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Performance Metrics: Definition, Types & Examples

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By Sam Nguyen

CEO Avada Commerce

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Employee performance metrics are regarded as key to tracking how perfectly your employees are performing. Conducting them in the right way becomes tricky. But, employee performance metrics can bring benefits to the organizations and employees when it is done right.

Performance metrics are considered among powerful tools widely used to evaluate the product’s usability. They are cornerstones of usability and can tell the key decisions as if the new item is ready to launch. Performance metrics are based on user behavior instead of what they say.

In this article, we will show you Performance Metrics: Definition, Types & Examples.

What are performance metrics?

Performance metrics are known as numbers and data representing organizations’ abilities, actions, and overall quality. Various forms of performance metrics include profit, sales, customer happiness, return on investment, customer reviews, general quality, personal reviews, along with reputation in marketplaces. Take note that performance metrics can be various when they are viewed through many different industries. (for example, there are 8 essential KPIs in software development.)

Performance metrics play an important role in any organization’s success. It is necessary for any organization to choose its performance metrics, then paying attention to those areas since performance metrics support and guarantee an organization’s success. Some key success elements are helpful in case they are tracked and acknowledged. Business measurements have to be controlled carefully to ensure they are providing the key answers, and the right questions are asked.

Businesses will consider the financial measurements below as the indicators of success:

For non-financial measurements, they are also keys to support report, drive, and access success. More importantly, the Malcolm Baldrige National Quality Award’s Criteria for Performance Excellence non-financial metrics will include:

  • Customer satisfaction
  • Employee satisfaction
  • Process excellence

Organizations over the world can depend on the following indicators:

  • A loyal customer base
  • Fast and responsive time to market
  • Effective processes for timeliness and quality
  • Mechanisms ensuring the learning, development, and continuous improvement

Organizations can define their indicators of performance in such key areas. Some metrics will help since they can reduce the complicated measurements and results in a value that can be managed, tracked, and improved. Those “shortcuts” can become misleading but used for process improvement or other feedback like compensation, promotion, and recognition.

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What is the difference between KPI and performance metrics?

Now, it is time for you to find out what the difference between a KPI and a metic is.

KPIs are known as measurable values showing you how effectively you reach your business goal. On the other hand, metrics are different, which simply gets the status of a business process tracked. In brief, KPIs will track if you can hit your business targets or objectives, then metrics get processes tracked.

Regarding metrics and KPIs examples, a tracked marketing metric is an SEO keyword ranking. It is helpful for you to follow the momentum for your searching marketing efforts, then acquiring better rankings is positive for you. It can have business value and can become tied to the outcomes; however, it is not the direct line of sight to match your business aims.

It is believed that the main difference is motivational. KPI will drive you to meet the target, and it can serve well as performance guideposts and maps to the business’s final results. This blurry line will come as you are looking at metrics and consisting of a good target.

Metrics should be regarded frequently and daily since they can map to your project, department, and program performance. If you can work on metrics and get good business results, you should think of a KPI.

Take note that the whole process of business performance management is becoming interactive. You can experiment and strive for a new thing. Metrics can become KPIs if they can have influences on business outcomes. KPIs can be metrics too if pursuing particular targets does not come into effect.

Besides, you should bear in mind that every KPI is a metric; but every metric is not a KPI. Let’s think about metrics, just like hockey teams. Every single person in the team is a real player. However, in the team, there will be a small group that is charged with ending the puck, which is known as goalies. There remain other players in the team, including centers, wingers, and defencemen.

You can see that it is the same with metrics and KPIs and many metric tons. You can click to see the percentage of new sales or subscription revenue.

As mentioned below, not every metric is KPIs. KPIs are known as one of the most important metrics that you can have. The ones that underscore your own key business goals are.

Types of performance metrics for employees

There are different types of employee performance metrics. And they are split up into four major categories:

  • Work quality metrics
  • Work quantity metrics
  • Work efficiency metrics
  • Organizational performance metrics

Performance metrics 1: Work Quality

Work quality metrics are talking about something on the quality of your employee’s performance. The well-known metric is the appraisal by your direct managers.

Management by objectives

A way to structure the subjective appraisal of managers is by using the management by the objectives. Take note that management by objectives is a management model that is focusing on promoting the performance of organizations by translating organizational aims into certain personal aims. Those aims usually take objective forms that are set up by the managers and employees.

The employees work towards those goals as well as report back to the managers on their process. Those aims can be offered certain weights. On the successful completion of those goals, points will be awarded to the employees. In turn, the manager can make their goals become tangible and make the performance reviews data-driven. Managers can also rely on the Performance management tool to streamline this process and make it more effective. It will help align the corporate goals with employees and get 360 feedback.

Subjective appraisal by manager

In some companies, performance is assessed a few times per year during the annual performance reviews. And employees are evaluated on some criteria, then the quality of their work is the most popular.

Product defects

It is hard for you to measure quality objectively. Traditional manufacturing industries often check an approach that will calculate the number of product defects. Defects or inappropriate produced items are known as an indication of low work quality and should be kept as low as possible.

Although increased standardization of manufacturing processes has been rendering this metric useless, measuring employee performance can be applied to another area. Defects or inappropriate produced items, are known as an indication of low work quality and should be kept as low as possible.

Although increased standardization of manufacturing processes has been rendering this metric useless, the approach to measuring employee performance can be applied to another area.

Number of errors

The number of input errors can work well as a replacement for the previous product defects. The same will go for the number of corrections in the written work or the quantity of big software codes. Typically in computer programming, single errors can stop the whole program from working. This can mainly affect the business, particularly for enterprises releasing monthly or weekly new software versions.

As you can see, the conciseness of a code piece is another vital quality factor. Should ten lines of code can give the same computational result as 100 lines of code; the former will become an indication of better quality.

Net promoter score

Net promoter score (NPS) can serve well as a good indicator of employee performance. NPS is known as a number from 1 to 10, representing a cline’s willingness to recommend the company’s services to other influential customers. Customers who can score from 9 to 10 will be likely to become satisfied and work as am amazing promoters for this company. The score will be regularly applied to assess the sales employee, where it is added in the final form that customers have to sign in. NPS helps you measure your employees’ performance, but eNPS (employee net promoter score) lets you know how happy and involved they feel at work. While NPS looks at how likely customers are to recommend the company’s services, eNPS checks if employees would suggest their workplace to friends. This way, eNPS tells us if employees like their jobs and helps us understand their perspective on the company’s overall health.

One of the advantages of NPS is simplicity. And its drawback is that it is popular for employees to guide clients to provide a specific rating like 9 or 10.

360-degreee feedback

360-degree feedback is another measurement to help you measure employee performance. To get employees’ scores assessed, his subordinates, managers, peers, and customers will be requested to offer feedback on typical topics. This kind of feedback can represent an exact and a multi-perspective idea of employee’s performance, points of improvement, and skill levels.

180-degree feedback

As you might not know, 180-degree feedback is known as the simplest version of the 360-degree feedback tool. In 180-degree feedback, only the employee’s managers and direct colleagues can give feedback. The system is usually applied by workers not controlling people or not having direct contact’s customers.

Forced ranking

Forced ranking (another word is the vitality curve) is a good way of ranking your employees just by requesting managers to make lists of their best to worst employees. Every ranking is targeted on getting the workforce improved. The workforce’s bottom can be easily replaced and fired by some top applicants from the company’s talent pool.

Performance metrics 2: Work Quality

When quantity is much easier to check and manage than quality, there exist many ways to measure employee performance metrics.

Number of sales

The number of sales is a simple way to get a sales employee’s pinpointed. It is true with “simple sales,” which means that organized street vendors can steer on the sales number since provided by sufficient time, people with the best skills will set up the most in hours on similar locations. But, as sales are becoming complicated, the number of sales will be less reliable since the low frequency and randomness play an essential role in the successful sales results.

Number of units given

A variety of industries are now consist of different ways to get the quantitative output expressed. The number of units given was a reliable quantitative metric, according to traditional manufacturing. You have to note that in modern organizations, the same metrics will be used. For instance, Bloomberg can track the number of keys their journalists can hit each minute. Another way to manage quantitative production is by tracking the number quantity of lines of code programmers can produce with an employee hours tracker. The use of an employee monitoring software will provide accurate work hours for your programming team and allow you to gauge their productivity.

In fact, there remain several disadvantages to making use of quantitive metric of production.

Managing time, first-call resolution or contact quality

Call centers are known as among the most employee performance metrics. Some metrics such as average handling time that is known as the average time customers are on the phone, consisting of when they are on hold or the first-call resolution, which is known as the number of callers whose issues are dealt with the very first time they called and contact quality, which is known as the rating customers can provide on the service and call levels that is a measurement of how many calls are answered in what time.

Performance metrics 3: Work Efficiency

There is a difficulty of both quantitative and qualitative employee performance metrics are that they will not say too much. As programmers can write 40 lines of code per hour, they can offer lots of codes; however, this will not indicate much about the quality of the code. There should be a balance between quality and quantity. The balance can be measured because the metric con considers the resources that are needed to provide your customers with a specific quality. Now, it is very difficult to get this balance that is known as among the reasons that many companies are struggling with rating employees, along with the performance review. Some companies such as GE, Adobe, and Deloitte already scrapped the performance reviews just because of that reason.

Performance metrics 4: Organization Level

Organizations can make use of employee performance software metrics to help assess competitiveness.

Revenue each employee

Revenue for each FTE = Total revenue / FTE

The function will calculate the revenue for each FTE (Full-time equivalent). This kind of metric is giving the ballpark estimate of how much a personal employee can bring to. You should take note that low revenue, along with lots of employees are providing a lower rating than the high revenue combination and some fewer employees. The metric can be used in many benchmark enterprises.

Profit by per FTE

Profit for each FTE = Total profit / FTE

Profit per FTE is known as the same metric to the previous one but will concentrate on profit rather than revenues. The company’s profit is known as its general revenue minus expenses. In fact, the high profit for each employee is a solid metric of the financial healthiness of an organization.

Human Capital ROI

This human capital ROI is known as metrics assessing the value of human capital habits, social, knowledge, and personal attributes. Just by getting this company’s revenue and separate this number by the compensation as well as the benefit-cost that your company will pay for your employees calculated, you can also calculate the human capital ROI.

Absenteeism Rate

Performance and absenteeism are highly correlated factors. Take note that highly motivated as well as engaged employees can take in fewer sick days. Furthermore, absent employees are becoming less productive, then high absence rates throughout the organization is known as a key indicator of low organizational performance.

Overtime per employee

Overtime per FTE = Total hours of overtime / FTE

The average overtime for each FTE is considered as final employee performance metrics. After that, employees who are ready to place additional efforts will be likely to become motivated and manufacture more in terms of work quantity.

Examples of business performance metrics

Depending on your business as well as areas you are targeting to monitor, you might wish to concentrate on typical business metrics. Following are the number of performance metrics examples for the industrial verticals as well as departments which become available for you:

Marketing Metrics

Marketing metrics are known as measurable values that are used by the marketing team to indicate the general performance of campaigns, lead nurturing, and social platform accounts, or so on. Controlling digital marketing KPIs can aid your team in staying on the concentration every month. With the big vase of various marketing channels that are used by the team, it is difficult for your own marketing teams to track their progress actively by using the right and the most helpful metrics. And relying on channels your team monitors, KPIs and metrics will be various. You can refer to some examples of marketing metrics:

  • Web traffic sources
  • Incremental sales
  • Social sentiment
  • End action rate
  • SEO Keyword Ranking
  • SEO traffic

Sales Metrics

In order to develop a more competitive business environment, enterprises have to control their own sales. One of the best ways to take control of your sales is by offering the sales team with the proper performance metrics and indicators. And you can easily find the sales of metrics and KPIs which are important for monitoring:

  • Sales growth
  • Average profit margin
  • Average purchase value
  • Product performance

Financial metrics

Company success depends on creating revenue as well as controlling your finance properly. It is not only clients who will score your financial data but also promising stockholders and investors. Having no control of your fiance can make people stay away from their enterprises. Let’s use those metrics to help you in monitoring, then proving the fiscal health of your own business.

  • Quick Ratio/ Acid Test
  • Debt to Equity Ratio
  • Current Ratio
  • Working Capital

SaaS Metrics

SaaS (software as a service/software as a service development) enterprises have to pay attention to metrics showcasing their own ability to keep customers, creating the revenue, and grab customers’ attention. Here are examples of some top metrics for SaaS firms. Following are several examples of top metrics for the SaaS companies:

  • Customer Lifetime Value
  • Customer Churn Rate
  • Monthly Recurring Revenue
  • Customer Retention Rate

Social Media Metrics

Social Media Metrics are known as values that are included by the marketing team to help track the social media campaigns’ performance. In fact, social media marketing is a kind of basic parts of any business, then bringing about site visits, then transferring web users into the lead. As a marketing team is applying many social media platforms in order to increase the impressions, it can become hard to control the performance of them. Those social media metrics can include the most necessary data and let your team track their own process:

  • Social Followers and Target
  • Facebook Page Status
  • Twitter Followers Metrics
  • Key Social Metrics

Each business has its data that is important to monitor in the real0tine or over time. Those metric examples become applicable to a multitude of fields and departments:

  • Time to healthcare service
  • Service level
  • Call Abandonment
  • Project burndown metric

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Final Words

In fact, it is unlikely for you to capture the performance in only one single employee performance metric. The above article also offers an overview of Performance Metrics: Definition, Types & Examples (Employee & Business). The best metrics consist of quantitative and qualitative metrics. Many enterprises are trying to perform this by asking colleagues and managers to check and review people’s performance in a 180 or 360-degree feedback loop. The combination of various qualitative and qualitative employee performance metrics, which are done by lots of people. Performance metrics are combined with recruitment data in order to predict what hires are the most likely to become top performers.

We hope that with our complete guide on performance metrics, you can easily control your business and create a favorable condition for your business development. If you have any questions, kindly contact us for further discussion and don’t forget to share this post on your social media.

Sam Nguyen is the CEO and founder of Avada Commerce, an e-commerce solution provider headquartered in Singapore. He is an expert on the Shopify e-commerce platform for online stores and retail point-of-sale systems. Sam loves talking about e-commerce and he aims to help over a million online businesses grow and thrive.