Measuring Employee Performance: Understanding Key Metrics for Business Owners

In today’s data-driven, digital-first business landscape, employee performance metrics and people analytics have become integral to managing a team.

You believe you’ve hired productive and skilled employees, but how do you know if they’re meeting your expectations or contributing to your company’s success?

Employee metrics aren’t a one-way street, though. Giving your team constructive feedback fuels their growth and establishes clear job expectations. It also gives them context about how well they’re succeeding and where you want them to go next. It’s essential for employee training programs and business goals, not just sales performance metrics.

This post serves as your guide to demystifying these crucial metrics, empowering business owners, HR managers, and team leaders with the knowledge needed to navigate the path to excellence.

Overview of employee performance metrics

Employee performance metrics are quantifiable measures that help companies assess their employees’ productivity, efficiency, and overall contribution to the company’s goals. 

These metrics provide valuable insights that help managers and business owners identify areas where employees excel and areas that require improvement. The key to effective performance metrics is to ensure they align with the company’s culture, values, and vision.

An employee’s performance will need to look beyond just employee efficiency as an individual. Think of how they’re meeting overall business objectives and where you can create a quantitative metric to tie their performance back to organizational success. Sometimes this is teamwork metrics or opportunities for employee development, while other instances should focus on employee morale.

High-quality metrics help you motivate employees while encouraging behaviors that generate positive customer feedback. So, you want to measure employee performance to determine the health of your business and the security of your work.

Understanding Key Performance Indicators (KPIs)

KPIs are specific and measurable metrics you can use to track progress toward a particular goal. These goals can be related to productivity, efficiency, customer satisfaction, or any other area contributing to the company’s success. KPIs can also vary depending on the industry, company size, and specific goals.

For example, KPIs for a sales team may include conversion rate, new leads generated, and revenue generated. In contrast, KPIs for a customer service team may consist of customer satisfaction score, response time, and first-call resolution rate. 

Employee performance metrics should always be treated as important KPIs.

Examples of common project management KPIs 

• Planned hours versus time spent: How much time a team spent on a project or task relative to how long it was expected to take.
• On-time completion percentage: How often assignments or tasks were completed by their deadline.
• Budget variance: How much does the final budget of a project vary from the estimate or the set limit?
• Return on investment (ROI): Measures net financial gain on an investment.
• Number of change requests: How often a stakeholder requests changes to the scope of a project. This can indicate either a project outline not being a good fit for what you want to solve or an issue with the project management process that fails to reign in excess.
• Complaints or concerns: How often does a customer or the project recipient have a complaint or concern about the process, output, or outcome?
• Employee churn rate: How many employees leave a company over a period or during a specific project.
• Net promoter score (NPS): A net promoter score comes from customer satisfaction surveys that highlight how likely a customer is to recommend you to another business.

It may seem jargony, but by setting and tracking common KPIs, business owners can ensure their employees are aligned with the company’s goals and performing optimally. These are just a few examples of KPIs. The specific KPIs a business or organization should track can vary significantly depending on their goals, industry, and circumstances.

Choosing KPIs that align with your business objectives and regularly monitoring them to make informed decisions is essential.

10 key employee performance metrics 

Effective employee performance measurement involves a variety of key metrics that provide insights into different aspects of an individual or team’s work. 

Before we get into the ten you’ll want to review for team members; there are a few different kinds of metrics to consider. Some essential categories include:

• Productivity: Productivity metrics often measure output and efficiency. These metrics can include the number of tasks completed, projects finished, or revenue generated per employee.
• Employee engagement: Employee engagement metrics will gauge employee involvement, satisfaction, and commitment. This effort can include surveys, feedback scores, or retention rates.
• Efficiency and utilization: Efficiency-focused metrics look at how employees use their time and resources to complete tasks and identify opportunities for improvement.
• Financial: Financial metrics look at projects more than how an employee works. These may review how profitable a project is or overall sales revenue. The quantitative measures can also consider customer complaints because of how you have to respond to resolve those issues.

Now, let’s look a little closer at the critical employee performance metrics to track.

1. Task completion rate

A task completion rate measures the percentage of tasks completed against the total assigned. It reflects an employee’s productivity, time management skills, and ability to meet job expectations.

Managers should ensure that tasks are well-defined and measurable to accurately track completion rates and create a fair situation for employees. The goal is to have employees generate the output you need while reviewing what you ask them to do.

A high task completion rate shows good alignment with the employee and their work and the demands of their job. 

Remember that a 100% completion rate should not be a demand for “satisfactory” output but should instead show when a team member is going above and beyond.

2. Quality of work

Assessing the quality of someone’s work involves evaluating their output’s accuracy, thoroughness, and overall excellence. High-quality work meets objectives and standards set by deliverables.

Managers can use this metric to focus on what they turn in — it’s more about the deliverable than the process. That makes this an intelligent metric to pair with those concerning leadership and team cohesion.

Use a standardized rubric or quality scale to objectively assess the quality of completed tasks and maintain a feeling of fairness for your team.

3. Timeliness and punctuality

In the remote world, people don’t always work at specific times or on certain shifts. However, the work they turn in should still have due dates and related requirements. For remote team members, a core metric is the timeliness and punctuality of their work and their responses to leaders or teams.

Adhering to a schedule is very important for overall company effectiveness, and we want to reward those who are consistent here. If you’re unsure how to evaluate this, consider setting a requirement that Slack messages must be responded to by the next business day. That accounts for time zones and varying schedules but still ensures the consistent communication and engagement required for effective collaboration.

Engaged employees tend to be on-time and ready to work. This key indicator may help you identify some of your strongest and weakest performers.

4. Availability and online presence

Related to timeliness, you can also evaluate a remote team member’s performance based on their overall availability. Teams need to be online and active to get their work done. If someone isn’t available or has a minimal presence — such as not responding to emails — they can slow down your entire operation.

Finding core hours that overlap for team members can dramatically improve collaborative work. Responsiveness and availability are crucial for ongoing success. Thankfully, you can use time tracking tools like Hubstaff to monitor availability and show managers hours of overlap and work.

5. Initiative and proactiveness

Initiative and proactiveness measure an employee’s ability to go beyond assigned tasks, suggest improvements, and contribute innovative ideas to the team. When a problem arises, this is a way to think about how well a team member works to address it.

Do they take the initiative and try to create a process to limit harm, or do they hang back and wait for it to cause a significant issue?

When measuring this, look for ways to include self-assessments and evaluations from team members and managers to focus on proactive contributions.

6. Feedback and effective collaboration

Another core employee performance metric is evaluating how well they give and receive feedback. How open is someone to correction and change? Do they embrace this and follow the suggested action, or do they drag their feet and exacerbate a problem?

Effective communication and collaboration are crucial in virtual environments.

Another element of this is the team member’s ability to offer feedback to team members and encourage collaboration. Creating a positive environment and giving constructive feedback help ensure that others feel comfortable and are willing to change.

Team members also tend to have fewer interactions with remote colleagues. So, when an interaction is negative, its impact will be significant. That can do major harm to team cohesion and productivity.

Measurements here require team surveys, peer reviews, manager feedback, and tools that assess the use of communication and collaboration tools.

7. Learning and development

Employee performance is more than just task completion. You want to encourage team members to grow holistically, and that means improving knowledge and skills. It’s great to offer this as part of their training and development with your company.

Turn learning into a KPI by giving someone courses or certifications to pursue. Managers should help team members identify skills to improve. Use free training programs or professional development programs to set goals that are easy to monitor.

Employee progress is important to the health of an organization. Think of it as a large performance indicator for your overall workforce and ability to grow.

Even better, turn completion into something to celebrate. Evaluate team members based on their finishing a course or certificate and then celebrate that win in your company’s communications channels.

8. Project efficiency

Project efficiency focuses on how well remote employees manage resources, time, and tasks to achieve project goals. This can be completing steps and tasks within a project, managing it, or completing it.

We like this as a performance-centric metric that emphasizes effective project execution. When someone does well, it often highlights lessons or tactics that can be shared with others.

Managers will want to evaluate projects based on how well they stick to timelines and adapt to issues. Other considerations include resource utilization, overall completion rates for milestones, and what kind of tools or support was needed for each step.

9. Task delegation and leadership

Many employees will need leadership opportunities to grow and thrive with you. Create a foundation with a metric around task delegation. Measure how often people delegate tasks appropriately or when they hold onto things they should not keep.

These metrics collectively provide a comprehensive view of remote employee performance, encompassing productivity, collaboration, and contribution to organizational objectives. It can also highlight when an employee’s performance indicates they’re ready for a management role.

Regularly reviewing and adjusting these metrics ensures they remain relevant to evolving work dynamics.

10. Absenteeism

Our final metric is a simple but important one: absenteeism. This tracks how often someone is absent from work. In the remote setting, people may be absent for a day, miss meetings, skip collaborative work, or shift their hours without proper notice. 

Poor employee attendance can be a threat to your organization.

Absenteeism is one of our more direct metrics, giving managers a clear view of engagement and performance. Absenteeism is also a good indicator of productivity and morale. Think of this as your warning light. When absenteeism is high, the team member might be disengaged, giving up, or looking for work elsewhere.

Tips on implementing an effective performance measurement system

Adopting the right approach is crucial whether you’re a small startup or a large corporation. A well-implemented performance measurement system boosts productivity and provides valuable insights for informed decision-making.

To help you navigate this process effectively, we’ve compiled a comprehensive list of tips on implementing an efficient performance measurement system.

11 tips for implementing performance measurement systems

1. Set clear objectives: Define the specific goals and objectives you want to achieve with your performance measurement system. Having clear aims will guide you through the implementation process.
2. Invest in technology: Use workforce management software to streamline data collection, analysis, and reporting. Modernizing your tech stack can improve accuracy and save you time and money.
3. Establish baselines: Measure current performance to create a baseline for improvement. This gives you a starting point to track progress effectively.
4. Regular data collection: Implement a consistent schedule for data collection and reporting to ensure data accuracy and up-to-date insights.
5. Customize reporting: Tailor reports to the needs of different stakeholders. Executives may require high-level summaries, while department heads may need more detailed data.
6. Performance reviews: Integrate performance measurement into regular performance reviews. Discuss results, goals, and improvement strategies in one-on-ones whenever possible. 
7. Transparency: Maintain transparency about the performance measurement process. Let employees know why and how their performance is being evaluated.
8. Align with company culture: Ensure your performance measurement system aligns with your organization’s values.
9. Benchmarking: Compare your performance against industry benchmarks to identify areas where you can excel or need improvement.
10. Recognize success stories: Highlight and celebrate performance improvement success stories.
11. Scalability: Design a system that adapts and scales with your organization’s growth and evolving needs.

By embracing these tips, you’re equipping your business with a powerful tool and creating a culture of transparency, improvement, and accountability.

With the right metrics and processes, your team can stay ahead of the curve and strive for excellence in an ever-evolving business world. Remember, it’s not just about measuring performance; it’s also about elevating it.

Benefits of measuring employee performance

Employee performance metrics empower businesses to make data-backed decisions, align their teams with strategic goals, and create an environment where employees thrive. 

Here are the key benefits of employee performance metrics, backed up by data from studies and relevant statistics. 

Increased engagement

Regular feedback and clear metrics increase employee engagement. According to SHRM, 89% of HR leaders agree that ongoing peer feedback is critical for successful outcomes.

Clear communication

Communicating employee metrics directly to employees sets a high standard for communication within a business. According to this study, companies with effective communication are 50% more likely to have low employee turnover.

Build employee trust

Employee trust is crucial for business success, and one key to creating trust is through transparent business practices. A Forbes study found that employees in high-trust companies reported 50% higher productivity than those in low-trust organizations.

Increased productivity

By establishing expectations through open communication, you can increase employee productivity. According to this study, 72% of business leaders believe effective communication has expanded their team’s productivity, and 52% of knowledge team members agree.

Employee satisfaction

Communicating with your team positively impacts their overall satisfaction scores. Over 74% of employees feel left out of important company decisions and news, resulting in lower job satisfaction.

Final thoughts on tracking employee performance

As we delve into the benefits of employee performance metrics, it becomes clear that this practice is not merely an option — it’s a fundamental driver of success in the modern workplace. 

By defining, measuring, and monitoring performance metrics, remote business owners can ensure their employees align with the company’s goals, improve productivity and efficiency, and drive business growth. 

Are you utilizing any employee performance metrics that we haven’t mentioned? We’d love to hear about your preferred ways to measure performance and assess employee performance. Give us your best quality metrics for individual employees and teams or your favorite way to gather customer satisfaction scores.