Measuring employee performance is one of the most important parts of HR but it’s also one of the most challenging. There is no one size fits all approach as what matters most in each industry and each business can vary significantly. Additionally, there can be a lot of subjective aspects to assessing employee performance that can be hard to quantify. This can make it a long process and difficult to compare performance fairly across teams and the business as a whole.
Fortunately, there are some general employee performance measurement metrics that help you better measure employee performance. Used in combination with qualitative performance reviews, you can get a more accurate and comparative picture of performance.
We’ve split these employee performance measurement metrics into the following four distinct sections that are usually associated with employee performance:
Quality of work is usually the most difficult to measure and is supported the most by appraisals and reviews from managers. You can find out more about employee appraisals and how to do them properly here, but there are some other standard formats and metrics to be aware of that can help you measure the quality of work.
These feedback formats are becoming extremely popular as they can provide a more holistic and therefore accurate idea of employee performance. A 360-degree approach involves gathering feedback and appraisals from managers, colleagues, subordinates, and customers while a 180-degree format is for employees that might not have subordinates or customers and can therefore only have manager and colleague feedback.
What is considered an error will vary from business to business but there is usually something that can be measured for this metric. It might be product or manufacturing defects or else customer complaints. Whatever you decide is right for your business, looking at the total number for each employee benchmarked against the average can be an immediate indicator of which employees struggle with the quality or who is performing well.
Net Promoter Score or NPS is a favorite for companies where employees deal with customers such as in customer service or sales. It is a number usually between 1 and 10 that represents the willingness of the customer to recommend the service to someone else or another potential customer. Customers are asked at the end of their service to indicate their response. This isn’t the most accurate metric as employees can instruct customers to mark a certain score or customers may not take the time to think about an accurate response. Still, both of these scenarios still mean that NPS is a good indicator of underperforming employees with low scores.
Quantity of work is fortunately much easier to measure and quantify but be warned. Overall quantity is not the most important area to measure and while it’s important to make sure that there aren’t any employees struggling in this area, quality should win out every time.
Again, the quantity will vary depending on your business. You will need to look at what it is you’re producing and what is important to measure. If it’s manufacturing, then the number of units or products produced per employee will be your quantity metric. For call centres or customer service, it might be the number of calls answered or the number of tickets resolved in a given time period. Other roles may just be the number of projects completed or leads closed. It might also be that overall volume of active tasks or projects is the right indicator of the quantity of your work, so this metric should be measured.
This is where the really important metrics come in. While quality should always outweigh quantity, overall efficiency is usually the best sign of how well an employee is performing. Efficiency is what amount you get out for a certain amount you put in and has a much stronger impact on overall business success. Here’s a step by step for looking at overall efficiency per employee.
* Choose the output or quantity – for example, the number of tasks completed.
* Select a time period to measure – for example during a working week.
* Measure the amount of output over your given time period – looking at the average for your workplace
provides a benchmark.
* The input value is usually the time the employee put in to get this output, for example, the number of hours.
* Divide the output by the input to get a per-hour figure
You can assign a value to measure the cost-benefit ratio and compare this figure across your organisation to look at efficiency for each employee.
You can also use some of these other metrics as an indicator of efficiency.
The number of overtime hours per employee used to be considered a good thing as employees were working longer. Today, overtime hours are associated more with additional overheads and a high number of overtime hours doesn’t automatically mean an employee is working harder. Using the efficiency equation above in combination with overtime hours can highlight those employees that are using more time than others to get the same amount of work done and therefore not working as efficiently.
As well as looking at overall errors to judge quality, frequent errors can be an indication of ongoing problems and therefore ongoing inefficiency.
This also varies from business to business. Turnaround time might be the time it takes to close a lead or finish a project. Whatever the case for your business, longer an average turnaround time can be an indicator that while an employee is getting the work completed, they aren’t doing so as efficiently are their colleagues.
Finally, don’t forget to take a look at the overall performance so you can review the business as a whole and compare individual performance to the big picture. Overall performance is best measured by revenue and profit per employee, so you can see exactly how much each employee is worth to you currently. This metric is best-used overtime or with set goals, so you can see how improvements within your HR initiatives affect how productive and efficient your employees are.
Attendance and absenteeism is also a good indicator of how your employees are performing overall. High absenteeism is a strong indication that your workforce lacks motivation and productivity will suffer as a result. If your metrics are underperforming here, then you should take a look at your overall employee experience.
However, you choose to measure employee performance, don’t forget that it should be personal to be effective. Combine qualitative and quantitative measurements and have managers work closely with employees to set goals and go over performance regularly. Yearly appraisals are no longer enough to give employees the resources and support they need to perform well.
With the above key employee performance measurement metrics, companies can improve productivity and profitability and align with the overall business strategies. By adopting a superior performance management plan such as SuccessFactors Performance and Goals can enable tracking across metrics and develop employees with consistent feedback and coaching. Contact us today to find out more or book your free demo of the SuccessFactors HCM Suite.