How to measure employee performance in 6 easy steps

By Indeed Editorial Team

Published 13 April 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

It's common for companies to conduct regular evaluations of their employees so that management may evaluate an employee's performance, career path and potential for improvement. Managers can also use employee reviews to determine raises and promotions. If you're responsible for measuring your team's performance, you may benefit from reading about ways to do so. In this article, we explain how to measure employee performance and list the types of employee performance metrics for you to consider.

What is employee performance?

Employee performance is how well an employee fulfils their job role and completes tasks, duties and projects within a workplace. Employee performance is not just measured on data but on how an employee behaves in the workplace and what sort of atmosphere they create. For example, successful employee performance is an employee who completes work to a high standard and is pleasant to be around.

How to measure employee performance

Follow these six steps to learn how to measure employee performance:

1. Prepare your feedback in advance

Well-intentioned feedback is critical. A well-planned meeting can keep the discussion on track and professional by contemplating your evaluation and how you can give it to your employee. For each employee or team, write thorough notes and talking points ahead of time so that you can reference them.

2. Give employees time to prepare

It's essential to explain to your staff how and why you conduct performance assessments and what the sessions involve. Have your team prepare for the evaluation by thinking about it ahead of time. Your employees may benefit from creating a document that includes all the grading criteria for their self-assessment. Use it to compare your performance rating with your coworkers during the meeting.

3. Provide documentation

Provide your employee with a written copy of the critical aspects of your evaluation, such as an evaluation form in writing form. This allows people to stay involved throughout the discussion rather than taking notes, and it can help them reflect on your comments when the meeting is over. If possible, supply your staff with blank copies during the onboarding process. It's much easier for employees to prepare for their first performance review if they know the management's criteria in advance.

Read more: How to write an effective performance improvement plan

4. Make the meeting a dialogue

Even though providing complete feedback is essential, allowing employees to ask questions and for you to ask as well is necessary. Employees might discuss any problems or difficulties they may deal with during an appraisal. These meetings can improve employee morale and productivity. Ultimately, how your employees feel about working for your firm directly impacts their productivity. For employee evaluations, think of them as an opportunity to improve your company's culture and internal processes.

5. End with a positive outlook on the employee's future

An employee's performance evaluation may include complicated features, such as offering criticism or discouraging news. So, it's a good idea to end the meeting positively. Clarify that you're committed to helping your employees achieve their professional goals by showing that you care about their well-being. This kind of reassurance can help both parties deal with severe criticism.

6. Evaluate performance and contributions

It's important to evaluate an employee's performance based on how well they do the tasks you've allocated them in their specific function. Think about how they contribute to a productive work environment where employees work together to accomplish their goals. By providing a specific example of a time when the employee did not function well as a team member and how they can handle it better, you may help them improve their colleague relations.

Read more: How to conduct employee performance reviews (With steps)

Types of employee performance metrics

The following are some of the employee performance metrics you may use to measure their abilities:

Closing percentage

An employee in a sales role may meet with a potential customer and close the sale. An employee's closing percentage tells you how many leads they've completed. Instead of looking at the total sales, a salesperson's performance is in two categories: those who close sales and those who only discover potential customers for the sales team to contact. The closing percentage can determine overall performance or examine closing percentages based on subgroups within the performance data. Price variations might reveal the strengths and shortcomings of a salesperson.

Defect rate

As an assessment for employees in the manufacturing or repair industries, defect rate measures the percentage of goods an employee works on that have faults. You may evaluate defect rates alongside quantitative production measurements, as some errors may be acceptable if the employee erases them with significantly increased production. In other settings where deficiencies can have substantial brand damage, defect rates may be a primary assessment metric.

Error rate

An error rate is a measure that ranks employees according to the mistakes they make in their work, just like the defect rate. Error rate measurements can be helpful when defects are not an adequate description of errors. Error rate, like defect rate, works well with production measures. The choice of which metric is more significant depends on the specifics of the evaluated performances and the relative value of extra effort weighed against any harm from errors.

Upsell rate

Many organisations highly prize the capacity to offer additional items or services in sales, especially for attracting new customers. For example, a sales associate may try to sell you a case, a wireless charger, or an extended warranty when you buy a new phone. An upsell occurs if the buyer purchases different products from the sales associate. Upselling shows excellent sales skills, while others are a symptom of a lack of expertise.

Return on investment

Return on investment (ROI) is a metric that various industries use to measure performance. ROI is how much revenue an employee generates for the business for every investment made. Employee performance management requires using ROI rather than an employer's costs of hiring and training new employees. For example, a marketing manager's return on investment for marketing campaigns relates to the number of revenue clients contacted through those initiatives.

Review score

An employee can receive feedback and ratings in various situations. Each year, senior employees give employees numerical or textual ratings of how well they performed throughout the previous year. There are multiple ways consumers and clients can leave feedback, including online evaluations on crowdsourcing sites and unsolicited letters or phone calls to an employer. Review scores might give insight into how others perceive an employee's interactions with them to get a better sense of an employee's performance.

Related: Areas for improvement to help with employee performance

Average sale size

Each deal a sales professional closes provides vital information about their ability to close deals with consumers. A sales professional can compensate for a lack of sales numbers with high volume. Producing huge sales is the best approach to swiftly boost one's net sales and frequently shows a promising future.

Attendance

The management can detect negligent performance by looking at an employee's attendance history. Employees that are frequently absent or late to work may be unreliable. Data on an employee's absences, such as the frequency they go without notice or arrive late, can show a lack of trust in the organisation. You can be confident in your company's total commitment if an employee has an excellent attendance record and consistently offers notice when necessary.

Unique contacts

The phone division is a volume-driven industry for many corporations with remote sales units. To succeed in phone marketing, a sales professional may devote a significant amount of time to make calls. An employee's weekly call time measure shows how much time they spend speaking with potential clients. An employer may also use a sales professional's weekly call time to determine how much time they devote to various sales efforts.

Related: How to manage poor performance at work in 9 easy steps

Unit production

The management evaluates employees in manufacturing and packaging positions depending on the number of units they create throughout their shifts. There are a variety of situations when an individual may get a unit production assessment, such as in stocking, assembly line operations, or order fulfilment. Unit production is easy to monitor and record.

Total sales

A supervisor may be more interested in an employee's overall sales than in qualitative figures like the average transaction size or up-sale percentage in rare instances. Total sales do not factor in other indicators like profit margins, showing a sales professional's ability overall. This is especially important in a company when not all employees have equal access to the same products, which can significantly impact qualitative sales metrics.

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