What are performance metrics for employees?
Employee performance metrics are a form of workforce analytics used to track how well employees are performing. The effective tracking and analysis of employee productivity and efficiency can paint a picture of how well an organization is operating.
The correct analytics may assist HR managers in identifying what is working well, determining whether employee performance is assisting in the accomplishment of corporate goals, and determining whether any areas can be improved to support future growth plans. They can also be a fantastic way to raise employee happiness and morale, which will increase retention, lower turnover, and lower labor expenses.
Related: Types of performance metrics for businesses
Your sector, company size, and overarching business goals will ultimately determine the employee performance indicators you utilize in your organization.
In general, we can divide employee performance measures into four main groups.
- Employee performance metrics for work quality
- Employee performance measures for the quantity of work
- Employee performance metrics for productivity
- Employee performance metrics at the organizational level
Examples of performance metrics for employees
Employee performance metrics for work quality
show how well an employee performs. A manager’s subjective evaluation is the most widely utilized metric.
Goal-oriented management
Using management by objectives is one technique to organize a manager’s subjective evaluation. A management strategy known as “management by objectives” aims to raise an organization’s performance by converting overall objectives into individualized targets. These objectives are frequently established by the employee and the boss.
The employee makes progress toward these objectives and updates the manager on it. Even a certain weight can be accorded to these objectives (several points). Points are given to the employee if these objectives have been completed successfully. Managers can then use this information to make goals more concrete and performance evaluations more data-driven.
Manager subjective evaluation
Employee performance is assessed twice a year during performance reviews in the majority of businesses. Employees are evaluated based on a variety of factors, with the most typical one being the caliber of their job.
Image Source: AIHR Academy
The so-called 9-box grid is an adaptation of this design. The employee’s performance and potential are evaluated using a 9-box grid based on 3*3 tables. Employees that perform well but have limited potential are ideal for their current position.
As they can contribute more value higher up the organizational ladder, employees in the top right corner of the chart those who score highly on both performance and potential are frequently chosen to be promoted swiftly.
This nine-box grid is a practical succession management tool that makes it simple to evaluate the present and future worth of employees (i.e. you want to promote your high potential).
Manufacturing flaws
Objectively assessing (production) quality is challenging. Calculating the number of product faults per individual or per team is a strategy that is frequently utilized by more traditional manufacturing industries. Defects, or improperly made products, are a sign of poor job quality and should be avoided at all costs.
Although improved manufacturing process standardization has rendered this statistic essentially meaningless, the method for gauging employee performance can be used in various contexts.
The volume of errors
The number of input errors could take the place of the aforementioned product flaws. Teams working on software development, for instance, could count defects per a thousand lines of code.
The same holds for the quantity of writing corrections or the number of software defects. A single error, particularly in computer programming, might render an entire program useless. This can have a significant effect on the business, particularly for firms that release new software versions on a weekly or monthly basis.
Another crucial aspect of quality is how succinct the code is. If ten lines of code instead of one hundred can achieve the same computational output, the former shows higher quality.
Employee performance measures for the quantity of work
There are several approaches to measure this employee KPI because quantity is frequently simpler to monitor than quality. Every industry will have its own unique set of measures for measuring quantity. Some jobs are more challenging to quantify or are not a good fit for our approach. For instance, the government will place a bed limit in hospitals in many nations. If this is the case, then the number of patients that doctors and nurses accept cannot be measured. It would be more beneficial to track the number of days people spend in bed, though.
Related: Difference between KPIs and performance metrics
The volume of sales
The quantity of sales makes determining a salesperson’s productivity especially simple. This is particularly valid for “basic sales.” This implies that, for instance, organized street vendors simply control sales volume since, given enough time, the most skilled individuals will generate the most amount of revenue in a given location within an hour. An illustration of an outcome measure is this.
However, when transactions are more complicated (i.e., have a longer sales cycle), the quantity of sales becomes less trustworthy because there are fewer of them and chance/randomness will have a bigger impact on the sale’s success.
Other measures work best for measuring complex sales cycles, such as software solution sales, which can have a sales cycle of up to 1.5 years. These are referred to as “process metrics” because they show the steps that must be taken to raise the likelihood of a sale being successful. For instance, the individual who calls the most potential consumers ultimately has the best chance of making a sale. A more accurate indicator of long-term sales performance in this situation would be the volume of phone calls.
The number of units produced
There are various ways for different sectors to express their quantitative production. A trustworthy quantitative statistic in conventional manufacturing was frequently the number of units produced. The use of comparable metrics is still prevalent in contemporary (service) organizations. To maintain efficiency, for instance, businesses that employ people in data entry positions occasionally track keystrokes per minute.
Monitor the number of lines of code that programmers write (for example, see this Quora topic on “How many lines of code do professional programmers write per hour?”). This is another technique to gauge quantitative production.
An exclusively quantitative production indicator has some clear drawbacks. Like in the preceding illustration, such an output metric should only be used when one’s output is relatively simple and uncomplicated.
A good example would be how many Rubik’s Cubes one can solve in an hour; experts may solve more than a hundred in a single sitting.
Note: Once you have chosen your pertinent metrics, be sure to include them in your HR report or a tactical HR dashboard.
Handling times, call quality, first-call resolution, etc.
One of the places where employee performance measurements are most important is in contact centers. Average handling time the amount of time the customer spends on the phone on average, including any time they are placed on hold and first call resolution the proportion of callers whose issues are resolved on the first call are examples of employee KPI metrics.
Other metrics include service level, which measures how many calls are handled in how long (for example, 90% of calls are answered in 25 seconds), and contact quality, which is the evaluation a customer can provide on the call. In this blog, you may find a detailed explanation of the performance indicators for contact center employees.
In a piece titled “5 Performance Appraisal Methods,” published by Advance Systems, they further examine a few of these indicators.
Employee performance metrics for productivity
Both qualitative and quantitative employee performance measurements have the drawback of being largely silent on their own. A programmer produces a lot of code when they write 40 lines an hour, but that does not indicate the caliber of the code.
A balance between quantity and quality is always desirable. This equilibrium is assessed using the 16. work efficiency metric, which takes into account the resources (such as time and money: quantity) required to generate a particular output (quality).
This balance is challenging to establish, which is one of the reasons so many businesses have difficulty grading individuals and with the performance review process in general.
Because of this, organizations like Deloitte, GE, and Adobe eliminated performance reviews.
Related article: Types of performance metrics for employees
But reliable performance information will aid firms in forecasting future performance.
Employee performance metrics at the organizational level
Employee performance indicators can be used by organizations to evaluate their own competitiveness. Instead of focusing on specific employees, these indicators are typically used to evaluate the effectiveness of a workforce as a whole.
Employee revenue
Total revenue / FTE equals revenue per FTE
This feature figures out the revenue per FTE (full-time equivalent). This measure provides a rough idea of how much money each employee makes. The ranking is worse when there are numerous employees and little revenue than when there are fewer employees and high revenue. Additionally, this metric can be used to benchmark businesses.
Revenue per FTE
Total profit / FTE equals profit per FTE
Similar to the preceding metric (17), profit per FTE places more emphasis on profit than revenue.Profit for a business is equal to all revenue less all costs. A reliable indicator of an organization’s financial soundness is a high profit per employee.
Return on Human Capital
An employee KPI statistic that measures the value of human capital is the human capital ROI (i.e. knowledge, habits, and social and personal attributes). You can compute a human capital ROI by taking the company’s revenue (less operating costs and compensation and benefit costs) and dividing it by the total compensation and benefit costs paid to its employees.
Absenteeism Rate
Performance and absenteeism have a strong relationship. According to Gallup, highly motivated and engaged workers typically take fewer sick days (up to 37% fewer). Employees who miss work are also less productive and have higher
Additionally, unproductive personnel who miss work are a major sign of poor organizational performance, as are excessive absenteeism rates across the board.
Related article: Types of performance metrics to track
Overtime per Employee
Overtime hours total / FTE equals overtime per FTE
One last measure of employee performance is the average overtime per FTE. Even though employers may use overtime to motivate personnel, overall performance is likely to decrease if employees get overworked. This in turn is probably going to impair retention and lower morale.
It is impossible to capture performance in one single employee performance metric. The best key performance indicators for employees combine qualitative and quantitative metrics.