Which Employee Performance Metrics to Track & Why
Decision-makers increasingly rely on HR professionals to find areas for improvement in an organization. Central to this project is the effective use of employee performance metrics. These metrics are essential for keeping a score of how an employee works toward the company’s common goal, and what’s measurable is what can be acted upon.
We’ll discuss the intricacies of tracking employee performance metrics and why they’re essential in HR management—and critical for a company’s success. We’ll zero in on key metrics to measure performance and productivity, as well as, how to track them effectively.
Key Employee Performance Metrics to Track
By tracking the correct employee performance metrics, businesses can understand how their human capital is performing and where they should focus their attention. Here are some of the top metrics to measure employee performance:
Key Performance Indicators (KPIs)
KPIs have become so ubiquitous in the modern workplace that they’ve almost lost meaning. Still, if cleverly designed, they can still serve as benchmarks for evaluating employee performance and aligning individual goals with organizational objectives. By defining and tracking the correct KPIs, organizations can measure progress and ensure that individual employees’ efforts contribute directly to overall success.
Different industries and departments track different KPIs. For instance, sales teams may track metrics such as sales revenue and conversion rates, while HR departments may focus on metrics related to the state of a company’s workforce, such as the employee diversity index, or turnover rates. Here are some common KPIs that different industries keep track of:
Revenue Metrics
These metrics focus on the financial performance of the organization, including revenue growth or profit margins.
People and HR Metrics
These metrics help the HR teams measure the health of their human capital—and allow decision-makers to take critical steps, such as bringing on new hires. Some KPIs include Net Promoter Score, absence rates, and turnover rates, which we’ll further discuss later on. They can also include satisfaction rates.
Customer Metrics
Assessing customer satisfaction, loyalty, and retention, these metrics include customer acquisition cost and the customer lifecycle value.
Sales Metrics
Sales metrics include sales revenue, conversion rates, average deal size, and YoY growth.
Quality Metrics
Quality metrics include churn rates, customer complaints, and customer satisfaction ratings.
Operational Efficiency Metrics
These indicators include cycle time, lead time, and process improvement metrics like Six Sigma or Lean metrics.
Marketing Metrics
Marketing metrics cover website traffic, conversion rates, cost per lead, and return on ad spend, known as ROAS.
Supply Chain Metrics
These metrics include inventory turnover, order fulfillment cycle time, and supplier performance.
Employee Turnover Rate
Employee turnover rate is the percentage of employees who leave a company within a specific period. It is an important metric that provides insight into the stability of a workforce and the effectiveness of talent management strategies. A study conducted by the Society for Human Resource Management found that, on average, about 15% of employees leave their jobs in the United States each year. When turnover rates are high, it can lower productivity, cost a company a lot in hiring and training new people, down employee morale, while it may interfere with what the company’s culture stands for. Better keep it in check by tracking it. Companies can lower it by adopting an employee retention strategy.
Productivity Metrics
Productivity metrics are essential for evaluating the efficiency of a company’s workforce. By tracking these metrics, businesses can identify bottlenecks and come up with strategies to be more productive. For employee performance, for example, if the output per employee is low, it might mean they need more training. Let’s explore some of the top productivity metrics that companies might use:
Revenue per Employee
This metric is company-wide and a staple of HR teams. It divides a company's output by the number of employees.
Units Produced per Hour
This metric is individual. It won’t accurately measure what a sales team must aim for, though.
Overtime Hours
By tracking the hours employees work beyond regular working hours, this indicator highlights high workload, which could signal both burnout and higher paychecks the company should be able to afford.
Other metrics include downtime, number of tasks completed, or number of errors. Depending on the sector, this could be poor KPIs. For example, a developer should be measured by the quality of their code, not by the number of lines they’ve been punching in.
Employee Satisfaction Scores
When employees are happy, they’re more likely to be productive, committed, and loyal to the organization. There are different ways to track this metric, such as surveys, feedback sessions, or one-on-one interviews.
If the scores show that employees struggle to keep a healthy work-life balance, the company might start offering more flexible schedules or wellness and training programs to address this issue.
Setting Up Measurement Frameworks for Employee's Performance
Here’s how to set up measurement frameworks for qualitative and quantitative metrics that align with business goals and facilitate meaningful information:
- Define Clear Objectives
Clearly establish the objectives and goals of the measurement framework and how they’re aligned with what the company expects in the long run. - Identify Key Performance Metrics
Choose measurable, actionable metrics that directly contribute to achieving organizational goals. - Choose Appropriate Data Collection Methods
Pick the right data collection tools, like polls and evaluations, to make sure you’re getting the insights you’re looking for. - Establish Data Collection Processes
Create a system for collecting, recording, and analyzing performance data to keep it accurate. - Regularly Review and Adjust
Schedule periodic reviews to see how effective and relevant the metrics and data are.
Implementing Tracking Systems for Measuring Employee Performance
HR teams can rely on various tracking systems, from time-tracking software to employee performance evaluation and management platforms. Although these systems provide real-time data, they can be siloed and hard to cross-inspect. Also, some are less favored by employees because they’re considered too old-fashioned.
Time-Tracking Software
Time-tracking software helps organizations monitor and track employee performance, attendance, work hours, and project timelines. Some employees feel too pushed by it because it’s considered a sort of micromanagement.
Time-Off Tracker
Standing on the opposite end to their near-namesake, the time-tracking solutions, the time off platforms are highly regarded by employees because they let them schedule their paid-time out dates on their own. HR departments also like this because it streamlines time off approval: an employee clicks here and there, a manager receives an email, they accept, and it gets signed off. Accountable and easy to track—but it’s difficult to compare it to how the requestor is performing.
Performance Management Platforms
Performance management platforms offer a well-rounded solution for monitoring KPIs and tracking how employees meet goals and progress. These tools help in collecting and evaluating performance. However, they might miss the mark on the people behind those stats. For example, it could be challenging to determine demographic insights attributed to a specific figure or group solely through the use of a performance management platform.
All-in-One Human Resources Information System
Not every solution for tracking performance is siloed, though. Certain platforms help companies run job postings, help with hiring and onboarding, provide metrics on employee performance, and offer analytics on categories such as compensation, departments, or seniority. These HR platforms, such as TalentHR, allow companies to check on the complete performance lifecycle of an employee from the get-go. They help recruiters and executives alike to put together the next job description by checking on hard data, such as the metrics we gave the rundown on during this article.
All-in-one solutions work exceptionally well because they allow HR teams to cross-inspect metrics. By bringing tracking systems and HR platforms together, organizations can level up employee efficiency and optimize performance management, talent development, and decision-making from a single interface.
Don’t wait—take action now and use TalentHR’s tools for workforce management. Register now for free.
To learn more about well-rounded solutions for employee performance tracking, visit TalentHR.
