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Employee Performance: What It Is and How To Measure It

Employee performance is one of the most critical aspects of any business. Read this guide to learn what employee performance is, how to measure it, and how to improve it.

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What is employee performance?

Employee performance refers to how well (or how poorly) an employee fulfills their duties and reaches their goals. Accurate measurement of performance includes the quality, quantity, and efficiency of a person’s work.

Employees drive your company forward. High performers can help you achieve goals faster, while low performers can have the opposite effect. Their hard work, creativity, and capacity for innovation inspire their peers and help the company stay competitive.

Monitoring employee performance will benefit both the company and the individual. It shows each person what they need to improve and allows the company to create development opportunities for its staff members. 

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How to improve employee performance

Employee performance is often more complex than it sounds. It’s a result of employee motivation, skills, engagement, and job satisfaction. Here’s how you can improve it.

  • Be transparent in your goals and expectations. It’s hard to do a good job when you don’t know what’s expected of you. Set clear, achievable goals, and make sure employees know what they’re working towards. 

  • Provide constructive feedback. Don’t criticize for critique’s sake. Instead, show employees what they did right, and where they made mistakes. Discuss how they can improve and listen to their concerns.

  • Prioritize learning and development. Employees who learn nothing new, can’t make progress, and eventually start underperforming. Create learning and development (L&D) programs that help your staff members expand their skill sets and learn new things.

  • Create a merit reward program. Top performers could quickly lose their motivation if their efforts aren’t recognized. A merit reward program motivates employees to do their best all the time. The goals should, again, be clear and achievable. If the standard is too high to reach and nobody can get a merit reward, your program will demotivate employees.

  • Focus on internal mobility and succession planning. Providing opportunities for promotion or lateral movement keeps employees longer. Plus, workers perform better when they know such options are available. Start an internal mobility and succession planning program, offer L&D opportunities, mentorship, and more.

  • Make work-life balance a priority. Don’t expect employees to set everything aside and work non-stop for the company. It might feel like performance and productivity increase at first. But in the long run, it will lead to burnout, absenteeism, a drop in performance, and turnover. Create a healthy workplace culture that encourages work-life balance and promotes well-being.

  • Create a strategic compensation strategy. Like it or not, compensation can have a strong say in employee performance. Ensure you’re not underpaying your staff and be transparent about pay.

How to measure employee performance

Evaluating employee performance is a complex but necessary process. It helps employees know they’re on the right track and improve when and where they need to. But it also helps companies spot performance issues before they affect major business processes.

To measure employee performance, you’ll need to use a combination of metrics and performance reviews. Metrics are objective data, while reviews and feedback require careful planning and are more personal. Here are some popular ways to evaluate employee performance.

1. Standard performance evaluation

These are 1-1 assessments with a manager evaluating one of their direct reports. You can look at multiple dimensions, including: 

  • Specific project evaluation 

  • Behavioral assessment 

  • Ethical and professional conduct, and more. 

Don’t forget to give constructive feedback. Help employees understand where they are meeting or exceeding expectations, but also where they could improve. Work with them to create a learning and development plan so that they can gain all the necessary skills. 

Don’t forget to also listen. Performance evaluations may feel one-sided, but they shouldn’t be. Hear what concerns or difficulties an employee has and work with them to find the best solutions.

2. 360-degree evaluation

A 360-degree evaluation gathers feedback from multiple sources, including coworkers, subordinates, and customers. 

The more varied the sources, the better results you’ll have. A 360-degree evaluation provides insight into both task performance and collaboration abilities.

3. Self-assessment

Self-assessments add a different layer to performance evaluations. They have a degree of subjectivity. But they also show you an employee’s self-awareness and their understanding of the company’s goals. 

Plus, you’ll get a good look at their willingness to improve and grow. You shouldn’t rely on self-assessments alone for a performance evaluation. But they’re a great tool alongside metrics and other types of reviews.

4. Objective-based performance

This type of review looks strictly at the goals an employee has reached and whether they do so before the designated deadline. To make the most of this evaluation, involve your employees in the goal and deadline-setting process. This helps them better understand what’s expected of them, and what the bigger goals they’re working towards are.

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5 employee performance metrics to track

No performance review can be complete without tracking performance metrics. Here are five to pay close attention to:

1. Revenue per employee

You can calculate this metric by dividing the company’s total revenue during a given period by the total number of employees. It will not give you a view of individual performance. Instead, you can use it to see how efficient and effective your workforce is. 

This metric helps to benchmark your company’s performance against the industry average and direct competitors. 

2. Absenteeism rate

Absenteeism and performance are strongly correlated. Employees who are engaged and satisfied with their job perform better and rarely miss work. 

Someone who is disengaged and unhappy with their job will have higher absenteeism rates and lower performance. Plus, high absenteeism rates often precede resignations, so this metric is crucial to track for any business.

3. Net promoter score

The net promoter score (NPS) is a less common, yet effective way to track performance. The NPS is a number, usually between 1-10, that represents how likely an employee is to recommend the company to a friend. 

A score of 9-10 means the employee would 100% recommend the company. It also shows you the person is highly satisfied with their job, engaged, and likely a top performer.

There’s another way to use NPS, though. This time, you wouldn’t be looking at an employee’s willingness to recommend the company, but at the customer’s. 

It is a common employee performance metric in sales, especially in departments where the customer interacts 1-1 with an employee. When they sign the contract for the purchase, they’re asked to rate on a scale from 1 to 10 how likely they are to recommend the company. If they say 9 or 10, it means the employee did a stellar job.

It is a simple metric, but it can be easily manipulated. Both employees and customers can lie, so it’s best to not rely solely on it when evaluating someone’s performance.

4. Role-specific KPIs

Role-specific KPIs include things like 

  • Total number of sales over a given period

  • Number of errors

  • Product defects

  • New leads over a given period.

In simple terms, you’re evaluating a person’s project performance, but you’re tailoring the assessment to each role.

5. Learning and development metrics

Learning and development (L&D) plays an essential role in employee performance. Metrics related to L&D show how well employees are learning new skills. It is also a mirror of their willingness to learn new skills and become better.

L&D often goes hand in hand with productivity and performance. It also boosts job satisfaction, engagement, and retention. Combining these metrics with other KPIs provides a clear view of performance and growth.

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Get insight into employee performance with people analytics

Employee performance is multidimensional. You need to look at the workforce data and understand what drives excellent performance, productivity, engagement, and more. Visier People Essentials is a complete solution for people analytics that will help you answer your most pressing workforce questions. From talent acquisition, retention, productivity, and compensation, you’ll be able to solve the hardest challenges in simple ways.

Understanding your workforce is only the first step to understanding and improving employee performance. Another critical aspect is skill gaps. When they occur, skill gaps can impact employee performance and productivity, and stand in the way of the company’s goals. The Visier Skills Intelligence Engine shows you unprecedented insights into your employees’ skills. From there, you can take a proactive approach to talent management, create L&D programs that help both you and the employees, and increase performance.

Finally, compensation is an essential component of employee performance. People who are underpaid and whose efforts aren’t recognized will eventually begin underperforming. Visier Smart Compensation helps you create an effective compensation strategy by using data to make decisions about compensation and reward high-performing employees.

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