How to Define Employee Performance Metrics

At its most basic, a performance evaluation is simply providing constructive feedback on whether an employee is underperforming, meeting, or exceeding the goals and objectives of their job. Employees need this feedback so they can feel confident knowing what is expected of them  as well as how and where they can improve.
Job goals evolve over time. Good collaborative performance reviews arise from sitting down with your employees to update personalized goals and objectives. Together you can  agree on the best ways, or metrics, to measure the performance. Some activities are relatively easy to measure, such as reaching a specific sales volume. Others might be more subjective, such as the ability to solve customer complaints in a way that preserves long-term loyalty.
Three basic metrics often used by small business owners are:
  • Productivity Metrics. Productivity is the bottom line for any employee, regardless of the job. It’s the amount of work an employee accomplishes in a specific amount of time, such as a workday or week. Productivity should rise as an employee gains experience and proficiency. Productivity is often measured using numbers, such as selling or producing a certain number of widgets, or making a certain number of sales calls.
  • Efficiency Metrics. This is a companion to productivity, measuring how much effort and/or expense is required for an employee to maximize productivity. Coming up with a creative solution to cut costs, or reduce the number of mistakes made in production, or increasing the accuracy of data entry, are just a few examples.
  • Training Metrics. Good training programs can boost productivity and efficiency when they are aimed at boosting specific performance outcomes. Written tests or post-training surveys are two ways to immediately evaluate the impact of your training initiatives. Longer term, training success will show up as improved results in your productivity and efficiency metrics.
When everyone in the workforce buys into the metrics used for performance evaluations, it can help you build productive and trusting working relationships with your employees.

Game Plan

  • Performance evaluations should take place at least annually. Many business owners find it helpful to do them more often. Engage your employees in determining the best review schedule for your business.
  • As you run through your metrics and add up the numbers, don’t lose sight of the human element. Quantitative metrics can only tell you so much. You need to be sensitive to the uniqueness of each employee and what they bring to the company that may be harder to measure, such as a personality and enthusiasm that inspires others. Often, this type of evaluation is more of a gut feeling. Try to apply all evaluations, including the subjective ones, evenly across your full workforce.
  • Keep your individual performance evaluations tied to how well the performance is helping to achieve overall company goals.
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