How to measure manager performance effectively in 8 steps

By Indeed Editorial Team

Published 5 May 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.

Measuring manager performance is important and gives decision-makers a comprehensive understanding about how well they perform. There are several metrics that C-suite employees can use to effectively measure their managers' performance. This gives senior executives a better understanding about how well managers can lead teams under them. In this article, we explore how to measure manager performance effectively in eight steps.

How to measure manager performance in 8 steps

If you're wondering how to measure manager performance, here are eight steps to follow:

1. Overall team performance

A manager's performance links directly to the results their team achieves. Even though this is not the only metric to consider, it's still quite important. Performance is an important indicator of how the manager oversees their team and manages employees. For instance, in a company's marketing function, performance can mean the quality and the number of leads that the team is able to generate over a specific period of time.

In the finance department, managers are responsible for making sure that the team maintains accurate reports and records all transactions. In case data is not readily available, it can indicate lapses in performance. At the start of a specific period, such as a quarter, most companies set specific targets for different teams and departments. A manager's performance is easy to measure by determining whether their team achieves those targets or how close they get by the end of the period.

Related: How to conduct employee performance reviews (with steps)

2. Overall engagement score

The managers in a company create a strong link between the C-level staff and the frontline employees. They play a pivotal role in managing employee engagement and understanding their needs and communicating them to the decision makers in the company. The engagement score is a metric that indicates the level of involvement or engagement of a manager within their team. Companies can establish a dedicated survey process to identify questions to ask from team members about their managers.

The engagement score also highlights the relationship between the manager and their employees. A lower engagement score indicates that the manager is not closely involved in the team's work processes and their overall impact within the team is low. While a 'hands-off' management style is not necessarily a bad thing, it's still important for managers to ensure that they know what each member of the team is working on and how they are performing:

Red flags that require action

The biggest red flag is a relatively lower engagement score than other departments within the company. If a manager has consistently low scores, it's important for upper management to take action and investigate the root cause. If upper management fails to take action, there's a risk that team members may start resigning or submitting requests for a transfer.

3. Turnover rates and absences

A major indicator of a manager's performance is the overall turnover rate in their team. When calculating the turnover rate, it's important to factor in the number of absences as well. How many employees quit after showing a consistent pattern of absences over a specific period of time? What was the general level of performance of such employees? Were they completing their daily targets or achieving their milestones?

Another important factor to consider is the resignation rate of high achievers within the teams. Many top-performing employees often quit because they feel their managers are unable to support them or restrict their progress. This can be an important metric in identifying managers with good management skills and those that have difficulty in managing high performers.

How to calculate the resignation rate of high achievers

Here's how to calculate the resignation rate of high performers in different teams:

  1. Select a time period. This could be any period, such as the last quarter.

  2. Calculate the number of high achievers who quit in that time period. You can use in-house metrics to determine performance and calculate the number of all high performers who quit.

  3. Calculate the average. Then, calculate the average headcount of all high achievers within the company's different departments.

  4. Divide the two. Now, simply divide the number of all high achievers that quit with the average headcount from the last step.

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

4. Employee surveys

Employee surveys are an important feedback tool that can help upper management measure manager performance effectively. Employee surveys are generally anonymous, which allows each respondent to speak freely and provide uninhibited feedback. It's important to prepare questionnaires carefully and ask the right questions. For instance, questions relating to the nature of feedback the manager provides, their level of involvement within operations and their overall management approach are important.

Some managers prefer taking a more autocratic approach with their team members, while others prefer a more democratic way, allowing team members to pitch in with their input. By asking such questions from team members, employers can identify a manager's strengths and weaknesses. Similarly, if a team is underperforming, a questionnaire that asks about any recent changes or suggestions for improvement can be quite helpful. The human resources department can discuss with managers whether they took such feedback into account when preparing strategies or not later on.

5. Overall rate of advancement

Good managers are quite open-minded and provide plenty of opportunities for advancement for their team members. They understand the strengths and weaknesses of their team members and help in their development until they are ready to take on more responsibility and advance to a bigger role. If a manager regularly suppresses the talents of their employees and prevents them from advancing in their careers, it can be a sign that they are against employee development.

If that is the case, it's important to understand why. If more people think that a manager is against advancement, they may consider moving to another organisation altogether. This could cause the company to lose talent over time. This could hurt the company's organisational performance and create feelings of resentment amongst top employees.

6. Set clear objectives and key results

Objectives and key results (OKRs) can help organisations measure manager performance accurately. At the start of a specific period, such as a quarter, the managers can present their objectives for the upcoming time frame. The framework requires managers to set goals for themselves and their teams. They can discuss their goals with upper management and justify their plan to achieve them.

The key results are the metrics that the upper management uses at the end of the quarter to determine the team's and the manager's performance as a whole. Upper management can use key results in tandem with KPIs to quantify performance data and identify areas of improvement. This also shows whether a manager understands the team's capability and can ensure a productive environment for each employee so that they are able to achieve their targets. The framework is quite popular and helps managers connect employees with the company's big-picture targets.

Related: Areas for improvement to help with employee performance

7. Resource consumption

Managers are responsible for ensuring that their teams achieve their goals within the allocated resources. Most companies establish firm financial controls to prevent budget overruns, though they still occur due to the dynamic nature of modern work environments. It's the manager's primary responsibility to complete the job while managing resources to prevent the company from losing money. This relates to both human and financial resources of the organisation.

If a manager regularly exceeds their team's allocated budget or requires additional resources from other departments to achieve their team's targets, it's an indicator of poor management. Managers are responsible for bringing new employees and integrating them into their teams effectively. They often work closely with HR during interviews to find talented new recruits and hire them. If a manager has a history of exceeding budgets and mismanaging resources, it can be difficult for top-level members to rely on them for important projects.

8. Initiative

Managers are in a prime position to provide feedback and input to upper management about how to improve basic processes and achieve the company's big-picture goals. They communicate directly with the frontline staff in most cases and can pass that feedback along. In most cases, managers also take initiatives to improve performance in their departments. If a small initiative is successful, they can present their findings to the upper management. They can then create guidelines and replicate it throughout other functions, improving company performance throughout.

Companies prefer managers that are willing to take initiatives and are constantly looking at ways to improve performance. During meetings, upper management can take note about the success of different initiatives and their overall benefits to the company. They can also run focus groups to identify the impact on staff and their overall level of satisfaction in working with a particular manager.

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