How your employees perform daily in your business will have an impact on your business's success or failure. Employee performance involves factors such as quality, quantity and effectiveness of work as well as the behaviors your employees show in the workplace. You – the business owner – have control over setting these expectations and monitoring them regularly. Understanding performance metrics, employee performance review methods and ways to improve performance will help you ensure your workforce can meet your business's needs and your customers' needs.
Employee performance relates to how well workers can conduct their required job duties. Evaluating performance is an easy way to pinpoint the need for additional training and mentoring to improve your workforce.
Employee Performance Definition
Employee performance refers to how your workers behave in the workplace and how well they perform the job duties you've obligated to them. Your company typically sets performance targets for individual employees and the company as a whole in hopes that your business offers good value to customers, minimizes waste and operates efficiently.
For an individual employee, performance may refer to work effectiveness, quality and efficiency at the task level. Your salesperson, for example, may be expected to complete a certain quota of calls to potential leads per hour with a specific portion of those resulting in closed sales. On the other hand, a production worker may have performance requirements for product quality and hourly output.
Individual performance affects your team and organizational performance. If you have employees who can't keep up or who perform subpar work, this means that other workers may have to pick up the slack or that you have to have work redone. When employee performance is poor, you may not be able to satisfy your customers and thus see negative impacts on your profits, company reputation and sales.
Common Employee Performance Metrics
The specific metrics used to monitor employee performance will ultimately depend on the type of work your business does. However, there are some universal metrics to consider.
Businesses should monitor the quality of work, individual employee goals, effectiveness of training and employee efficiency. Evaluating quality of work and efficiency helps you prevent expensive mistakes, makes it more likely that your employees meet deadlines and reduces wasted time, materials and effort. Evaluating the effectiveness of training and individual employee work goals will help you determine if employees are best equipped to perform their jobs and to offer guidance when needed.
Some more specific performance metrics you might use depending on your type of business include:
- Number of product defects
- Number of errors
- Number of sales
- Number of units made
- Call handling time
- First-call resolution
- Absenteeism rate
Evaluating Employee Performance
Your business has several employee performance evaluation methods from which to choose, and you may find it helpful to use multiple methods to get a more complete picture of individual, team and organizational performance. Some of these include:
- Management by objectives: This employee performance-review method focuses on goal setting between managers and employees. It has the advantage of giving employees clear expectations of how they should perform their jobs and uses deadlines to monitor progress toward these goals.
- 360-degree feedback: This method takes advantage of getting input on employee performance from several individuals with whom the person works. In addition to having a direct supervisor look at work-performance metrics like effectiveness and efficiency, co-workers, other managers and anybody else to whom the worker reports can provide perspective on the employee's skills and character.
- Scale and ranking methods: There are various employee performance-review options that use lists or scales of desired traits to assess an employee. Employees may be ranked based on best to worst performance to easily identify those who may be desirable for higher roles as well as those who need more training.
- Employee self-evaluation: Often used in conjunction with another review method, self-evaluation gives employees a chance to think about their own work performance and identify their strengths and weaknesses. The disadvantage of this method, though, is that it can be hard for employees to be subjective about themselves.
Improving Employee Performance
In addition to evaluating employee performance regularly, you'll need an employee performance-improvement plan to respond to your findings. It helps to first identify why your employees do not meet performance expectations. Perhaps they lack proper training, motivation, morale or understanding of performance targets.
Once you've identified the cause, it's time to take action in the forms of offering additional training, implementing an effective reward system, improving the work environment, empowering your workers and using useful technologies.