21 Employee Performance Metrics
Employee performance metrics are key to tracking how well employees are carrying out their job. HR must have methods to measure the productivity and efficiency of employees. Tracking employee performance metrics benefits both the organization and the employee. We’ve listed 21 key performance indicators for employees that you should track, with examples.
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Generally speaking, we can split employee performance metrics into four core categories.
- Work quality metrics
- Work quantity metrics
- Work efficiency metrics
- Organizational performance metrics
Work quality employee performance metrics
Work quality metrics reflect on the quality of an employee’s performance. The most commonly used metric is a subjective appraisal by their direct manager.
1. Management by objectives
A way to structure the subjective appraisal of a manager is to use management by objectives. Management by objectives is a management model aimed at improving the performance of an organization by translating organizational goals into specific individual goals. These goals often take the form of objectives that are set by the employee and the manager.
The employee works towards these goals and reports back to the manager on their progress. These goals can even be given a certain weight (a number of points). Upon successful completion of these goals, points are awarded to the employee. In turn, managers are able to make goals more tangible and make performance reviews more data-driven.
2. Subjective appraisal by manager
In most companies, employee performance evaluation happens twice a year in performance reviews. Employees are assessed on several criteria, the quality of their work being the most common.
An adaption of this scheme is the so-called 9-box grid. The 9-box grid is based on a 3×3 table in which the employee is assessed on performance and potential. Employees with high performance but low potential are perfect for their current function.
Employees in the top right corner, those who score high on both performance and potential, are often designated to quickly advance through the organizational ranks as they can add more value higher up the ladder.
This 9-box grid is an easy way to assess the current and future value of employees and is a helpful tool for succession management (i.e., you want to promote your high potential).
3. Product defects
It is tricky to measure (production) quality objectively. An approach often used by more traditional manufacturing industries would be to calculate the number of product defects per employee or per team. Defects, or incorrectly produced products, are an indication of low work quality and should be kept as minimal as possible.
Even though increased standardization of production processes has rendered this metric almost useless, the approach to measuring employee performance can be applied to other areas, such as the example below.
4. Number of errors
The number of input errors could act as an alternative to the previously mentioned product defects. For example, software development teams could measure errors per thousand lines of code.
The same goes for the number of corrections in written work or the number of bugs in software code. Especially in computer programming, a single error can stop an entire program from working. This can have a major impact on the business, especially for companies who release weekly or monthly new software versions.
The conciseness of a piece of code is another important quality factor. If ten lines of code can produce the same computational result as 100 lines of code, the former is an indication of better quality.
5. Net promoter score
Net promoter score (NPS) can act as an indicator of employee performance. NPS is a number (usually between 1 and 10) that represents the willingness of a client to recommend a company’s service to other potential clients. Clients who score a 9 or 10 are likely to be highly satisfied and will act as promoters for the company. This score is used regularly to assess sales employees, e.g., in car sales, where it is included in the final form customers need to sign.
The advantage of NPS is its simplicity. The disadvantage is that it is not uncommon for employees to instruct customers to give a certain rating (i.e., 9 or 10).
6. 360-degree feedback
360-degree feedback is another tool to measure employee performance. To assess an employee’s score, his peers, subordinates, customers, and managers are asked to provide feedback on specific topics. This feedback often represents an accurate and multi-perspective view of an employee’s performance, skill level, and points of improvement.
7. 180-degree feedback
180-degree feedback is a simpler version of the 360-degree feedback tool. In the 180-degree feedback system, only the employee’s direct colleagues and manager provide feedback. The system is therefore often used by workers who do not manage people and/or do not have direct customer contact.
8. Forced ranking
Forced ranking (also called the vitality curve) is a way of ranking employees by asking managers to make a list of their best to their worst employees, in that order. This way, all the firm’s employees are compared with each other and evaluated on their performance. Each ranking is aimed at improving the workforce. The bottom 10% of the workforce can be fired and replaced by the top applicants from the company’s talent pool, a practice that is claimed to lead to a significant improvement in workforce potential.
However, there has been a lot of criticism of this “rank and yank” approach, and most companies stopped the practice, including General Electric, whose then-CEO Jack Welch popularized the practice.
Work quantity employee performance metrics
As quantity is often easier to measure than quality, there are multiple ways to measure this employee KPI. The metrics used to judge quantity will vary between industries. Some jobs are more difficult to quantify or not well suited for this method. For example, in many countries hospitals will have a cap on beds, set by the government. If so, doctors and nurses cannot be quantified for how many patients they permit. However, measuring how many days patients spend in beds would be more useful.
9. Number of sales
The number of sales is a particularly easy way to pinpoint a sales employee’s output. This holds especially true with ‘simple sales’. This means that, for example, organized street vendors only steer on the number of sales because, when given sufficient time, the people with the best skills will sell the most in an hour in the same location. This is an example of an outcome metric.
Related: Read more about HR metrics
However, when sales are more complex (i.e., a longer sales cycle), the number of sales becomes less reliable because lower frequency and randomness/luck will play a larger role in the successful outcome of the sale.
Complex sales cycles, like software solution sales (which can have a sales cycle of up to 1.5 years), are best measured by other metrics. These are so-called process metrics, as they represent the actions one needs to do to increase the chance of a successful sale. For example, the person who calls the most customers has, in the end, the best shot at making a successful sale. In this case, the number of phone calls would be a more reliable metric of long-term sales success.
Employee performance metrics like this include 10. The number of (potential) client contacts one has is 11. the number of phone calls one makes, 12. the number of company visits, 13. the number of active leads, et cetera.
14. Number of units produced
Different industries have different ways to express their quantitative output. In traditional manufacturing, the number of units produced was often a reliable quantitative metric. In modern (service) organizations, similar metrics are still being used. For example, companies with employees in data entry roles sometimes monitor keystrokes per minute to ensure efficiency.
Another way to measure quantitative production is to track the number of lines of code that programmers produce (check, for example, this Quora question/discussion on “how many lines of code do professional programmers write per hour?”).
There are some obvious disadvantages to using a purely quantitative metric of production. Like in the previous example, only when one’s output is very simple and straightforward should such an output metric be used. An example would be the number of Rubik’s Cubes one can solve in an hour, as skilled Rubik’s Cubes solvers can solve over a hundred per hour.
As a side note, when you have selected your relevant metrics, make sure to include them in a tactical HR dashboard or in your HR report.
15. Handling time, first-call resolution, contact quality, etc.
Contact centers are one of the most employee performance metrics-driven places. Employee KPI metrics include average handling time, which is the average time the customer is on the phone, including when they are on hold, and first-call resolution, which is the number of callers whose problem is resolved the first time they called.
Others include contact quality, which is the rating a customer can give on the call, and service level, which is a measure of how many calls are answered at what time (e.g., 90% of calls are answered in 25 seconds). Check for a full overview of contact center employee performance metrics in this blog.
Advance Systems published an article on 5 performance appraisal methods in which they explore some of these metrics further.
Work efficiency employee performance metrics
The difficulty of both qualitative and quantitative employee performance metrics is that they do not say much on their own. When a programmer writes 40 lines of code an hour, they produce a lot of code, but that says nothing about the code’s quality.
There should always be a balance between quantity and quality. This balance is measured in 16. work efficiency, as this metric considers the resources (e.g., time and money: quantity) needed to produce a certain output (quality).
It is hard to achieve this balance, which is one of the reasons a lot of companies struggle with rating employees and with the performance review practice itself. Companies like Deloitte, GE, and Adobe scrapped performance reviews mainly because of this reason.
However, solid performance data will help organizations to predict future performance.
Organization level employee performance metrics
Organizations can also use employee performance metrics to assess their own competitiveness. These metrics are generally used to assess the efficiency of an entire workforce as opposed to individual employees.
Revenue per FTE = Total revenue / FTE
This function calculates the revenue per FTE (full-time equivalent). This metric gives a ballpark estimate of how much an individual employee brings in. Low revenue and many employees give a lower rating than the combination of high revenue and fewer employees. This metric can also be used to benchmark companies. A famous example is the following infographic by Expert Market:
In his book Exponential Organizations, Salim Ismail often refers to this metric. According to him, linear organizations have a linear function of employees and profit, while exponential organizations have an exponential function of employees and profit. That’s one of the reasons why these organizations grow much faster.
18. Profit per FTE
Profit per FTE = Total profit / FTE
Profit per FTE is a similar metric to the previous one (17) but focuses on profit instead of revenue. A company’s profit is its total revenue minus expenses. A high profit per employee is a solid metric of an organization’s financial healthiness.
19. Human Capital ROI
The human capital ROI is an employee KPI metric that assesses the value of human capital (i.e. knowledge, habits, and social and personal attributes). By calculating the company’s revenue (minus operating expenses and compensation and benefit cost) and dividing this number by the total compensation and benefit cost that the company pays its employees, you can calculate a human capital ROI.
This approach is popularized by Jac Fitz-enz in his book The ROI of Human Capital. However, his approach to measuring human capital is far from reliable and subject to major changes (we at AIHR studied his book and tried to calculate the ROI metrics for a number of major companies in the Netherlands. The results were disappointing, as the metrics fail to take important factors into account, like layoffs, incidental cost, and other non-recurring events).
20. Absenteeism Rate
Absenteeism and performance are two highly correlated constructs. Highly motivated and engaged employees take in general fewer sick days (up to 37% less, according to Gallup). Additionally, absent employees are less productive and high absenteeism rates throughout an organization is a key indicator of lower organizational performance.
21. Overtime per Employee
Overtime per FTE = Total hours of overtime / FTE
The average overtime per FTE is a final employee performance metrics. While companies may try to motivate employees with overtime, performance is likely to suffer overall, if staff end up being overworked. This in turn is likely to contribute to lower morale and weaken retention.
Conclusion
It is impossible to capture performance in one single employee performance metric. This article provides a comprehensive overview, but the one metric to rule them all is not in here. Why? Because it does not exist yet. The best key performance indicators for employees combine qualitative and quantitative metrics. Most companies try to do this by asking managers and colleagues to review people’s performance, in a 180 or 360-degree feedback loop.
And we think that’s the way to go. The best metric is a combination of different qualitative and quantitative employee performance metrics, done by multiple people.
Performance metrics are often combined with recruitment data to predict which hires are most likely to be top performers. This is done by comparing candidates’ profiles with their performance a year later. Patterns in this data can be used as input to make better hiring decisions for new candidates.
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