What to measure in employee performance reviews

Measurements are an object of common managerial proverbs: “you can’t improve, what you can’t measure” and “what gets measured, gets done.” But, when it comes to performance management, some might feel that this philosophy is inadequate. People are so much more than data. And teams have more productive things to do than bury themselves in employee performance metrics.

Yet, teams can’t rely on the ‘feeling’ that they’re doing well. They need tangible data to evaluate that feeling and guide corrective actions. Measuring performance factors can help you know where your team stands.

How should you measure employee performance?

During employee performance reviews, there are three main questions to ask:

• Does this team member produce what they’re supposed to produce? (aka, are they effective?)
• Does this team member use resources well? (aka, are they efficient?)
• Does this team member take actions to improve themselves and their environment? (aka, are they learning and improving?)

There are dozens of factors to measure when trying to answer these three questions. Here are a few important ones to consider:

Are your employees effective?

Productivity & quality

Productivity is one of the most common factors used in performance appraisals. It indicates employees’ output in a specific amount of time. For example, X employee:

• wrote Y blog posts in a month
• produced Y product units in an hour
• made Y sales calls in a week
• answered Y customer support tickets in a day

Those calculations are a good start. But, they don’t tell the whole story. Quality is the most important aspect of performance. To measure quality, you could think of ways to assess how effective each employee’s output is. For example:

• How many of their sales calls resulted in actual sales?
• How many of their customer support complaints were solved?
• What percentage of their blog posts resulted in customer leads?

Also, you can measure quality from a more negative perspective:

• What percentage of their customer complaints were passed on to others to solve?
• What percentage of their sales calls proved unsuccessful?

It’s best to make these performance review calculations regularly. Then, you can share the numbers with your employees and discuss them. This gives employees the chance to improve regularly, rather than once a year.

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Employee performance goals and objectives

Especially when goals are more about quality, ‘management by objectives’ works well. Using this employee performance measurement technique means you should sit down with your team members and set goals. Setting goals through a conversation allows team members to have more of a say in their job, which will make them more likely to give it their all.

Team member goals could be abstract (e.g. improve communication skills) or specific (e.g. achieve certain quotas). Personal goals should always tie into higher organizational goals, so employees know how their work contributes to the entire company. Employees should also know how you monitor their work towards these goals. That way, they’ll have a better understanding of your expectations.

Using a ‘management by objectives’ approach makes assessing team members’ performance a lot easier:

• What percentage of critical objectives did they meet?
• What percentage of main/secondary tasks did they complete?
• What percentage of goals did they abandon/found unattainable?

Answering these questions will give you an accurate measurement of an employee’s performance. These performance measurements will also help you set future goals. Weekly 1:1 meetings with team members are a good way to keep on top of performance goals. They can help teams keep their goals current and ‘catch’ problems early.

How to measure employee effectiveness

Attendance

Measuring attendance doesn’t always make sense. If you’re a results-driven team, counting minutes or sick days might be a waste of time. Measuring attendance makes sense for time- and location-sensitive roles. If you have customer inquiries flooding in, you expect your customer support reps to be available. If they’re not, your response time and customer experience may suffer.

Example attendance measurements are:

• Percentage of days employees checked-in late
• How frequently (and how long) employees are absent
• Percentage of contracted working time lost due to absence (crude absence rate, usually measured for the entire team)

Time management

Time management is a desirable skill in most positions. Employees need to divide their time effectively across their projects. You can measure their time-management skills by calculating the percentage of missed deadlines, turnaround time or how quickly they complete tasks. Tools like Asana, Jira, Podio and Trello can help.

You don’t need to calculate these factors on a monthly performance review basis. Sometimes quarterly or twice a year is enough. But, if you notice a team member working slower than usual, you can do something before they start missing important deadlines.

How to measure employee improvement

Training

Companies usually measure the number of training programs or sessions that employees attended per year. But, it’d be useful to measure the results of those training opportunities during a performance review. Do employees use what they learned? You measure this by comparing their performance rating in one skill before and after relevant training. If an employee’s recent performance metrics are 10% higher than they were previously, it’s a good indication that their training was effective.

Initiative & innovation

Both are difficult performance metrics to measure. Innovation can come in many forms. Employees might demonstrate their innovation in subtle ways (like making small suggestions to improve work processes). Or they may make grander gestures, like suggesting how to restructure a key project. Initiative could range from working without supervision to solving conflicts. Someone who always has fresh and exciting ideas can’t escape your attention. But, it’s also important to track small improvements that everyone on your team makes.

Measuring initiative and innovation doesn’t necessarily need quantifiable data. As a 2011 Harvard Business Review article argues, numbers can’t capture all that matters in employee performance. Sometimes, managers can rely on qualitative data (like examples of cases when their team members took initiative). If managers find their memory lacking, they can ask employees to recount a recent initiative or innovative action they’re proud of.

How to make the most out of employee performance reviews

A 2015 global talent management survey conducted by Willis Towers Watson consultancy firm shows that less than half of employers thought their employee evaluation systems were effective. A small percentage of employers are even thinking of eliminating employee performance reviews, according to the same survey.

So, how do you make the most of performance measurements? Team leaders could try this rubric when dealing with employee performance:

• Measure a small number of important factors. For example, for a customer support team, you could measure one or two quality factors (like what percentage of complaints they solved) and regular attendance. Then, you can measure employee goals three or four times a year.

• Create your own formulas. Companies and teams often have individual needs. For example, Jeff Haden, a contributing editor in Inc., explains how his team had to create an adjusted formula to measure productivity. Their previous formula didn’t allow comparisons between teams to decide which one was doing better.

• Keep company-wide KPIs in mind. For example, if your company claims customer satisfaction KPIs are its first priority, you should measure these metrics on a team level too.

• Revise your measurements. Sometimes, factors you chose to measure prove less valuable than expected. Don’t be afraid to shift away from performance metrics that don’t make sense for your company. For example, imagine that a manager measures the weekly amount of sales calls their team makes as a performance indicator. If they notice that their team focuses on making as many calls as possible without caring about quality, then maybe it’s time to shift towards a more meaningful measurement.

• Communicate results to your team. Your team needs to know what you’re measuring so they can focus on what’s important. They should also know what your intentions are: could their performance review cost them their job (e.g. through forced ranking) or will you use it to help them improve? It’d be best if you used regular measurements as a means to give feedback to employees. Regular ‘informal check-ins’ and employee coaching can have positive business results.

• See performance evaluation as a daily priority. Annual performance reviews are on their way out. Growing teams can opt for frequent feedback: quarterly, monthly or even weekly. Not all factors have to be measured constantly. But, some (e.g. number of customer inquiries that went unanswered) make more sense in the short-term so you can make improvements quickly.

• Try 360-feedback. Often, team leaders need input from other employees to help them assess their team members’ performance. If you choose to track factors like helpfulness and values, feedback from peers can be invaluable.

• Opt for the right tools. There are plenty team collaboration tools that could help you. You could also use complete performance review platforms like PeopleGoal, Small Improvements and Trackstar to monitor goals.

Continually measuring performance can be a tough task but it’s the most effective way to build productive teams.

Frequently asked questions

What are performance metrics for employees?

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.

What are the five key performance indicators for employees?

Key performance indicators might include: timeliness, attention to detail, creativity and innovation, and time management within their given role.

What are good performance metrics?

A good performance metric embodies a strategic objective. It is designed to help the organization monitor whether it is on track to achieve its goals. The sum of all performance metrics in an organization (along with the objectives they support) tells the story of the organization’s strategy.