How to Master Employee Performance Metrics to Turn Insights Into Income

In today's dynamic business environment, organizations are increasingly seeking effective strategies to enhance productivity and employee engagement. A critical challenge many face is identifying and implementing the right performance metrics to accurately assess and drive employee success.

With Deel's extensive global experience in payroll, HR, and IT management, we understand the complexities involved in measuring performance and are committed to providing tailored solutions that meet your unique needs.

This article will offer knowledge and tools to select the best performance metrics for your teams to turn insights into income and achieve your organization's objectives. You’ll also find examples of role-specific performance metrics to start tracking right away.

What are performance metrics?

Performance metrics are quantifiable measures used to evaluate an individual’s, team’s, or organization’s performance against specific goals or benchmarks. These metrics provide insight into efficiency, effectiveness, progress, and areas for improvement.

Performance metrics help in:

1. Tracking progress toward goals
2. Driving accountability and decision-making
3. Motivating individuals and teams by aligning their efforts with desired outcomes

Performance metrics are essential for assessing progress towards set goals and objectives and making informed decisions for improvement.

What are the four types of performance metrics?

The four main types of performance metrics are:

1. Financial metrics: Focus on financial outcomes such as revenue, profit margins, ROI (Return on Investment), and cost efficiency. - Example: Net Profit Margin measures profitability relative to revenue.

2. Operational metrics: Assess the efficiency of processes, productivity, and resource utilization. - Example: Turnaround Time tracks the time taken to complete a task or deliver a product/service.

3. Customer metrics: Measure customer satisfaction, loyalty, and engagement. - Example: Net Promoter Score (NPS) gauges how likely customers are to recommend the company.

4. Employee/People metrics: Evaluate employee performance, engagement, and satisfaction. - Example: Employee Retention Rate measures the ability to retain staff over time.

Can employee performance metrics also be qualitative? 

The answer is yes, performance metrics can be qualitative. Qualitative performance metrics focus on non-numerical aspects of employee performance, such as behavior, communication, teamwork, and problem-solving skills. 

When used alongside quantitative metrics, qualitative performance metrics can provide a more holistic view of an employee's performance. This combination enables organizations to make better-informed decisions regarding promotions, compensation, training, and employee development.

You will find multiple examples of quality vs. quantity metrics in the following sections. The exact job performance metrics you'll need to measure ultimately depends on the business goals, department, and role.

Employee performance metrics you need to track in your organization

Work efficiency

Work efficiency evaluates both the quality and quantity of the output. 

For example, a chef able to prepare 20 meals in an hour may sound more efficient than one who can prepare ten meals. But customers will probably complain if the food isn't well cooked and the composition is not aesthetically pleasing. So the chef cooking for ten people creating delicious, beautiful plates is still the winner from a work efficiency perspective. 

Quantity is great – as long as the quality is, too. Work efficiency is critical to measure since it evaluates what actually matters – quality and quantity.

Success rate

For example, this metric is highly relevant for sales representatives to measure the number of closed calls.

Another example of success rate is the conversion rate for e-commerce companies or online service providers. 

An example of a low success rate in the latter case is having many visitors to a site but no one buying.

Completion rate

While work efficiency makes more sense for more complex tasks, the completion rate is a simpler measure that you can use to measure tasks with less room for failure. 

For example, let's say the chef's assistant is responsible for polishing silverware. Their completion rate could be how many forks and knives they polished in an hour. 

The completion rate is primarily relevant for simpler tasks. However, it is practical because of its lack of ambiguity.

Metrics such as the success and completion rate help you understand employee efficiency and the output produced. Tracking these metrics allows you to identify areas for improvement and allocate resources effectively.

Quality of work

This metric can be tricky, especially for more advanced or creative roles with more room for subjectivity. However, quality metrics ensure that your team produces work quickly and maintains a high-quality standard. After all, high-quality products and services lead to higher customer satisfaction and long-term success.

For example, it is easier to evaluate the quality of the above-mentioned assistant's silverware efforts vs. the quality of an abstract painting. 

Furthermore, quality is more challenging to measure when working with people than with numbers. 

For example, a piece of programming code is more straightforward to objectively evaluate than, e.g., a coaching session. 

In client-facing roles, you can assess the quality of work by measuring customer satisfaction and complaints–but remember that client reviews are highly subjective. 

Some quality of work metrics you can include are:

• Defect rates (bugs found in code or product features)
• Customer satisfaction scores (CSAT)
• First-time resolution rates (for customer support)

Quality of work is important for all roles. Still, efficiency might be a better KPI since it also considers the valuable resource of time.

Learning ability

Continual learning and development are essential for staying competitive and fostering innovation. These metrics help you understand the effectiveness of your organization's training programs and identify skill gaps that need addressing.

Some concrete metrics you can use are:

• Training hours per employee
• Skill improvement rates
• Percentage of employees with updated certifications or qualifications

For roles requiring clear and measurable skills, such as programming, learning ability is easy to measure by a simple skills test. It can be more challenging for creative/client-focused roles. Learning ability is vital in roles where problem-solving and evolution are core concepts. It might be less relevant in monotonous roles.

Collaboration and teamwork

Effective collaboration and teamwork are crucial, as any company must coordinate various teams and departments. Looking at collaboration and teamwork metrics can help you identify potential bottlenecks in team dynamics and address issues hindering collaboration.

Like the previous metric, teamwork is a more challenging employee performance metric. It's hard to put a number on it, and you often have to rely on teammates' opinions, which always have a certain degree of bias.

Some concrete metrics you can measure are:

• Cross-functional project success rates
• Team satisfaction scores (from surveys)
• Ratings or insights from peer reviews or 360-degree evaluations

Work ethics

Work ethics directly affect an employee's productivity, and measuring metrics can help identify areas where employees are lacking and need improvement.

Plus, good work ethics ensure that employees take pride in their work, which leads to higher-quality output.

Examples of tangible measures of work ethics are: 

• Attendance
• Respecting deadlines
• Being on time

Role-specific performance metrics examples

Besides the more generic metrics we reviewed in the previous section, including metrics specific to each role will offer a more targeted view into the performance of specific departments. Below are our suggestions:

Sales performance metrics

Some relevant sales performance metrics are:

• Closing rate – how many cold calls or sales meetings lead to a deal?
• Upsell rate – the number of closed sales where the sales representative managed to upsell—for example, offering an add-on like custom support or a private session for a service, or an exclusive case when buying a pair of sunglasses
• Average order value – the dollar amount of the average order
• Revenue - the total income generated by the sales team during a specific period. Measure it by summing the revenue from all completed sales transactions. Revenue is a critical metric because it indicates the success of the sales team in driving business growth and profitability
• Hours of resources invested in follow-ups with sales
• Conversion rate - the percentage of leads that are converted into sales. You can calculate this metric by dividing the number of closed deals by the total number of leads generated during a specific period. A high conversion rate indicates that the sales team is effective at persuading potential customers to purchase, which contributes to revenue and business growth

Marketing performance metrics

• Monthly website traffic - how many visitors arrive on your website monthly via SEO, email campaigns, social media outreach, etc. 
• Lead generation – how many new potential customers the marketing professionals attract. This KPI can be measured by, e.g., signups for email lists or social media followers. Lead generation is essential because it indicates the marketing department's success in creating interest in the company's products or services, ultimately contributing to sales and revenue
• Conversion rate – how many visitors on a website turn into paying customers. This metric is a better success indicator than monthly traffic volume, especially from a sales/growth perspective. If the traffic volume is high but the conversion rate is low, it indicates that the website might need to be updated. A high load time, a clunky design, or an uninspiring copy can reduce the conversion rate
• Open rate/Click-through rate – how many people on the email list open and click on links in the email, respectively
• Blog articles published per month – especially if your business uses SEO as a lead generation strategy
• Customer acquisition cost (CAC) - the average cost of acquiring a new customer through marketing efforts. You calculate this metric by dividing the total marketing expenses by the number of new customers acquired during a specific period. A low CAC indicates efficient marketing strategies, while a high CAC may signal the need for improvement or optimization

Business performance metrics

• Gross profit margin – the cost of goods/services sold minus the net sales
• Return on investment – how much of an investment is earned back in some form of revenue. An example: how many sales a specific dollar amount of ad spend yielded
• Profitability – profitability is a metric looking at the profit margin and comparing it to the business goals
• Productivity – this metric measures the rate at which an employee produces output. Following our reasoning above, work efficiency can be a better key indicator than productivity, especially for more complex tasks

Project management performance metrics

• Planned value – the approved budget for completing each specific project phase. The total planned value refers to the entire project, but you can also talk about the half-time planned value or the planned value one month in
• Actual value – Unlike planned value, this metric uses the completed work rather than the planned work for a project phase
• Cost variance -  indicates how you perform vs. budget at a certain point. You calculate this metric by taking earned value minus actual cost. Cost variance is valuable to estimate how you are pacing financially and if you need to take any actions to course-correct
• Budget performance - how well a project's actual expenses align with its allocated budget. You can calculate it by comparing the actual project costs to the planned budget
• On-time completion rate - the percentage of projects completed on or before their deadlines. Calculate this metric by dividing the number of on-time projects by the total number of projects within a specific period. This metric is vital because timely project completion is essential for maintaining customer satisfaction and meeting business objectives
• Project success rate - the percentage of projects that achieve their objectives and meet or exceed stakeholder expectations. Calculate it by dividing the number of successful projects by the total number of projects within a specific period. A high project success rate indicates effective project management, which contributes to overall organizational performance and customer satisfaction

Customer success performance metrics

• Net promoter score (NPS) – sometimes called customer satisfaction score, this numerical value derives from a specific question in a questionnaire sent to customers: How likely is it that you would recommend [the product or service] to someone? You can calculate NPS by taking the percentage of people who voted 9-10 and subtracting the number of people voting 0-6
• Customer retention rate – indicates how many of your customers remain customers over time. The exact period is to be determined by your company, depending on what makes sense for your business
• Customer churn rate – this is the opposite of the retention rate and measures how many of your customers drop off. Ideally, you use the same time frame as for the retention rate
• Customer feedback – while this is more of a qualitative than a quantitative metric, it helps understand what works well and where there's room for improvement
• Average customer lifetime – how long does the average customer stay with your business?

Customer support performance metrics

• Customer satisfaction – this is probably the most critical metric to track. This performance indicator is usually measured by letting customers complete a quick questionnaire or click on a post-purchase thumbs up/thumbs down symbol. It enables you to know how the customers perceived the interaction – if they got their problem solved and the friendliness of the customer service representative
• Average ticket count – refers to how many support tickets your team receives in a typical day. You can measure this metric on a daily, weekly, monthly, or yearly basis or all of them. The average ticket count can help predict staffing needs. Also, if the number increases, it can indicate that something about your product or services needs improvement or clarification
• Ticket backlog – how many unresolved issues you and your team have
• First response time – for how long a customer needs to wait (on average). The lower this metric is, the more positive the customer experience

Engineering performance metrics

• Daily active users – How many people use your software on average daily? Compare this number to the number of customers. Suppose the daily active users is a much lower number. In that case, it can indicate that customers don't find the software valuable or are confused about how to use it
• Product uptime – measures the time your software works during a determined period. Naturally, the bigger, the better!
• Bug response time – how long it takes for the developer team to identify, address, and solve a bug. Some bugs are minor and don't affect the user experience much, while others can cause the entire system to go down

Leadership performance metrics

• Active listening skills – as a leader, it is vital to be a good listener able to reflect the employees' thoughts to them for clarity and insights
• Vision – how well does the leader embody and spread the company vision?
• Alignment – do the activities make logical sense? Are they connected? Are they related to the overall vision?
• Inclusion – how well does the leader model and promote workplace diversity, equity, and inclusion?

Benefits of using performance metrics

Increased focus and accountability

When employees know they are being evaluated and the basis for the evaluation, it's easier for them to focus and prioritize in stressful situations. It also pushes for accountability since it will be clear who contributed to what. 

Performance metrics also give insight into whether employees are on track with their goals. 

Improved motivation

Similarly, performance metrics awaken motivation. People are naturally motivated to grow and evolve. 

So to drive performance even further, display clear career paths to your employees, so they know how to reach the next levels of their careers. 

Better decision-making

Employee performance metrics help assess employee performance. This data can be used to allocate resources, identify high-performing teams or employees, and guide investment in training or development programs. As a result, you can plan for succession, promote new leaders, and make other strategic decisions.

More objective performance reviews

Clear performance metrics allow managers to benchmark performance levels. It helps conduct more fair performance reviews based on actual results and not on factors like personal connection or charisma.

Enhanced communication

Performance metrics facilitate evaluation during regular check-ins. They help inform feedback and development conversations around performance goals with each employee. That way, they set the tone for positive and productive working relationships.

Increased productivity

Job performance metrics help boost productivity by improving accountability and motivation. Correct use of employee performance metrics thus directly leads to higher profits.

Improved organizational performance

Using qualitative and quantitative metrics drives organizational performance and gives an invaluable competitive advantage. By measuring and analyzing these metrics, organizations can identify areas for improvement, make informed decisions, and drive positive change.

Without these efficiency metrics, companies risk going in the wrong direction and bypassing golden opportunities.

Driving company growth and success

Employee performance metrics help drive company growth and success by showing where you fall short of meeting organizational goals. 

Additionally, performance metrics help align employee efforts with the organization's strategic goals and objectives. Employees understand how their work contributes to the company's success by setting clear expectations and measuring progress.

Learn to use them strategically for your unique business needs, and you will have an almost unfair advantage!

Reduced turnover

Since performance review metrics give employees clarity, direction, and unbiased feedback, they lead to happier team members and, thus, reduced turnover rate.

Performance metrics can help organizations identify high-potential employees, guide promotions, and make informed decisions about compensation and rewards. As a result, you retain and develop top talent, contributing to long-term success.

Drive high performance and growth with Deel Engage

Deel Engage is an AI-powered people suite providing everything you need to build high-performing teams. Our performance management module:

• Enables people teams to launch automated performance reviews with a few clicks
• Creates transparency over goals at organizational, departmental, team, and individual levels
• Gives your managers and admins complete power over review types, visibility, anonymity settings, and more
• Collects qualitative and quantitative employee performance insights that enable transparent, bias-free promotion decisions
• Links reviews to job levels and career progression pathways and empowers team members to track their performance progress
• Offers a skills matrix feature to identify existing skills gaps and strengths at individual, team, and organizational levels

Ready to commit to an ongoing performance management culture? Get in touch with our consultants today.