How to Measure Employee Performance: Metrics, Methods, and Tools for Performance Evaluation and Assessments

As of 2018, 76% of HR professionals would tell you that your organization can’t do without ongoing performance reviews from peers.

The issue with conducting continuous reviews is that it can all be pointless if you don’t extract useful findings. That’s why knowing how to measure employee performance is critical for companies of all sizes.

This article will break the process down and help you find the best ways to measure work performance. Plus, it digs into why it’s important in the first place.

How to measure employee performance

You have to start with an enterprise performance management plan. Then, you can apply the basics of continuous performance management.

Here’s how to measure the progress along the way:

Step 1: Role-relevant goal setting to gauge employee performance

Goals are vital to performance because good goals help engage employees in their work. This should be a collaborative process versus you assigning them goals that might not align with their work. You want the employee to come out of goal-setting thinking, “I want to do that” instead of “I have to do that.”

When creating the goals, start by defining each OKR meaning to reflect the positive change you want to see. Next, you can break down each goal into smaller points.

Don’t forget that you should set some soft metrics to measure intangible factors. To be able to do it accurately, you should set at least five aspects. These can include behaviors, attitudes, skills, knowledge, and administrative areas.

Then, you can translate this information into KPIs to track individual progress. If you’re not sure which KPI to choose, here are a few suggestions to get you started:

Productivity and work quality

One of the main ways to assess your employees is to see how productive they are and what their quality of work is like. Generally speaking, productivity is easier to gauge than work quality. This is because employee productivity is about how big or frequent the output is.

For example, an employee might produce more reports than his peers in a week. However, that doesn’t necessarily mean those reports are of quality.

To inspect the quality in that case, you have to ask the following:

Skill development and improvement

Even if you’ve hired someone with an impressive resume, you’ll still need to track the skill development and engagement levels. After all, a resume alone might not be enough to predict if someone will thrive in your organization.

The best way to tackle this issue is to evaluate employee behavior on the job to make sure your performance management plan is working.

For instance, you’ll need to consider aspects like:

A great way to tackle this is through regular check-ins with your employees. Checking in once a week can have a big impact on their engagement and performance.

Achievement of goals and objectives

Define some individual goals and objectives for your employee to tackle over a specified period. Then you can expand those goals as you advance. Keep in mind that quick expansion is a key indicator of solid progress.

Ideally, your employee would be able to cover the required goals with the most efficient usage of the resources. This could mean avoiding working overtime or going past due dates whenever possible.

Team integration

Apart from doing their work well, reliable employees know how to work well with others.

So, it would help to ask team members that interact with the employee in question for feedback. You can also evaluate how their peers view them in terms of communication skills.

While this might sound like a hassle, you can always use digital tools that facilitate peer-to-peer feedback, like Conversations^®. This way, anyone can initiate feedback, and you’ll get to check what people are saying about any given employee.

Learn more in this white paper, “9 Tips for Giving Feedback (Without the Stress)”

Come up with personalized performance metrics

Even in the same industry, each company will have its own way of conducting business. The last thing you want is to implement a certain KPI that doesn’t apply to your workflow just because other organizations are using them.

Instead, personalized metrics can keep the process flexible. As a result, you can reduce the sense of unfairness that might come with performance management. You might even ask employees to provide feedback about the KPIs!

Step 2: Set benchmarks

After you come up with the aspects you want to measure, you’ll need to set a baseline. To do that, you’ll have to track data for a while from the performance you get from the average employee.

You can also use data from other organizations in the field to find your benchmark. Then you can go ahead and set your peak performance level.

All that’s left is to compare how your employees are doing with how they should be doing. Look for the areas with the biggest gaps between the actual and the ideal. Those are the areas that you can focus on to help employees.

Step 3: Give employees a guide on how to improve and monitor their progress

Good leadership doesn’t stop at measuring and benchmarking. You also have to direct your employees on how they can improve.

It’s best if you also provide them with regular updates. This way, you can capitalize on the positive changes and work on the gaps together.

When you have everything set into motion, try to automate the process and find a suitable interval. Some companies go with the classic annual review model. However, surveys point out that 92% of employees would rather get feedback about their performance more often.

Remember that measuring work efficiency regularly pays off. After all, a lot can happen in a year, and you might want to adjust the goals as you go.

Best methods for performance measurement

Measuring usually requires hard numbers. However, that’s not very applicable when it comes to the performance management process.

What HR professionals usually aim to do is to quantify the qualitative. Thankfully, there are some key performance management methods that help with that.

1. Graphic rating scales

You can use sequential numeric scales (1-5 or 1-10) that measure performance metrics. For instance, you can rate the employee in aspects like “time management,” “task completion,” or “helping peers.”

Alternatively, you can use frequency scales, like “always,” “frequently,” “occasionally,” or “never.” These can be a good fit if you don’t think that numbers can accurately describe the metric.

After all, the rating scale itself is the static part, and you can tailor the metrics to your organization’s needs.

2. 360 feedback

The name 360 refers to the fact that this feedback isn’t one-sided. Instead, it takes into consideration the input from coworkers, managers, and maybe even customers. Ideally, you want to hear from people who interact with the employee.

The main principle behind 360 feedback is that combining insights from multiple sources can give you a clearer picture. This way, you can avoid blind spots in an employee’s strengths and weaknesses.

3. Self-evaluation

One of the most effective ways of providing feedback is to encourage employees to evaluate their own performance on a regular basis. You can use multiple-choice questions, essay questions, or both to extract insights.

Then, you’ll need to compare the self-evaluation to your expectations and reviews. The discrepancies between the two can show you the main areas for improvement.

However, the most common issue to watch out for here is receiving deluded feedback.

4. Management by objectives (MBO)

Management by objectives or results is a very straightforward and efficient way of providing feedback.

Typically, the employee agrees with management on certain objectives and how to measure them. Of course, all these should align with the company’s goals. Then, the employee receives an evaluation based on those expectations.

This approach works best in organizations with efficient communication between management and staff.

5. Checklists

This method is quite basic and relies on a yes/no checklist. It’s simple enough and helps you see where your employees are meeting performance expectations and where they aren’t. Next, you can pinpoint the skill sets and areas where the staff needs guidance.

However, this method takes away the ability to grade performance. So, you might want to limit it to very rigid metrics only where any deviation from the ideal is unacceptable, like sticking to an important deadline.

6. Ranking method

In the good-old ranking method, management ranks employees from the most to the least productive. This happens according to a set of parameters.

However, this approach can turn into destructive competition if you’re not careful about the work culture.

7. Behaviorally anchored rating scales (BARS)

The BARS method rates an employee’s behavior and uncovers how it relates to job performance. It’s represented in statements that describe the behavior as specifically as possible.

One of the benefits of this method is that it measures the intangible, which is typically overlooked. For example, an employee might take the time out of their day to help out colleagues. So, BARS would be great at tracking this positive behavior.

However, it would be a little hard to keep track of these minor instances throughout the day. So, it’s best to use it alongside another performance measurement method.

Why is it important to measure employee performance?

Accurately assessing performance can help align the workflow with the company’s objectives. It can also save resources while predicting problems that could arise later in the work culture.

One of the appeals is that it helps the HR managers spot the areas that need tweaking. For instance, the results can point to certain training programs that the employees need.

Yet another company-wide benefit to look forward to is identifying the top performers. Then you can use these insights to boost the company’s culture with employee recognition. That said, you might need a software solution, like Workhuman’s Social Recognition^®, to streamline the process for HR teams.

Plus, analyzing the results can help you identify the metrics that don’t provide a heavy indication of the employees’ performance. This way, you can save time and effort on measuring those and focus on the more relevant aspects instead.

Keep in mind that evaluating performance can be quite expensive and time-consuming. So, you’ll want to weed out any unnecessary metrics or activities in the process to balance the benefits with the drawbacks.

FAQ

Conclusion

Knowing how to measure employee performance is detrimental to achieving organizational goals and maintaining a healthy work culture.

Once you find the right metrics and methods for your company, you can recognize employees that are doing well. On the other hand, you’ll be able to put the ones that need to work on themselves on a performance improvement plan.