How to Master Employee Performance Metrics to Turn Insights Into Income
Your employees are your most valuable asset, and understanding their performance is critical for driving success.
But how do you understand how your employees' performance impacts the company's bottom line?
And even more importantly, how do you leverage your employee performance data to drive business results?
With today's highly volatile labor market and employees who know their rights, you simply can't afford to skip out on measuring performance.
Employee performance metrics provide the insights you need to optimize your workforce and achieve your goals.
But, if you use the wrong employee performance metrics as a basis for reviews, you can deter rather than encourage your employees.
Fret not – this article will give you the knowledge and tools to select the best performance metrics to turn insights into income and achieve your organization's objectives.
You’ll also find 38 Role-specific performance metrics to start tracking right away.
📈 What are performance metrics?
Performance metrics are quantitative measures used to assess the effectiveness, efficiency, and progress of a process, system, product, or individual.
They provide a means to:
- Monitor performance over time.
Performance metrics are essential for assessing progress towards set goals and objectives and making informed decisions for improvement.
Some standard performance metrics include:
- Key performance indicators (KPIs): Specific, quantifiable measures for tracking progress toward strategic goals and objectives. KPIs help focus on the most critical aspects of performance and drive improvement efforts.
- Financial metrics assess a business or project's financial health and performance. Some examples of financial metrics are: revenue, profit, return on investment (ROI), and cost-effectiveness.
- Operational metrics evaluate the efficiency and effectiveness of business processes, such as production rates, throughput, and capacity utilization.
- Quality metrics assess the quality of products, services, or processes, including measures like customer satisfaction and adherence to industry standards.
If you're wondering: But can employee performance metrics also be qualitative?
The answer is yes, performance metrics can be qualitative.
Qualitative performance metrics focus on non-numerical aspects of employee performance, such as behavior, communication, teamwork, and problem-solving skills.
When used alongside quantitative metrics, qualitative performance metrics can provide a more holistic view of an employee's performance. This combination enables organizations to make better-informed decisions regarding promotions, compensation, training, and employee development.
You will find multiple examples of quality vs. quantity metrics further down.
The exact job performance metrics you'll need to measure ultimately depends on the business goals, department, and role.
💡 Wanna know more? Check out our value-packed article on how to measure employee performance. Metrics are the backbone of successful employee reviews – in addition to comments.
🏆 9 Benefits of using performance metrics
Increased focus and accountability
When employees know they are being evaluated and the basis for the evaluation, it's easier for them to focus and prioritize in stressful situations. It also pushes for accountability since it will be clear who contributed to what.
Performance metrics also give insight into whether employees are on track with their goals.
Similarly, performance metrics awaken motivation. People are naturally motivated to grow and evolve.
So to drive performance even further, display clear career paths to your employees, so they know how to reach the next levels of their careers.
Employee performance metrics help assess employee performance. This data can be used to allocate resources, identify high-performing teams or employees, and guide investment in training or development programs. As a result, you can plan for succession, promote new leaders, and make other strategic decisions.
More objective performance reviews
Clear performance metrics allow managers to benchmark performance levels. It helps conduct more fair performance reviews based on actual results and not on factors like personal connection or charisma.
💡 Discover 20+ performance review best practices to help you turn reviews into revenue.
Performance metrics facilitate evaluation during regular check-ins. They help inform feedback and development conversations around performance goals with each employee. That way, they set the tone for positive and productive working relationships.
Job performance metrics help boost productivity by improving accountability and motivation. Correct use of employee performance metrics thus directly leads to higher profits.
Improved organizational performance
Using qualitative and quantitative metrics drives organizational performance and gives an invaluable competitive advantage. By measuring and analyzing these metrics, organizations can identify areas for improvement, make informed decisions, and drive positive change.
Without these efficiency metrics, companies risk going in the wrong direction and bypassing golden opportunities.
Driving company growth and success
Employee performance metrics help drive company growth and success by showing where you fall short of meeting organizational goals.
Additionally, performance metrics help align employee efforts with the organization's strategic goals and objectives. Employees understand how their work contributes to the company's success by setting clear expectations and measuring progress.
Learn to use them strategically for your unique business needs, and you will have an almost unfair advantage!
Since performance review metrics give employees clarity, direction, and unbiased feedback, they lead to happier team members and, thus, reduced turnover rate.
Performance metrics can help organizations identify high-potential employees, guide promotions, and make informed decisions about compensation and rewards. As a result, you retain and develop top talent, contributing to long-term success.
🙌 7 Employee performance metrics you need to track ASAP
Work efficiency evaluates both the quality and quantity of the output.
For example, a chef able to prepare 20 meals in an hour may sound more efficient than one who can prepare ten meals. But customers will probably complain if the food isn't well cooked and the composition is not aesthetically pleasing.
So the chef cooking for ten people creating delicious, beautiful plates is still the winner from a work efficiency perspective.
Quantity is great – as long as the quality is, too.
Work efficiency is critical to measure since it evaluates what actually matters – quality and quantity.
For example, this KPI is highly relevant for sales representatives to measure the number of closed calls.
Another example of success rate is the conversion rate for e-commerce companies or online service providers.
An example of a low success rate in the latter case is having many visitors to a site but no one buying.
While work efficiency makes more sense for more complex tasks, the completion rate is a simpler measure that you can use to measure tasks with less room for failure.
For example, let's say the chef's assistant is responsible for polishing silverware. Their completion rate could be how many forks and knives they polished in an hour.
The completion rate is primarily relevant for simpler tasks. However, it is practical because of its lack of ambiguity.
Metrics such as the success and completion rate help you understand employee efficiency and the output produced. Tracking these metrics allows you to identify areas for improvement and allocate resources effectively.
Quality of work
This metric can be tricky, especially for more advanced or creative roles with more room for subjectivity. However, quality metrics ensure that your team produces work quickly and maintains a high-quality standard.
After all, high-quality products and services lead to higher customer satisfaction and long-term success.
For example, it is easier to evaluate the quality of the above-mentioned assistant's silverware efforts vs. the quality of an abstract painting.
Furthermore, quality is more challenging to measure when working with people than with numbers.
For example, a piece of programming code is more straightforward to objectively evaluate than, e.g., a coaching session.
In client-facing roles, you can assess the quality of work by measuring customer satisfaction and complaints–but remember that client reviews are highly subjective.
Some quality of work metrics you can include are:
- defect rates (bugs found in code or product features);
- customer satisfaction scores (CSAT);
- first-time resolution rates (for customer support).
Quality of work is important for all roles. Still, efficiency might be a better KPI since it also considers the valuable resource of time.
Collaboration & teamwork
Effective collaboration and teamwork are crucial, as any company must coordinate various teams and departments. Looking at collaboration and teamwork metrics can help you identify potential bottlenecks in team dynamics and address issues hindering collaboration.
Like the previous metric, teamwork is a more challenging employee performance metric.
It's hard to put a number on it, and you often have to rely on teammates' opinions, which always have a certain degree of bias.
A way around this is to find something tangible – for example, communication – to measure and see it as an indication of teamwork. Assessing teamwork in a performance evaluation is especially important in roles where the output directly depends on clear communication and frequent interactions.
Some concrete metrics you can measure are:
- cross-functional project success rates;
- team satisfaction scores (from surveys);
- ratings/insights from peer reviews or 360-degree evaluations.
Continual learning and development are essential for staying competitive and fostering innovation. These metrics help you understand the effectiveness of your organization's training programs and identify skill gaps that need addressing.
Some concrete metrics you can use are:
- training hours per employee;
- skill improvement rates;
- percentage of employees with updated certifications or qualifications.
For roles requiring clear and measurable skills, such as programming, learning ability is easy to measure by a simple skills test. It can be more challenging for creative/client-focused roles. Learning ability is vital in roles where problem-solving and evolution are core concepts. It might be less relevant in monotonous roles.
Work ethics directly affect an employee's productivity, and measuring metrics can help identify areas where employees are lacking and need improvement.
Plus, good work ethics ensure that employees take pride in their work, which leads to higher-quality output.
Examples of tangible measures of work ethics are:
- respecting deadlines;
- being on time.
👨💼 38 Role-specific performance metrics
Besides the more generic KPIs, including metrics specific to each role is helpful. Below are our suggestions:
Sales performance metrics
Some relevant sales performance metrics are:
- Closing rate – how many cold calls or sales meetings lead to a deal?
- Upsell rate – the number of closed sales where the sales representative managed to upsell. For example, offering an add-on like custom support or a private session for a service, or an exclusive case when buying a pair of sunglasses.
- Average order value – the dollar amount of the average order.
- Revenue - the total income generated by the sales team during a specific period. Measure it by summing the revenue from all completed sales transactions. Revenue is a critical metric because it indicates the success of the sales team in driving business growth and profitability.
- Hours of resources invested in follow-ups with sales.
- Conversion rate - the percentage of leads that are converted into sales. You can calculate this metric by dividing the number of closed deals by the total number of leads generated during a specific period. A high conversion rate indicates that the sales team is effective at persuading potential customers to purchase, which contributes to revenue and business growth.
Marketing performance metrics
- Monthly website traffic - how many visitors arrive on your website monthly via SEO, email campaigns, social media outreach, etc.
- Lead generation – how many new potential customers the marketing professionals attract. This KPI can be measured by, e.g., signups for email lists or social media followers. Lead generation is essential because it indicates the marketing department's success in creating interest in the company's products or services, ultimately contributing to sales and revenue.
- Conversion rate – how many visitors on a website turn into paying customers. This metric is a better success indicator than monthly traffic volume, especially from a sales/growth perspective. If the traffic volume is high but the conversion rate is low, it indicates that the website might need to be updated. A high load time, a clunky design, or an uninspiring copy can reduce the conversion rate.
- Open rate/Click-through rate – how many people on the email list open and click on links in the email, respectively.
- Blog articles published per month – especially if your business uses SEO as a lead generation strategy.
- Customer acquisition cost (CAC) - the average cost of acquiring a new customer through marketing efforts. You calculate this metric by dividing the total marketing expenses by the number of new customers acquired during a specific period. A low CAC indicates efficient marketing strategies, while a high CAC may signal the need for improvement or optimization.
Business performance metrics
- Gross profit margin – the cost of goods/services sold minus the net sales.
- Return on investment – how much of an investment is earned back in some form of revenue. An example: how many sales a specific dollar amount of ad spend yielded.
- Profitability – profitability is a metric looking at the profit margin and comparing it to the business goals.
- Productivity – this metric measures the rate at which an employee produces output. Following our reasoning above, work efficiency can be a better key indicator than productivity, especially for more complex tasks.
Leadership performance metrics
- Active listening skills – as a leader, it is vital to be a good listener able to reflect the employees' thoughts to them for clarity and insights.
- Vision – how well does the leader embody and spread the company vision?
- Alignment – do the activities make logical sense? Are they connected? Are they related to the overall vision?
- Inclusion – how well does the leader model and promote workplace diversity, equity, and inclusion?
💼 Learn more about how to evaluate manager performance in our guide.
Project management performance metrics
- Planned value – the approved budget for completing each specific project phase. The total planned value refers to the entire project, but you can also talk about the half-time planned value or the planned value one month in.
- Actual value – Unlike planned value, this metric uses the completed work rather than the planned work for a project phase.
- Cost variance - indicates how you perform vs. budget at a certain point. You calculate this metric by taking earned value minus actual cost. Cost variance is valuable to estimate how you are pacing financially and if you need to take any actions to course-correct.
- Budget performance - how well a project's actual expenses align with its allocated budget. You can calculate it by comparing the actual project costs to the planned budget.
- On-time completion rate - the percentage of projects completed on or before their deadlines. Calculate this metric by dividing the number of on-time projects by the total number of projects within a specific period. This metric is vital because timely project completion is essential for maintaining customer satisfaction and meeting business objectives.
- Project success rate - the percentage of projects that achieve their objectives and meet or exceed stakeholder expectations. Calculate it by dividing the number of successful projects by the total number of projects within a specific period. A high project success rate indicates effective project management, which contributes to overall organizational performance and customer satisfaction.
Customer success performance metrics
- Net promoter score (NPS) – sometimes called customer satisfaction score, this numerical value derives from a specific question in a questionnaire sent to customers: How likely is it that you would recommend [the product or service] to someone? You can calculate NPS by taking the percentage of people who voted 9-10 and subtracting the number of people voting 0-6.
- Customer retention rate – indicates how many of your customers remain customers over time. The exact period is to be determined by your company, depending on what makes sense for your business.
- Customer churn rate – this is the opposite of the retention rate and measures how many of your customers drop off. Ideally, you use the same time frame as for the retention rate.
- Customer feedback – while this is more of a qualitative than a quantitative metric, it helps understand what works well and where there's room for improvement.
- Average customer lifetime – how long does the average customer stay with your business?
Customer support performance metrics
- Customer satisfaction – this is probably the most critical metric to track. This performance indicator is usually measured by letting customers complete a quick questionnaire or click on a post-purchase thumbs up/thumbs down symbol. It enables you to know how the customers perceived the interaction – if they got their problem solved and the friendliness of the customer service representative.
- Average ticket count – refers to how many support tickets your team receives in a typical day. You can measure this metric on a daily, weekly, monthly, or yearly basis or all of them. The average ticket count can help predict staffing needs. Also, if the number increases, it can indicate that something about your product or services needs improvement or clarification.
- Ticket backlog – how many unresolved issues you and your team have.
- First response time – for how long a customer needs to wait (on average). The lower this metric is, the more positive the customer experience.
Engineering performance metrics
- Daily active users – How many people use your software on average daily? Compare this number to the number of customers. Suppose the daily active users is a much lower number. In that case, it can indicate that customers don't find the software valuable or are confused about how to use it.
- Product uptime – measures the time your software works during a determined period. Naturally, the bigger, the better!
- Bug response time – how long it takes for the developer team to identify, address, and solve a bug. Some bugs are minor and don't affect the user experience much, while others can cause the entire system to go down.
💡Is it time to fill out a new cycle of performance reviews? Get inspired by 45 compelling performance feedback examples.
🤜 🤛 Also, if poor performance gives you a headache, check out our tips and tricks to diagnose and address poor performance effectively.
➡️ Drive high performance and growth with Zavvy
With our performance review software, you can create your custom feedback systems.
No need to rebuild the wheel – as a customer, you are welcome to use templates from successful companies and modify them according to your needs.
Plus, you can incorporate our one-on-one meeting software for sharing continuous feedback outside your formal performance review cycles.
1:1 check-ins to centralize all things, notes, and questions for your one-on-ones.
Employees can create new action items directly based on the feedback they get in the meeting and during performance reviews.
Schedule a demo with us to see how easily Zavvy adapts to your company and unique needs!
What are HR's key performance indicators?
Some HR key performance indicators are:
- Turnover rate – high turnover indicates that employees are unsatisfied at your workplace. It is costly, time-consuming, and can decrease morale – so you must address it urgently. Look at factors such as whether you offer fair compensation and how the atmosphere and team culture is.
🔍 Discover a more in-depth discussion of why people quit their jobs and what you can do to address the most recurring reasons.
- Duration in a position – if your turnover rate is high, and there are no obvious factors, it might be because your employees feel stalled in their development. Without clear routes for growing and evolving within the company, your people might look at your competitors for new challenges.
- Dismissal rate – this measures how many people get fired or laid off. If this number is high, your hiring practices might be worth looking at. Were you not recruiting in alignment with company values or not measuring skills correctly?
What are good performance indicators?
For KPIs, you can use the SMARTER rule (an extension of the SMART goals framework) to ensure your performance indicators are doing a good job:
- Evaluate – Regularly check that you're on track with the selected metrics.
- Re-evaluate – Regularly check that your chosen metrics still align with the business objectives.
How do you measure employee effectiveness?
It depends on the specific role. For example, it can be the number of successful outcomes over time, such as the number of closed sales or the number of approved (fully functional) units produced in a factory. Typically, employee effectiveness comprises quality and quantity.
What is the difference between performance KPI and metrics?
While both KPIs and metrics measure performance, KPIs are a specific subset of metrics directly tied to an organization's strategic goals and objectives.
KPIs help organizations focus on the most critical aspects of performance. In contrast, metrics provide a broader perspective on various aspects of an organization's operations.
For example, the number of calls made per day is a metric that provides insight into the activity level of a sales team member. In contrast, the monthly sales revenue target is a KPI that measures progress toward the overall sales goal of the organization.