All companies struggle with the issue of measuring employee performance. A manager faces this dilemma first hand and struggles with finding the best way to evaluate employee performance.
In all honesty, there is no perfect way to evaluate employee performance. There are several HR frameworks such as annual performance reviews that have been there for several years now.
However, there has been a shift in the trend. many modern companies are now using unconventional employee performance metrics to evaluate employee performance. This is because they have now understood that employees bring several intangible benefits to the table such as leadership and mentorship that cannot be quantified easily. Therefore, using a purely data-driven approach is not advisable.
Using inappropriate performance metrics can impact employee performance and motivation drastically thereby affecting an organization’s performance. So to avoid that, managers must have the right employee performance metrics. Evaluating them on those will empower them to understand their performance better and take the necessary corrective actions.
What Are Performance Metrics?
Performance metrics are KPIs that benchmark and measure employee performance. These values provide insights to employees on their contribution and goal achievement in the organization.
Some performance metrics are quantifiable such as measuring the number of units produced whereas in some cases, they cannot be easily quantified. For example, if a job role has more to do with soft skills such as listening or coaching, then getting quantifiable results can be a challenge.
However, it is still worthwhile to capture these intangible contributions because they impact an organization in a great way. Let’s move on to learning some of the benefits of tracking performance metrics.
Benefits of Tracking Performance Metrics
Keeping a track of performance metrics helps you determine how your staff is doing at work. When employees are able to achieve their performance targets, it improves the overall health of the company.
When employees are unable to do so, performance metrics help managers and leaders make strategic decisions on how to improve the situation. For instance, a company that solely relies on a sales team to generate revenue will have to check with the team and evaluate metrics like sales calls/day or the number of sales/day. These metrics will help the management analyze the situation and recommend a course of action.
There are several other advantages that performance metrics deliver. let’s have a look at a few:
Performance metrics define employer expectations.
Everybody at job wants to perform well. But how to do that? Well, performance metrics help employees understand what to strive for and how to achieve their goals. Moreover, it sets a bar for motivated employees to surpass expectations.
With no performance evaluators, there can be a great deal of miscommunication in the workplace. Consequently, employees fail to meet their performance targets. Therefore, make sure employees are well aware of what the business expects them to do so that they can make a conscious effort to achieve their targets.
A common problem that companies face is dealing with employee turnover. It is painful for the company for the following reasons:
- It comes at a great cost. Hiring employees is expensive in terms of the employee’s compensation and the time and effort that HR puts in to fill the void.
- Training the new hire is costly as well as time-consuming. It takes time for the new hire to be brought up to speed and to match the productivity of the former employee.
- The departure of an employee increases the workload of the existing employees.
So what can performance metrics do to minimize these problems?
As mentioned earlier, metrics set expectations. Employees can gauge how and where are they performing well and what areas need improvement. it reduces their chances of quitting.
However, a lack of metrics in employee performance makes employees perceive ratings, appraisals, and increased compensations as arbitrary. As a consequence, they lose their morale and quit.
Establishing clear metrics is one of the steps managers can take to reduce turnover.
Performance metrics are indicators of an employee’s success at the job. They set the bar, telling employees to work their way up to them. However, a lack of metrics can lead to complacency and miscommunication.
For example, if a team member isn’t performing well, the manager cannot do much due to ambiguity. Similarly, another employee might think that they are doing well whereas, in reality, their performance may be average.
So how do metrics improve performance?
As mentioned before, metrics are key performance indicators. Having them gives employees a clear idea of what to achieve and managers of what to evaluate.
So if an employee is underperforming, managers know what metrics to focus on and analyze. As a result, both the manager and employee can work collaboratively to rectifying the problem. The manager can provide additional training or other methods of support to help the employee scale up.
10 Employee Performance Metrics Managers Must Track
Efficiency should be a priority for employees. This requires them to have a good sense of time management and resource utilization. They should be able to monitor missed deadlines and how well a certain task was executed. But what is efficiency?
In simple terms, it is the output that you get after putting in a certain amount of input that contributes to the overall success of a business.
Here is how you can measure an employee’s efficiency. For instance:
- Choose the number of tasks completed
- Measure the number of tasks completed during a period of one month.
- Measure the output against the average figure of the workplace. The average of the workplace is the benchmark to measure.
- Evaluate an employee’s input which is the number of hours an employee puts in.
- Divide the output by the input to get the efficiency figure
Remember, efficiency is a key indicator that reveals whether an employee is meeting expectations or not.
When measuring efficiency, remember to evaluate the following as well:
- The job description
- The nature of work
- Amount of work assigned
- Deadline for completing tasks
- Quality of work done
With this information, it will be easier to implement strategies to improve efficiency.
Why Is It Important to Measure Efficiency?
Below are the benefits of having efficiency as a performance metric:
- Efficiency pinpoints areas where improvement is required
- Allows the organization to make adjustments to business functions or employee’s performance
- Adjustments, no matter how big or small can improve the bottom line of a business.
- Efficiency can be integrated into employee’s performance, performance plans, and personal goals
Quantity is a KPI that is easier to measure than quality and can be measured in several ways. However, the metrics used to measure quantity vary from industry to industry. Let’s have a look at some of the metrics used to quantify employee performance.
Number of Sales
This metric works best for a sales employee’s output. This specifically holds true with simple sales, where depending on an employee’s skill, you can determine how much will they sell in a given time and location.
However, the process isn’t as simple for sales with longer cycles. With complex sales cycles, the number of sales doesn’t really do the job because factors like frequency or luck will come into play.
Complex sales cycles such as the sale of an HR software solution for example AttendanceBot can be measured using other metrics. For example, the number of demos given in a month.
Number of Units Produced
Quantitative output can be expressed in a number of ways. The number of units produced is a reliable metric used in traditional manufacturing and is still being used in modern organizations.
Another metric to measure quantitative production is the number of codes of lines that a programmer can produce.
Although these metrics are simple and easy to measure, they cannot be used to measure output that is complex.
Handling Time, First-Call Resolution, and Contact Quality
These metrics are mostly used in the customer service centers to gauge sales made or problems resolved. If you’re dealing with a customer on call, the average handling time is the time a customer is on the phone including when they are on hold. First-call resolution is the number of calls in which the problem was resolved the first time the customer called.
Contact quality is the measure of ratings a customer gives on a call. Other metrics include service quality which measures the number of calls answered in a given time. For example, answering 90% of the calls in 30 seconds.
Teamwork is an important performance metric in most organizations now. It is important to foster teamwork in culture and is fairly important when employees have to work in groups and solve complex problems. Some of the traits that best describe a team player are:
- Reaching out to other peers for assistance
- Brainstorming with a co-worker
- Helping out other team members, mentoring, and explaining tasks to them
- Stepping forward for complex projects
Teamwork can be measured by:
- Pulse surveys
- Measure the impact of large and small events
- Allows employees to self-report events
- Number of projects assigned
- Projects employees volunteer for
To stay up to date with industry trends, employees are evaluated based on their ability to adapt and learn. Listed below are a few metrics that can be used to measure the learning ability of an employee:
To evaluate an employee’s ability to learn, they can be encouraged to take on some online training programs. You can keep track of the following:
- Do they complete the course?
- How well do they engage with the course?
Low completion rates signify that employees are not so serious about learning from a training program. High completion rates, on the contrary, reveal that employees are invested in the course and know that the stakes are high.
Learner Performance and Progress
This metric gives detailed information of an individual’s performance- their score on a task and whether they completed a certain certification. Other details include key takeaways from the training and whether the employee implemented the learnings in their work.
An employee’s skills before and after the training can be evaluated with the following:
- Written exams
- Real or simulated tasks
- Online quizzes
Organization Level Performance Metrics
Metrics under this category are used to evaluate the efficiency of the entire workforce and not just individual employees.
Absenteeism and performance are correlated to each other. Motivated and engaged employees tend to take fewer days off. On the contrary, employees with low morale and motivation take more sick days consequently reducing an organization’s output and performance.
Overtime per Employee
This is another performance metric and is calculated as:
Overtime per FTE (full-time equivalent)= Total hours of overtime/ FTE
Although some companies may encourage employees to work overtime, it may not prove to be fruitful in the long run. Overworked employees are exhausted and frustrated which impacts their output. Consequently, they suffer from lower morale and high absenteeism.
Employees Setting Their Own KPIs
another important factor to measure an employee’s performance is to see if they set their own KPIs. This determines how invested they are in their work. It also demonstrates their keenness to achieve their targets and goals. By setting their own KPIs, employees feel more motivated and committed to their work. It also represents that they consider themselves accountable for their work.
Time to Set Performance Metrics for Your Employees
Everything boils down to one key aspect-there is no one metric that rules others out. Metrics have to be a combination of qualitative and quantitative because employees are human beings and their worth cannot be just measured against any one metric.
Another important point is that an employee’s performance should be reviewed by multiple people to ensure accuracy and honesty.
Now that you have read this article, you can start making a combination of metrics that suit your employees and their role the best.