism rate in the organization is usually calculated by dividing the number of
working days in which the employee was absent by their total number of working days.
The total cost of absence is calculated by including employee pay, the cost of managing
absence, and replacement cost.

 Percentage of Workforce Cost; This KPI, although not often employed, could be
used for cost reduction purposes or to help improve automation/robotization in an
organization. This is a metric that takes the cost of the workforce and divides it by
the total cost faced by the organization.
 Quality of Hire: The quality of hire is the percentage of new hires that are given a
good rating by their manager during their performance review. Quality of hire
indicates how effective HR is in recruiting and selecting candidates. Consistently
maintaining a high quality of hire rating enables the organization to reach its
strategic goals. This indicator can be calculated as follows:
Quality of Hire = (Average job performance of new hires + Percentage of new
hires reaching acceptable productivity within a determined period + Retention
rate after a year)/3 (Or number of indicators)

2. KPIs for Marketers:

 Customer Acquisition Cost: Customer acquisition cost (CAC) looks at the total
sales and marketing spend needed to gain a new customer. This includes all
program and marketing costs, salaries, commissions, technology, software, and
any overhead associated with a lead becoming a customer. This indicator can be
measured using the following formula:
Customer Acquisition Cost = (Total Marketing Expenses + Total Sales
Expenses)/Number of New Customers acquired
 Customer Lifetime Value: Customer lifetime value is how much revenue a
business can reasonably expect over the average lifespan of a single
customer. This can be measured using the following formula:
Customer Lifetime Value (LTV) = Average Sale Per Customer * Average Number of
Times a Customer Buys Per Year * Average Lifetime of a Customer (years of months).

 Marketing ROI (Return on Investment): Every company wants to see a return on

its marketing investment. Calculating ROI is crucial in assessing the monthly
and annual performance. Equally important is the ability to plan strategies and
budgets for upcoming planning periods. This can be measured using the following
formula:
Marketing ROI = (Sales Growth – Marketing Investment)/Marketing Investment

 Social Media Engagement Rate: A major role in marketing is social media. One
of the main KPIs for social media is engagement. Likes, shares, comments,
messages, tags, or mentions could be tracked. Any way that a customer or lead
is interacting with us, can be counted as engagement. This can be measured as
follows:
Average Engagement Rate Percent = Total Likes, Comments & Shares/Total
Followers * 100
 Customer Retention Rate: Customer retention is a great KPI to track for
marketers because we can use the information in our messaging for our
marketing campaigns. Additionally, this metric helps us better understand our
customers, so we can market to them better. This can be measured using the
following formula:
Customer Retention Rate = [(Number of Customers at the End of the Time Period –
Newly Acquired Customers) / Customers at the Beginning of the Time Period] * 100
3. KPIs for Project Management:
 Cost Performance Index (CPI): The cost performance index (CPI) measures
financial management efficiency in a project. CPI fluctuates throughout a
project’s lifespan because of variable expenses like wages and prices of inputs.
Using CPI metrics, project managers can make decisions that influence the
delivery of projects within the budget.
CPI = Earned value (EV) / Actual costs (AC) 
where; EV = budgeted cost of work completed; AC = actual expenses incurred
 Budget Variance: Budget variance (BV) is done periodically to measure the
difference between the estimated expenses (earned value) and actual figures.
Also known as cost variance (CV), it is used to track expense items within project
activities, helping the manager decide how best to allocate the remaining
resources for optimal performance. Budget variance is calculated as
follows: BV/CV = Earned value (EV) – Actual value (AV)
 Profitability: Determining the profitability of a project is not an easy task, but
project managers need to calculate the returns to decide whether a project is
viable to the business. It allows them to drop unproductive ventures, steer away
from loss-making activities, and get more profitable clients. Profitability is
generally calculated as follows:
Profitability = Billable amount – Total costs
where;
Billable amount = (Billable hours X Billable rate) + Billable expenses
 Total cost = (Hours spent on project X Labor rate) + All expenses
Profitability has the following implications:
Balance > 0 = Profit
Balance = 0 = Break-even
Balance < 0 = Loss
 Planned Value: Planned value (PV) is a core component of the cost
management plan, and it aims to assign a baseline monetary performance
against identified milestones in a project. The planned value should be
calculated before the work begins, as it will be needed to compute the
schedule variance and the schedule performance index.  PV is calculated
using the following formula:
PV = Budget at completion (BAC) * Planned percentage complete
 Billable Utilization: Billable utilization is the ratio of available hours against the
hours billable to the client. It measures the time spent on generating revenue
and pits it against the expected revenue, so project managers have a way of
measuring performance during task execution. The project manager can set
baselines to control utilization. While profitable to the business, maximum
utilization could lead to employee burnout, and minimum utilization would
make it harder to stay profitable. This is calculated as follows:
Billable utilization = (Number of billable hours / Number of available hours) * 100%
4. KPIs for Procurement:

 Supplier Defect Rate: Supplier defect rate is used to evaluate a supplier’s individual

quality. Measuring supplier defect rates and breaking them down based on the

defect type will offer actionable insights into a supplier’s trustworthiness. Supplier

defect rates are usually measured in defects per million.

Supplier defect rate= Number of substandard products/Total number of units tested

 Supplier Lead Time: Supplier lead time is the amount of time that elapses between

the time a supplier receives an order and the time when the order is shipped. This

KPI is often measured in days. Vendor lead time starts with availability confirmation

and ordering and ends with the delivery of goods.

Supplier lead time = Delivery time (Goods and receipts delivery) – Order time (PO acceptance)

 Vendor Availability: Vendor availability is used to measure a vendor’s capacity to

respond to emergency demands. This procurement KPI helps organizations
determine the degree of reliability they can place on a vendor. Vendor availability (%)
is measured by the ratio of the number of items available on a vendor’s side to the
number of orders placed with the supplier.

 Spend Under Management: Spend under management is the percentage of

procurement spend that is regulated or controlled by the management. As an

organization’s spend under management rises up, its ability to optimize cost and

forecast expense increases with it.

SUM = Total approved spend (i.e., direct, indirect, and service-related cost ) – Management

spend

 Procurement ROI: Procurement ROI is used to determine the profitability and cost-

effectiveness of the procurement investment. This metric is best suited for internal

analysis.

Procurement ROI = Annual cost savings / Annual procurement cost

5. KPIs for Supply Chain Managers:

 Perfect Order: Easily the most important metric for measuring the effectiveness
of a supply chain, the perfect order KPI is a compound of several important
metrics that gives us insight into several areas of our order fulfillment process. It
can also help us track our storage and delivery operations, manage costs, and
gauge customer satisfaction. The formula for measuring the perfect order KPI is:

((Total Number of Orders – Number of Error Orders) / Total Number of Orders) *

100

Where number of error orders refers to the key component (on-time, in-full, damage-

free, or accurate documentation delivery), you’re measuring.
  Customer Order Cycle Time: Customer order cycle time gives us important
insights related to product service and supply chain responsiveness. It depicts
the period between the moment a purchase order is received from the customer
and the moment the order is successfully delivered to the customer. Here is the
formula for calculating the customer order cycle time:

Actual Delivery Date – Purchase Order Creation Date

 Fill Rate: Fill rate is one of the most crucial supply chain KPIs we can use to
monitor the order fill and line fill rates. It’s represented as a percentage of
packages or SKUs successfully shipped on the first attempt. The formula for
calculating the fill rate of a supply chain is:

((Total Number of Items – Number of Shipped Items) / Total Number of Items) *

100

 Inventory Days of Supply: Inventory days of supply represent the number of days
our inventory can sustain without restocking. This supply chain KPI helps us
track the amount of inventory in our warehouse so we can replenish it just in time
before demand gets high or in case of a stock-related catastrophe – while saving
our reputation and investments. Here’s how to calculate inventory days of supply:

Inventory on Hand / Average Daily Usage of Inventory

 Freight Bill Accuracy: Shipping our inventory items from factory to warehouse (or
from warehouse to the customer) is integral to smooth logistics operations, and a
slight error can harm our business’ reputation and cash flows. Here’s the formula
for calculating freight bill accuracy:

(Number of Correct Freight Bills / Total Freight Bills) * 100

6. KPIs for Finance Department:

 Net Present Value (NPV): This financial metric is used on a project-by-project
basis to determine if an endeavor will be profitable. To do this, reconcile future
cashflows over a period of time as a present value. This is a perfect example of a
KPI for the finance department.
Net Present Value = Today’s Value of Expected Cash Flows – Today’s Value of
Invested Cash
 Future Value (FV): The future value financial KPI is also commonly used by
finance departments when evaluating the value of prospective projects or
endeavors. To do so, this financial performance indicator uses an assumed rate
of return to estimate the value of an investment at a future date.
Future Value = Present Value * (1 + Interest Rate) Time
 Payback Period: This is a good KPI for the finance team. The payback period
metric is best used on a project-by-project basis to determine the amount of time
it takes an investment to pay for itself. This helps the finance department assess
which projects seem the most promising.
Payback Period = Initial Capital Cost for Project / Annual Savings or Earnings from
Project

 Total Debt-to-Asset Ratio: As the name implies, this financial KPI measures the
total amount of debt a company has and compares it to the company’s assets.
This is a ratio that is better kept on the lower side. If the ratio is too high, a
company may have difficulties acquiring future loans, as it shows that they have
a higher chance of defaulting on their obligations. At the same time, all
companies should make use of at least a little bit of debt to help fund expansion.

Total-Debt-to-Asset = (Short-Term Debt + Long-Term Debt) / Total Assets

 Interest Coverage Ratio: When money is borrowed from anyone, the minimum
amount that must be paid is the interest. Is a company in a good position to do
that? This KPI indicator for the finance department measures a company’s ability
to cover its interest expense with its earnings before interest and taxes (EBIT).
Interest Coverage = EBIT / Interest Expense