Brett Knowles, pm2 Consulting
Brett is a long-time thought leader in the Strategy Execution space for high-tech organizations, beginning in the late 80’s while teaching at Harvard and being involved in the initial Balanced Scorecard research and books. His client work has been published in Harvard Business Review, Forbes, Fortune and countless other business publications.
Pub: August 28 2021
Upd: January 23 2023
Employee performance metrics are fundamental to see how employees are executing their job. Managers should have ways and methods to measure performance, productivity and work efficiency of each employee. By tracking employee performance metrics both the organization and the employee can find numerous benefits.
Table of Contents:
- What are Performance Metrics?
- Types of Performance Metrics
- Why is Tracking Performance Metrics Important?
- Key Performance Measures
What are Performance Metrics?
Performance metrics are known as numbers and data that represents an employee’s abilities, actions and quality of their job. There are different types of performance metrics like profit, sales, return on investment, customer satisfaction, etc. However, performance metrics can be different in every industry and even in every department of an organization.
The success of a company depends on good performance, which is why it is imperative for any organization to carefully choose its performance metrics and accurately assess performance measurement to guarantee success.
Types of Performance Metrics
There are different types of employee performance metrics, but they’re divided into four main categories:
- Work quality metrics
- Work quantity metrics
- Work efficiency metrics
- Organizational performance metrics
Why is Tracking Performance Metrics Important?
Tracking performance metrics is important because they provide valuable information on what is working to derive growth, profitability and better business performance in general. Performance indicators help to implement strategies for meeting goals across every aspect of the organization. Tracking metrics aid in planning for improvements, changes and adjustments to a company’s processes to meet objectives faster and more efficiently.
Key Performance Measures
Having clarified the main idea of performance indicators / metrics, I would pick 10 employee related key results: five leading and five lagging measures:
- Lagging Measures
Lagging measures typically look at the outcomes from core processes and determine their overall success rates, without consideration of what root cause problems might be leading to the observed performance.
As a matter of principle, I avoid survey-based measures since they suffer from all sorts of inaccuracies including recency, personal bias, the perception of control, etc.
For employees, the five lagging indicators I would use are:
- eNPS: Employee Net Promoter Score assesses the likelihood an employee would refer a friend to work at your organization. eNPS surveys are great ways to determine the overall fitness of your organization's relationship with its employees.
- Employee Turnover: Although a significant lagging indicator, your overall employee turnover is an indisputable measure of how well you’re meeting your employees employment expectations.
- Employee Productivity: Every work function has some specific deliverables whether they be transactions processed, project milestones completed or relationships nurtured. Productivity measures look at the quantity of those deliverables divided by the hours of human capital to achieve those results.
- Participation in Company Social Activities: COVID has taught us, if nothing else, how important work is in our social lives. Research indicates that the higher engaged an employee is the more likely it is that they will participate in a company sponsored social event. It is important to note that you need to conduct multiple social events in order for this measure to be statistically viable since there are also personal preferences in terms of the sorts of social activities people will participate in.
- Absenteeism: We have had several clients over the years that have used absenteeism as a proxy for employee satisfaction. Their annual employee surveys indicate that more absenteeism is seen in places of lower employee engagement. Although this measure needs to be revalidated every year, it is an interesting short-term, leading indicator of employee satisfaction.
- Leading Measures
Leading measures for employee engagement, by nature, are attempting to predict where employees may have concerns with their jobs. For this section, I tend to rely on Daniel Pink's work from “Drive”, in which he provides comprehensive research on the intrinsic motivators that build employee engagement.
Daniel identified three intrinsic motivators, but based on our experience we've added two more based on contemporary experience in North America.
The five categories of intrinsic motivation that I would measure are: purpose, mastery, progress, autonomy and socialization.
- Purpose - purpose looks at the connection between an employee and the overall purpose of the organization. Research indicates that all employees are highly motivated by their contribution to the overall success of the organization, particularly in organizations with high social equity.
- Mastery - mastery looks at the ability of the employee to continuously get better at their job. This comes through training, mentoring, apprenticeships, internal promotion opportunities, etc. There is a building body of research indicating this is the single most important intrinsic motivator for most employees in North America.
- Progress - employees need the ability to see the progress they are making in their jobs on a day-to-day basis. With the work from home environment and the gradual reduction in managerial support, it is important that the employees can self recognize when they do a great job. Think of this as the dashboard of your car that gives you continuous and accurate information about how you're progressing.
- Autonomy - in this world where we define work through OKRs (objectives and key results), we are accountable for delivering the outcomes, provided we live within the company's values. This shift from job descriptions, which outline the tasks we should do, to objective-based expectations, gives space for creativity. Each employee has the autonomy to solve problems using their own capabilities, skill sets, resources and competencies.
- Socialization - like with any high-performing sports team, the players need to know the role of each of their colleagues, and see how well they're performing their jobs. In this way individuals can provide support and coaching to their teammates to help them achieve their shared outcomes of the process. We need to create environments where performance is no longer a taboo topic discussed behind closed doors in one-on-one meetings, but rather like coaching sessions between periods in a game, opportunities for the employees and coaches to co-create solutions to whatever the opposition is doing.
You can learn more about this approach by clicking here.
Unfortunately, it is impossible to enclose performance in only one performance metric. The best key performance indicators for employees are a combination of quantitative and qualitative metrics, leading and lagging indicators. So, the best thing managers can do is combine them to get the most accurate results regarding their department and objectives to get the best results in business performance.
In the end, employers and employees are not just resources, but human beings whose worth cannot just be measured in numbers and data. An organization has to try different employee performance metrics and choose those that are most suitable for both the organization and the employees.
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