What is a KPI or Key Performance Inductor ?

A KPI is a way to measure employee performance in the workplace.

There are a number of metrics to keep track of employee productivity and better manage your teams, depending on your needs and the nature of your work.

For example, if you want to measure how a sales employee is performing you can easily do so by evaluating their total sales and comparing it to their salary and expenses. Monitoring and assessing the performance of an employee whose duties are less quantifiable gets tricky, though.

This is where methods to measure employee performance come into play. We have previously discussed how to create effective teams and be a good leader, you need to adopt some effective evaluation techniques as well.

Why use KPIS for employee evaluation

A lot of companies use KPIs to measure employee performance and for a good reason. KPIs offer valuable insights. A common mistake that managers make is using them to measure the value of their employees compared to profit margins. This is not only inaccurate but also tells little about their true overall performance. After all, monitoring performance only numerically is a one-sided way of looking at your employees’ productivity.

Of course, you want to measure their performance in quantity as well. However, the qualitative data you can extract using key performance indicators for employee evaluation will help you discover new ways to motivate them. Not only that but also delegate the tasks properly according to each one’s capabilities. Furthermore, using an employee work performance review process is going to enable you to better understand your employees’ motivation triggers and weak points. Therefore, boosting your project management success!

If you are wondering how to measure employee performance effectively, the answer is using applications that automate the processes of logging working hours and projects. Most of them, like Elorus, offer you analytics to use in reports and to make decisions.

You may use key performance indicators for employee performance evaluation, team management issues, pricing policy, and project management strategies to an optimal level. This is because they allow you to identify problems on time.

Last but not least, KPIs are useful in assessing payroll operations. That is, how well your employees’ salaries reflect their performance and potential.

How to decide on metrics to measure employee performance

There is a wide variety of different versions of employee performance evaluation systems available. Depending on your needs, what attributes you deem important or the scope of your evaluation, you can choose between metrics that focus on:

• Quantity: This could mean sales, number of products manufactured, number of invoices processed – virtually anything that can be quantified and presented in a report.
• Quality: Number of defective products, performance errors, customer feedback etc.
• Speed: Project completion times compared to estimated times of delivery, everyday tasks completion time, units manufactured per day etc.
• Cost: Payroll costs per employee compared to annual revenues or per project.

Using a combination of those key performance indicators for employee evaluation will give you more comprehensive insights.

KPIs for Employees:

• Voluntary Attrition or Employee Turnover Rate
• # of Key Hires
• Keep Smart (Learning and Employee Retention)
• Gallup Employee Engagement Survey
• Employee Net Promoter Score (NPS)
• Percentage of ” A Players ” – Total
• Percentage of “A Players” – Managers
• Customer Retention
• Total Number of Customer Interactions
• Customer Service Quality
• Customer Satisfaction
• Number of Employees

KPIs for employee performance examples

Below we have some of the most commonly used key performance indicators for employee evaluation. They will help you increase employee engagement and development.

Profit per employee

This is a basic indicator of how much profit each employee brings to your company. You can calculate it by dividing total profit (minus expenses) by the number of employees.

Profit per employee = Total profit/Number of employees

This KPI is especially useful for companies that outsource tasks to freelancers or remote workers who don’t incur the same amount of expenses as in-house employees. If this metric is high, it translates into robust organizational finances!

Utilization rate per employee

This performance indicator gives you the ratio between billable hours logged and total hours logged per employee. Put simply, it gives you a clear image of the profitable work of your employees with respect to their internal cost.

Utilization rate (%) =  (Total monthly billable hours/total monthly hours logged) x 100

In order to use this valuable indicator, make sure you have a time tracking software that will enable you to distinguish billable from non-billable hours. Different companies tend to have different views on what a billable hour is.

However you choose to view it, this metric will give you useful insights on non-billable time. This way you can spot the activities that take it up and do necessary time management changes!

Average time for task completion

If you want to look into project efficiency in a more practical rather than financial way, this KPI is ideal.

Average task completion rate = Total time to complete a task (within a set time frame)/number of times performed

It will inform you about your team’s efficiency and it helps you understand how long different aspects of a project take to be completed.

Overtime Rate

This can either be perceived as an employee engagement KPI or as an indicator of employee wellbeing. Essentially, it’s the average overtime each employee puts in monthly.

Overtime rate = Total hours overtime/number of employees

If this rate is high it means that perhaps you need to hire more personnel, as the workload might be wearing out your employees.

Also, remember that it doesn’t necessarily say much about your employees’ quality of work or engagement. Therefore, you should keep an eye on it if you want to keep your employees happy and strong.

Customers’ positive feedback

An employee performance monitoring system is incomplete unless it has a way to get customer feedback about your employees’ communication skills and effectiveness.

The most effective way to get their feedback is by asking them. It’s as simple as that!

You can send out customer satisfaction surveys or place conversation ranking widgets to your customer service or sales management tools. However, keep in mind that this process is a moving target; customer satisfaction shifts due to changes influenced by internal factors (e.g. pricing policy, product) and external as well (e.g. marketing trends).