A Modern Approach to Measuring Employee Performance
Performance evaluations typically evaluate an employee's output, and the impact that output has on the company's revenue.
But is this still the best way to assess a person's contribution to a company?
The Problem With Output
Some experts argue that measuring output can create an incorrect impression of success. One big criticism of this approach is that it doesn't accurately define whether the production was effective or efficient. For instance, an employee handles 10 case files per day, but five of those have to be re-done or require additional work later on, then the success rate of this person is actually only 50% of that measured output.
Output is also a relic of the Industrial Revolution, when measuring the amount of cotton spun or iron produced was an easily quantifiable metric. When removed from the factory setting, output isn't as always as easy or clear to quantify. How do you measure the output of a good idea?
Another problem that can arise from measuring output is stress. When output is the focus of the organization or when managers constantly seek to improve on the previous period's targets, they run the risk of creating work environments where employees feel heavy pressure that may not be sustainable over time.
Research shows that stressed employees are 77% less effective than when under non-stressful circumstances. They're also more likely to be absent and complete work to a lesser standard. These issues can significantly raise the costs of running a business and damage reputations. Also, stress tends to spread, so one employee feeling stressed with their work goals can often mean others will become stressed, too.
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4 Modern KPIs to Measure Employee Performance
So, if not output, what should employers focus on? Well, the answer is in the name of the game: performance. This term doesn't refer to how much work an employee completes, but the employee's contributions through interactions and behaviors.
For example, an employee who completes five case files but regularly trains or supports junior staff members to learn new skills and improve their effectiveness is performing at a higher level than an employee who completes more case files but half of which need rework. Of course, that also depends on the company's goals; the reverse can also be true.
"The trick is in finding the metric that tells the story you need and what numbers are most impactful for your company," said Sean Carroll, founder and director of Brighton, UK-based Vixen Digital.
Employees who are engaged show greater productivity, innovation and efficiency overall. Leaders can assess a person's engagement and drive by involving them in the company's decision-making process.
Asking employees for feedback and input on what they see as the best way to reach the company's top goals, for instance, can help managers determine whether employees are engaged and going above and beyond — or just going through the motion.
Initiative is a great metric to use in performance evaluations because employees that demonstrate initiative tend to offer unparalleled benefits for the company. If staff can undertake tasks without being asked, they are saving management time and improving the workflow of the organization.
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Before implementing this measure, however, it's important to ensure that management isn't preventing initiative. Communicating that initiative is welcome by praising those who show initiative in staff meetings is a good way to communicate the importance of this metric to the company. Of course, not punishing employees whose initiative go south is equally important to avoid instilling fears and an uneven playing field.
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If performance isn't all about how much gets done, then the focus should also include how well work gets done. Effective employees do more than the bare minimum, in the allotted time. Rather, they seek ways to improve processes, produce better quality work, complete tasks with greater accuracy and accomplish projects using fewer resources. Organizations that nurture effectiveness as a top criteria gain efficiencies that are otherwise very difficult to achieve.
Several surveys conducted to shed light on the Great Resignation trend have found that employees today are highly motivated by learning and development opportunities. Many select employers based on the growth opportunities the company offers. These employees are typically highly driven and tend to perform at higher levels when provided training and education options.
In turn, they help improve company output and reduce turnover and labor costs since they're also more likely to stay with a company that offers valuable learning and development opportunities.
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Are Goal-based KPIs Outdated?
Despite all of the above, goal-based achievements should not be abandoned entirely. What some experts argue is that they shouldn't be the only or most important metric in performance evaluations. A goal-based target provides direction for the employee, but they must be practical and follow SMART guidelines:
Goals should also be realistic. That doesn't mean they should be easy, but employees should view them as attainable or the only purpose they will serve is demotivate the troops.
“With those ideals in mind, employees will be more focused at work and can be better monitored for successfully helping a brand achieve corporate strategic goals,” said Ben Wieder, CEO of Clearwater, FL-based Level 6.