How to Measure Employee Performance: A Guide for People Leaders

Performance is the backbone of any successful organization. But how do you measure employee performance? And going a step further, why does Jane effortlessly glide through tasks, while Mike struggles?

Measuring performance is more than annual reviews or numbers on a spreadsheet. It means grasping the patterns, strengths, challenges and decoding the enigma of 'performance' in tangible metrics.

Why? To uplift, support, and empower your people.

This article will:

• Discuss why measuring employee performance is crucial.
• Showcase various methods for measuring performance in the workplace.
• Highlight the key dimensions of employee performance.
• Share a few metrics to measure employee performance.
• Provide some examples of different approaches to performance measurement from the likes of Netflix, Cisco, and Facebook.

📈 What is employee performance?

Employee performance refers to the assessment of an individual worker's actions, behaviors, outcomes, and overall contributions to an organization over a specified period. It is a measure of the efficiency, effectiveness, and quality of the work delivered by an employee in line with the company's goals, objectives, and expected standards.

Simply put, employee performance is a worker's ability to perform their duties efficiently and effectively.

Factors commonly used to measure overall performance include:

• quality of work;
• speed and quantity of work;
• ability to meet deadlines;
• communication skills;
• reliability and problem-solving;
• teamwork.

"Performance data is the center of everything. More important than attrition. More important than engagement. It is the most important thing you can collect in HR analytics, because without it the rest of your data tells you very little. [...] We need to understand where and why great work is happening." Jessica Zwaan, Chief Operating Officer at Whereby.

Regular performance assessments can aid in identifying areas of strength and improvement, facilitating better alignment with organizational needs, and ensuring career growth and development for the individual.

📏 5 Methods for measuring employee performance

Quantifying employee performance isn't always obvious or straightforward. 

It is essential to find fair ways to reflect on a worker's contributions and share positive feedback that encourages growth and improvement. 

Below are five common methods for measuring employee performance.

Simple ratings

A letter grading system or performance rating scale is a basic scoring method where employees are rated on a scale, typically from 1 to 5 or 1 to 10, based on their performance in various categories.

simple form of traditional appraisals that can work but tends to suffer from a top-down approach and subjectivity.

You can also use these metrics in 360-degree feedback surveys for a broad overview of an employee's abilities from different perspectives.

🔢 Should you use performance ratings? We talked to various experts who weigh in on the pros & cons.

Skill gap analysis

Another common option is to assess whether an employee exceeds, meets, or fails to meet performance expectations in different skill categories. 

This method involves assessing the difference between an employee's current skills and the skills required for their role. The larger the gap, the lower the performance score.

💡 Tip: Use a skills matrix to document your people's essential skills.

Quantifiable data

This approach relies on objective, numerical data to evaluate an employee's performance. Examples include sales figures, number of projects completed, or customer satisfaction scores.

For example, you could measure the time to complete a task or the number of jobs completed in a day.

That way, it is fair and easy to say Employee A can complete Task X in one hour, which is faster or slower than the company average. 

A measurement like this is fair and easy to acquire. You can use it to improve efficiency for employees or the overall process.

Success ratio

The success ration measures the number of successes versus the number of attempts or failures.

For instance, in sales, it might look at the number of closed deals versus the number of leads.

For example, if Employee A has a 75% success rate and Employee B has a 25% success rate, you know where to divert more of your attention.

360-Degree feedback

360 Feedback is a comprehensive evaluation method that collects feedback about an employee from their peers, subordinates, supervisors, and sometimes even customers.

With 360 performance reviews , employees can provide feedback to coworkers across hierarchies.

Coworkers fill out surveys answering questions about their coworkers' performance. They can submit answers anonymously if desired. 

🤫 Not sure if anonymous feedback is the right choice for your organization? Check 5 cases for and 5 against it, plus company examples illustrating both options.

The 360 approach to performance reviews is a great way to develop a fair process that crowdsources performance reviews rather than relying on a single person or department. 

➡️ Compare the benefits of 360-degree feedback versus traditional performance appraisals.

👀 How is performance measured? 5 Dimensions of employee performance

There are many different ways to measure employee performance.

But it all boils down to defining performance for your organization and your employees' specific roles and responsibilities. 

Here are some key dimensions of employee performance. 

Work quality

Different roles and duties can vary significantly in the importance of work quality. 

Results as simple as accuracy in the case of a job like data entry or order fulfillment can be much easier to measure than more complex tasks like the quality of copywriting or graphic design. 

In many cases, the quality of an employee's work is one of the most critical factors, as it can rely on skill and talent.

Speed and work quantity

Another important metric for many roles is efficiency.

After all, the value of many employees depends on the amount of work they can complete. 

Work quantity is generally easier to improve than work quality. 

For example, you can improve it by sitting down with an employee to optimize procedures and streamline processes.

Teamwork and communication

While not directly influencing performance in most cases, teamwork and communication skills can affect a team's overall efficiency. 

Generally, poor communication can have a very negative impact on team and employee performance. In contrast, good communication keeps things running smoothly. 

You can improve teamwork through meetings, software upgrades, and soft skills training.

Reliability and ownership

In many cases, consistency and reliability are crucial to an employee's role performance. 

Showing pride in one's work and taking ownership of the outcome can be vital to a quality performance that meets expectations. 

In contrast, an employee whose work is unpredictable in quality or turnaround can be difficult to rely on. 

Autonomy and problem solving

Low employee confidence or excessive micromanagement by team leaders can result in a lack of initiative and independence among workers.

For employees to reach their full potential and contribute to the company, they need to have problem-solving skills. They will also need enough freedom to make decisions that fall under their role. 

A fear of taking risks or lack of innovation and autonomy can slow company growth and won't build trust in the workplace.

➡️ Different roles will entail specific competency models. Use them to create competency-based performance appraisals, for more insightful reviews for each team and department.

🏆Discover 7 best practices for writing an effective performance review for your employees.

🎯 9 Metrics and KPIs to evaluate employee performance

What are performance metrics and performance KPIs?

KPI stands for key performance indicator; in other words, a way to indicate performance in a quantifiable way. 

You can use KPIs to measure employee performance as benchmarks for expectations in their role.

Performance metrics are more general, often acting as guidelines that give management a way to track an employee's ability or progress on a task. 

Performance metrics are often simple formulas to calculate employee productivity or quality of work.

Success rate

The success rate is a relatively simple measure of how often employees can achieve their individual performance goals, KPIs, and objectives. 

Setting simple pass-or-fail guidelines can be a more straightforward way to measure performance for duties more challenging to quantify.

Tip: You can then average the results of multiple projects or time periods to get a percentage success rate.

Completion rate

A simple completion rate could effectively measure performance for more objective tasks with less bearing on quality. 

For example, you could use quotas for repetitive tasks or an overall completion rate for an assortment of duties that each involve their own subtasks. 

Completing all or more such duties in a satisfactory manner will indicate strong performance. 

Attendance

Attendance can be an important factor in some roles and organizations. When this is the case, having an attendance policy that tracks performance is essential for fairness and keeping employees on track. 

For example, a point system that tracks overall attendance performance based on tardiness, absences, and no-shows will quantify reliability in this category.

Improvement

Calculating an improvement score is vital for rewarding ambition and measuring long-term success. 

Employee growth can be as simple as additional training to improve skills or tracking other performance metrics over time and comparing the results. 

An employee with above-average performance but stagnant improvement may not be as valuable as an employee who started with average performance and is showing steady progress and ambition.

Teamwork

Measuring teamwork and communication can be tricky. 

You often have to rely on the opinions of others, which can come with both positive and negative bias. 

Since teamwork performance is easier to notice when there is a problem, a strike system that tracks failures in communication can help monitor if anyone is struggling in this area. This will be your first step to correcting the issue. 

Meeting deadlines

In many roles, deadlines are vital for good business and happy clients. You can use deadline success rates to express the importance of staying on schedule for employees who tend to procrastinate or fall behind. 

A simple success rate or +/- of days early or late on projects will show who is good at time management and could use extra guidance. 

Quality of work

Measuring quality isn't always easy. Depending on the role, quantifying or even recognizing quality can be difficult, especially for those without specialized knowledge in that field. 

A school grading system (A+, B-, D, etc.) may be appropriate in some cases.

In other cases, you may need to get creative in measuring and recording performance quality.

Average scores from 360-degree performance reviews

Quantitative 360 feedback focuses on measurable, numerical data. Typically, respondents rate an individual on various competencies using a scale (e.g., 1 to 5 or 1 to 10).

These ratings can be averaged to produce scores for specific areas or overall performance.

Example questions:

• Rate the individual's communication skills on a scale of 1 to 10.
• On a scale of 1 to 5, how effectively does the person collaborate with their teammates?

Quantitative feedback can be used for benchmarking, tracking progress over time, or comparing performance against peers or organizational standards. These numerical metrics offer a clear, albeit sometimes superficial, snapshot of performance.

However, when combined with qualitative feedback, you will get the depth and nuance necessary to understand the why and how behind the numbers.

Collecting qualitative 360 feedback provides the stories, examples, and contexts that can guide development efforts, coaching sessions, and training interventions.

Example questions:

• Describe a situation where the individual demonstrated strong communication skills.
• What areas of improvement have you noticed in the individual's teamwork?

Sometimes, qualitative feedback from their coworkers is the best (or only) way to measure an employee's performance. 

9 Box grid

The 9-box model is a classic HR tool used in talent management and succession planning. The grid assesses individuals on two primary dimensions: performance and potential.

Usually, the Y-axis represents potential, while the X-axis represents performance. 

Both categories are broken down into:

• low; 
• medium; 
• high performance.

This breakdown results in combinations like:

• medium performance with high potential (promising rookies);
• medium performance with medium potential (average Joes); 
• low performance with low potential (bad hires).

In essence, the 9-box matrix simplifies complex evaluations of employee performance and potential into a visual tool that can guide talent management decisions. It's a metric that provides a holistic view of an employee's current value to the organization and their future trajectory.

📈 Check out our complimentary resource with 38 role-specific performance metrics.

🏢 How do influential companies measure employee performance?

Below are three examples of how successful businesses measure employee performance and use the results.

Facebook

Though Facebook only runs performance reviews bi-annually, it is a very in-depth process incorporating 360-degree feedback tools and a complex rating system. 

Facebook uses a simple seven-tier scale ranging from "does not meet expectations" to "greatly exceeds expectations." Their scale also includes a pinnacle called "redefine" for employees whose performance is quite literally off the scales.

Learning & development is one of four main pillars used in these reviews, showing the importance of employee growth and upskilling. 

💬 Read the complete case study about employee performance measurement at Facebook.

Netflix

Netflix has also implemented 360-degree feedback. However, they use it as a replacement for performance reviews rather than a supplementary resource. 

This approach gives management a well-rounded view of each worker. 

Employees can submit reviews for as many coworkers as they wish.

These reviews are not limited to a yearly schedule, allowing for frequent feedback and constant accountability. 

Rather than using a rating scale, Netflix focuses on constant support and feedback to keep employees moving forward. 

Though the "Keeper Test" asks managers the very real question, "How hard would you fight to keep this employee if we had to make cuts?"

🎥 Tune in for the complete case study on measuring employee performance at Netflix.

Cisco

Unsurprisingly, the American-based tech company Cisco heavily embraces technology and automation when measuring employee performance. 

"Team Space" is their digital feedback system which manages performance measuring for over 70,000 employees.

The software focuses on employee strengths and offers real-time feedback. This way, managers can address issues as they arise and find opportunities to enhance and utilize their workers' skills. 

Focusing on employee growth, rather than scores and ratings, drives Cisco's performance measurement program.

📡 Learn more in our case study on Cisco performance reviews.

🔍 Why measure employee performance?

You may think measuring employee performance is simply a way to enforce a certain quality standard.

However, while you can use employee performance to weed out underperforming workers, measuring employee performance has other significant benefits too.

For employees to thrive and grow, measuring performance can be used to look for opportunities for improvement.

For example, suppose an employee excels in their work quality, but their overall output is low. Focusing on improving their efficiency without lowering the quality of their work can make them more valuable and successful team members.

You should work with employees to align performance goals and strategize how to achieve them. 

These types of individual goals help employees stay focused and motivated. Plus, with support from People Ops, they can improve their skills, benefiting career growth and adding value to the company.

Employee performance may also help identify weak areas in the company. Such weak areas can be weak links in a team or inadequate training that may lead to poor performance. 

You can optimize training programs and reduce turnover by addressing these issues and strengthening underperforming employees.

➡️ Enable a culture of high performance with Zavvy

Management cannot effectively support their workers if they don't know who is performing well and who needs help.

If this sounds like your business, but you don't have the infrastructure or manpower to conduct modern performance reviews, Zavvy can help. 

Our performance review software has everything you need to run effective employee performance evaluations.

You have full control over which tools and methods you want to use. Plus, our automations and analytics will make getting results quick and easy.

‍📅 Schedule a demo today to see how our software can help your company and employees reach their full performance potential.

❓ FAQs

What is the most common method for measuring employee performance?

The most common method for measuring employee performance is the Performance appraisal or Performance review. This process typically involves a scheduled evaluation where managers and other superiors assess the employee's performance against a set of predefined criteria. Feedback is then provided, and goals are set for the next period.

📈 Get a step-by-step guide and tips for successful performance review meetings.

What tools are used to measure performance?

• Performance management software: Tools like Zavvy, BambooHR, or Workday.
• Project management tools: Software like Asana, Trello, or Jira can be used to track task completion and timeliness.
• Feedback and survey tools: Platforms like SurveyMonkey or Typeform to gather peer or 360-degree feedback.
• Time tracking software: Tools like Toggl or TimeDoctor to monitor hours worked and productivity.

What is an example of KPI for employee performance?

For a sales representative, a key performance indicator for employee performance might be the number of sales made or the value of sales over a specific period.

For a customer success representative, a KPI for performance is the Net Promoter Score (NPS), which measures the likelihood of customers to recommend your product or service to others.

For a marketing manager, a KPI for performance is the customer acquisition cost (CAC). This metric represents the cost to acquire a new customer. It combines the costs of marketing and sales—including wages, marketing mediums, advertising costs, and any other expenses related to bringing in a new lead and converting them to a customer.

How does HR measure performance?

HR typically employs a combination of qualitative and quantitative methods. These can include self-assessments, peer reviews, manager evaluations, 360-degree feedback, and tracking of quantitative metrics or KPIs relevant to the employee's role. HR often uses software systems to consolidate and analyze this data for better insights.

What are the 4 key measures of performance?

• Quality: Focus on how well an employee performs work, and whether or not it meets or exceeds standards.
• Quantity: Focus on the volume or amount of work an employee produces.
• Timeliness: Focus on how quickly and punctually an employee completes tasks.
• Cost-efficiency: Focus on ensuring an employee does their tasks in the most resource-effective manner.