Effective performance measurement helps companies identify their strengths and weaknesses, top high performers, areas for improvement, and helps set benchmarks with historical data.
Gaining a competitive advantage by achieving a certain level of business performance is the primary prerequisite for the successful operation of a company in the long term in today’s highly competitive environment. For this reason, the performance measurement and management system becomes more and more important tool for evaluating of company performance.
Managing talent effectively is critical to achieving organisational business objectives regardless of industry, staff size or location. This common thread, however, does not extend to how organisations manage, provide feedback and motivate their talent. Although there is little consensus on the best way to manage employee performance, the use of performance reviews is pervasive.
Almost all organisations recognise that performance management is necessary to align an employee’s effort with the organisation’s expectations. Yet, HR and people managers concede that evaluating employee performance is cumbersome and time-consuming, with few direct improvements toward employee engagement and, ultimately, performance.
Today’s HR professionals and managers have access to a wide range of advanced job performance measures. Performance evaluation usually includes hard facts and data representative of employee work, but we also need to remember that it’s not just about data.
Accurate job performance measures also consider insights that only another human can understand and appreciate. After all, various factors can influence the way an employee performs. So how do you tune the performance evaluation process to ensure you’re not being subjective or unfair?
Performance management and performance appraisal
Although employees and managers often think of performance appraisal as synonymous with performance management, the two are not the same.
Performance management is the broad collection of activities designed to maximise individual and, by extension, organisational performance. It includes setting expectations, measuring employee behaviors and results, providing coaching and feedback, and evaluating performance over time to use in decision- making. The purpose is to align individual efforts to achieve organisational goals.
Performance appraisal, or performance evaluation, is the assessment of past performance within a given time frame. The purpose is to judge how well employees have performed relevant to expectations and to use this information to make a variety of talent and organisational decisions. A performance review generally refers to the component of performance appraisal that involves completing rating tools/forms and having a formal conversation between an employee and manager to discuss the evaluation results.
How to measure job performance
Because decision-makers need complex data to guide their process, performance evaluations must find the middle ground between intuition and performance indicators. After all, you can’t build a business on the feeling that everything is going well – you need actual measurable and quantifiable proof that what you’re doing is working.
Let’s have a look at the factors an evaluator checks during a performance evaluation meeting:
- Is this person effective? Do they do their assigned tasks according to company standards?
- Do they know how to use the resources at their disposal? Are they efficient?
- Is this person looking to improve and grow in their current position? Are they actively learning new skills and trying to better themselves?
- If you pay close attention to the points mentioned above, you’ll identify 2 clear indicators of performance: efficiency and effectiveness. Now, how do you measure these?
HR professionals came up with a series of metrics that help make sense in a management by objectives business model. These job performance measures are based on both hard data and human insight in order to make sense of the efficiency and effectiveness of an employee.
The most important ones are quality of work (often paired with productivity), growth and development graph, team integration (usually associated with communication skills), and goal & objectives achievement.
Job performance measures based on indicators
In this section, we’ll look at some of the most critical employee performance metrics and how to measure each factor. Plus, we’ll have a look at the reason why it’s essential to understand their meaning.
Quality of work & productivity
Productivity is generally easier to measure than the quality of work. After all, productivity can sometimes be confused with ‘keeping busy’ or always having a packed schedule. But just because a team member always has something on their plate, it doesn’t mean their work is of quality. What productivity shows is how much a person produced in a given period of time. So, if Jane from content marketing produces ten blog posts per month, everyone can say she is productive. But is her work yielding results? That’s where you start to check the actual quality of work.
In the case of Jane, you can appraise work quality by measuring factors such as:
- The number of viewers brought in by her blog posts
- Number of new clients generated organically
- Social media engagement with the content she creates
- The bounce rate on each of the posts she created
- Types of comments and rankings under each blog post
Overall, when you have a clear goal in mind (increasing sales, for instance), it’s easier to measure the quality of work by focusing on how the results align with it. Of course, an employee’s performance in terms of work quality depends on their tasks, the industry, and other elements of that nature. So, you need to adapt the evaluation process and make it your own.
Growth and development
Because many people use a chronological resume template to apply for jobs, it can be easy to assume that a person who has a full CV is growth-oriented. In most situations, this impression is accurate – people who have experience with different employers and in various positions in the field are more interested in learning and growing.
However, it’s difficult to understand the internal environment of another business. For instance, employees who seem diligent on paper may not be as proactive as they appear in a different environment. The only way to tell the difference is to check their behavior once they are part of your organisation.
Here are a few pointers to look out for:
- They are excited to participate in training programs offered by the company;
- They apply the information received during training to improve work performance;
- They respond well to constructive feedback and consider recommendations;
- They make suggestions on improvements around the office and are interested in creating a positive environment;
- They attend professional development events and seek to engage in training even on their own time (setting improvement individual goals to hone new skills or sharpen old ones).
To ensure the performance management system considers these indicators, use data such as attendance to training, participation during learning events, and skill improvement over time.
Team integration
The ideal employee knows how to deliver maximum work quality and productivity with minimum effort and expense. They don’t make many costly mistakes, and they use the resources already at their disposal without going into overtime or missing deadlines.
But, to get to this level of performance, you need both job knowledge and team support. After all, in today’s work environment, you can’t do much if you don’t have the team’s support. Therefore, team integration and communication skills need to be monitored. In this case, the most valuable insight comes from the team members, especially those who interact daily with the person under evaluation. Ask for employee reviews of the person, and don’t forget about team assessments.
Goal & objectives achievements
Clear goals and objectives defined for a specific period are ideal for measuring employee performance. After all, once a goal has been achieved according to expectations, it’s pretty clear that everything is going well. However, leaders cannot set the right goals without everyone’s input. Most organisations that set company goals at the executive level without consulting employees will create unhappy employees.
Managers must sit down with their teams and chat about future career goals and objectives. Everyone involved should have a saying in the process. It will help you set more realistic goals and time frames, making employees feel valued and seen.
Plus, you can also have a set of goals for the team, where each member can decide on their individual goals for growth and development. Goals like better communication or increasing quality leads delivered by a project can inspire people to work harder.
Also, don’t forget that employee evaluation is a 2-way conversation meaning you should also discuss individual employees’ personal goals and find ways to tie them into the higher organisational goals. Plus, it helps to know what type of language to use, so both parties have a positive and productive performance review meeting.
Performance evaluation tools
Each company has its own tools for performance appraisals, but here are a few specific examples of the most common formats:
- Graphic rating scales – are a simple tool that can be used to keep track of an employee’s performance in time. Evaluators use numbers (1 to 10) to rate an employee’s performance goals in a specific area or skill. As time goes by, the scale should have an upward trend to the person is improving and can overcome challenges.Self-evaluation forms – ask employees to submit regular self-evaluation forms and compare your appraisal to the results. Employees are often more critical of themselves, which will help you understand if you’re both on the same page regarding performance evaluation.
- 360-degree feedback – it’s important to get feedback from multiple sources within the company, including supervisors and remote colleagues. A complete assessment must include opinions from the entire circle of people the employee interacts with within the company (hence the 360-degree feedback system). By varying the sources, it’s easier to identify the true positives and negatives in their performance.
Wrapping up - Gauging employee performance is important to understand whether they are a good fit for the company. But it also helps with understanding employee goals that may not be in perfect alignment with your business. Plus, it’s good to have regular performance reviews, not just annual ones. More frequent check-ups normalise the process and allow management to keep in touch with the employees. And, if there is a problem, it’s easier to fix if caught early on.
What’s the Difference: KPI vs Metrics
Metrics and KPIs are often confused, but the clear difference is KPIs are the key measures that will have the most impact in moving your organisation forward. They clearly articulate and provide insight into what your organisation needs to measure and achieve to reach your long-term objectives. Great strategic plans have 5-7 clear Key Performance Indicators that keep the pulse on how you’re performing against your plan.
Metrics also track and provide data on your organisation’s standard business processes but are not the most important metrics your organisation needs to measure, monitor, and perform against to make progress against your strategic plan.
It’s easy to use the two terms interchangeably, but here is a good way to think about it. Key Performance Indicators help define your strategy and clear focus. Metrics are your “business as usual” measures that still add value to your organisation but aren’t the critical measure you need to achieve. Every KPI is a metric, but not every metric is a KPI.
Example: KPI vs Metrics
An example of a great KPI is to increase new customer trials by 15% in 2022, representing a growth of 15 trials per week to 18 trials per week. This KPI supports a specific strategic outcome–an increase in net-new revenue and helps clearly outline an outcome.
An example of a metric would be organic inbound website traffic. It’s important to track this metric as it helps feed your strategy outcome, but it’s not a clearly defined KPI related to an outcome. It’s just a valuable metric.
Structuring Your KPIs
Creating KPIs forces your organisation to clearly define the performance measures that outline how you’ll achieve your big strategic priorities. Here’s a great video on how you can develop your KPIs.
As you create yours, KPIs are comprised of four key attributes and your output should be 5-7 clear KPIs for your plan. Remember the following:
- Define Your Measure – This sounds obvious, but every KPI must have a clear expression of what you need to measure. The more descriptive your performance measure, the better. You can categorise performance measures into these categories:
- Activity Measures –This measures activity and can include a percentage, number, currency and activities, or processes. An example of this measure would be the number of leads in your pipeline.
- Outcome Measure – This measures progress against a defined outcome, often expressed as a percentage increase, change, or results from an outcome. An example of this would be % increase in revenue compared to last year.
- Project Measure – This measures the progress of a project, often expressed as percent complete, a deliverable, activity, or process the owner can influence. An example would be % complete to complete XX strategic project.
- Target Structure – These represent a numeric result against a date. A perfect example would be $XXXM in revenue by the end date of a strategic objective.
- Define Your Target – Your target is the numeric value you’re setting out to achieve. Targets need to match your measurement type and due date. If your measure is a percentage, your target needs to be a percentage. If your measure is a raw number, the target should be a raw number.
- Outline the Data Source – Every KPI needs to have a clear data source. Make sure you articulate where you are pulling your data from and what the calculations are so everyone is on the same page.
- Define an Owner and Tracking Frequency – As with any SMART goal, a KPI needs to have a clear owner and defined tracking frequency. So, make sure someone is accountable for pulling the data and updating performance on a defined frequency. We recommend monthly in most cases.
A Checklist to Know You Got Your KPIs Right
We know KPIs and performance metrics can be downright hard. As an evaluation to see if you got your Key Performance Indicators right, here’s a quick punch list you can use to pressure test your list of KPIs to make sure they’re strategic:
- They provide a way to see if your strategy is working.
- They focus our staff’s attention on what matters most for success.
- They provide a common language and understanding for communicating our performance.
- They are valid and realistic, helping ensure we’re measuring the right things.
- They are verifiable and ensure accurate data.
- Bonus: They’ve moved from outputs to outcomes. When we say moving from outputs to outcomes, it means the KPI has clearly expressed the result or outcome of achieving the objective. It helps answer the question, “why are we working on this objective?” The best KPIs are a clear expression of your desired outcome at the end of your strategy.
Last updated: 4 July 2022
Author
Founder and Managing Director Anne Morris is a fully qualified solicitor and trusted adviser to large corporates through to SMEs, providing strategic immigration and global mobility advice to support employers with UK operations to meet their workforce needs through corporate immigration.
She is a recognised by Legal 500and Chambers as a legal expert and delivers Board-level advice on business migration and compliance risk management as well as overseeing the firm’s development of new client propositions and delivery of cost and time efficient processing of applications.
Anne is an active public speaker, immigration commentator, and immigration policy contributor and regularly hosts training sessions for employers and HR professionals
