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How to track employee performance: expert guide
Measuring the performance of your team isn’t just about getting an honest glimpse into its productivity - it’s critical to the success of your business. A continuous performance management approach supported by modern tools motivates people to accomplish their goals, but also to build more meaningful relationships with their managers and grow within the organization.
In other words, it supports the human experience that matters so much to every employee in the modern workplace. The 2019 Deloitte Global Human Capital Trends report revealed that 84% of respondents consider the human experience as an important issue to their organization.
Now you see why tracking it can make such a difference in how you achieve business objectives. But how do you get started?
The best way to approach employee performance is by combining employee monitoring and management with the help of time tracking and resource allocation solutions (or just one solution, if you’re lucky).
Read this article where we zoom in on why employee performance matters, how to track it and with which metrics, and how to connect it with resource allocation.
1. What is employee performance?
Employee performance refers to the effectiveness of workers in accomplishing their tasks and delivering results. But that’s just one side of the coin. The other is about how organizations manage, develop, and stimulate employees to achieve better results - a cornerstone for how an organization performs.
While there’s no general and overarching theory about it, managers can easily tell a high-performing individual or team by comparing how they work and what they deliver to the industry standard.
2. Why is employee performance important?
Let’s get started with feedback. Giving feedback is impossible if you have no idea how employees perform in their daily tasks. You need to find a way to measure that because regular feedback is something your workforce needs to keep their spirits up and become even more productive.
- 24% of professionals would consider leaving their jobs if their managers provided them inadequate feedback. (Source)
- 68% of workers who get accurate and consistent feedback feel fulfilled in their jobs. (Source)
- 69% of employees admit that they would work harder if they felt that their efforts were better recognized. (Source)
- Organizations that invest in providing continuous feedback have a 14.9% lower turnover than businesses that bet on annual appraisals. (Source)
And you can be sure that the new generations of employees expect to get feedback on a regular basis.
- 80% of Gen Y workers prefer on-the-spot recognition over formal reviews. (Source)
- 63% of Gen Z professionals want to hear timely and constructive performance feedback throughout the year, not just once a year. (Source)
But the traditional approach of quarterly or annual reviews doesn’t work anymore. These reviews don’t deliver the feedback employees need and force managers to dedicate a lot of time to performance reviews (that rarely deliver the desired results).
- 90% of performance reviews are considered as “painful and ineffective.”
- 51% of employees believe that annual reviews are inaccurate. (Source)
- Performance management takes lots of time - each year, managers spend 210 hours and employees spend 40 hours on it. (Source)
- 95% of managers report being “unhappy” with traditional performance management solutions. (Source)
Meaningful performance management is also related to better business outcomes. According to Deloitte, high-impact organizations are 1.4 times more likely to meet their financial targets than low-impact organizations. They’re also 2.4 times more likely to innovate.
You can see now why building the right process and getting the right tools is so important:
- The right tools and practices help to understand how employees work.
- This, in turn, allows delivering accurate feedback on a regular basis.
- A feedback culture inspires employees to bring more energy to their work every day.
- And research shows that an inspired employee is 125% more productive than an employee who is merely satisfied.
3. How do you measure employee performance?
You should just track employee performance - that’s easier said than done if you don’t have the right tools at hand.
You can ask that employee’s co-workers or supervisors to tell you whether they perform well or not. But in the end, you’ll be getting a bunch of subjective opinions.
Another way is to ask the employee about their perceived level of performance. You can do that by asking them to provide you with an account of work done within a week or month. But again, this approach leaves you with a subjective account dependent on the employee’s ability to recall their experience. Below you can find solution.
Ask your employee to use employee monitoring software.
From time real-time tracking and activity logs filled at the end of the day, these solutions help workers to understand how much time they’re spending on tasks and how productive they are in their daily tasks. And you get a source of objective data about how they perform.
In our experience, one of the biggest problems companies face at this point is convincing employees to log their work time. Workers are often discouraged because it’s just another responsibility added to the already growing pile of tasks. What works here is the right process and tools that allow easy time tracking.
Take predictive timesheets as an example. Instead of having to manually add and describe tasks before tracking the amount of time spent working on them, employees can use timesheets that come filled with preliminary data set up by their manager for this project (hint: Primetric provides predictive timesheets!).
A good set of monitoring tools should also allow you to collect various metrics that offer an insight into an employee’s performance against the bigger picture of business objectives.
4. Which employee performance metrics should you use?
Management by objectives
This management model focuses on improving the organization’s performance by translating business goals into specific individual goals set by the employee and manager. The worker works to achieve these goals and reports back to the manager on their progress.
Absenteeism and performance correlate highly because they depend on employee engagement. Researchers confirm that highly motivated and engaged employees take fewer sick days (even up to 37% less, according to Gallup). Absent employees are less productive by default, and high absence rates throughout the organization indicate lower organizational performance. We added a special report covering this to Primetric to help project managers understand this piece of this puzzle.
Profit per FTE
This metric refers to the profit made per full-time equivalent (FTE). Also called whole time equivalent (WTE), FTE is a unit that indicates the workload of an employed person in a way that helps project managers to compare workloads easily across various contexts. To calculate profit per FTA, you need to divide your total profit (revenue minus expenses) by FTE. If you get a high number here, it’s a sign that your organization is doing well in terms of productivity.
In Primetric, you get FTE metrics divided into departments and teams for specific technologies. This helps to evaluate the performance of individual team members, teams, and even entire departments.
If you'd like to get started with calculating your FTE, I prepared an open access FTE calculator where you can add your values and get an estimation:
Revenue per employee
Revenue per employee shows how much revenue is generated per employee on average. By combining it with the cost per employee, you can use this ratio to see how the company will perform in a specific quarter. In Primetric, you can generate this report in seconds.
Overtime per employee
To calculate the average overtime per employee, take the total hours of overtime noted in whatever system you’re using to track working time, and divide it by the number of employees. In general, employees who are willing to go the extra mile - they’re motivated and produce more. So, a reasonable amount of average overtime is a good sign. You can get your hands on this metric in Primetric reports as well.
Utilization rates are a great way to measure the productivity of an individual in generating revenue against available capacity. Utilization reflects the number of an employee’s work hours that can be billed versus their overall availability.
If you don’t know what you can offer or how much you can deliver, you might end up under- or over-utilizing employees. To avoid this problem, you need target utilization rates. Solutions like Primetric help to learn more about your employees’ utilization and set you on the path to greater profitability.
Pro tip: To ensure that employees are productive, don’t assign them too little work - they’ll just get bored. But avoid overwhelming them with tasks right - too many tasks lead to frustration. Find the sweet spot between the two. Primetric helps to ace this aspect of project management by giving you easy-to-use heat maps that show who is overloaded with work and who has nothing to do at the moment.
Time logged vs. planned
Another key metric that directly relates to employee performance in the comparison between the amount of time planned for a project and the time your team actually logged. Any disparity here helps to identify problems in your estimation approach. And if you run Fixed Price projects, every logged hour that wasn’t part of the initial plan decreases the project’s profitability.
This is where Primetric helps as well by offering you disposal reports that compare scheduled vs. capacity vs. tracked hours.
5. Tracking employee performance - best practices
- Set expectations and goals - Understand what you want to accomplish. Are you looking to increase employee productivity or improve employee retention or engagement? You need to have clear objectives for your program.
- Do spot-checking or random inspections - Verify that the team is tracking their time correctly by checking in once in a while.
- Always keep an eye on the bottom line - Performance metrics are helpful because they show whether your team is performing on tasks well and fast. But does your profit margin reflect this productivity?
- Use the right performance tracking tool for the job - Instead of juggling different Excel spreadsheets, find a modern solution that combines time tracking and resource allocation in one place to get a bird’s eye view of performance at your organization.
6. Combine resource allocation with employee monitoring in Primetric
By implementing time tracking, individual employees will be able to track the time they spend working on the tasks. But you need to put this time in a bigger context. This is where resource allocation comes in.
In software development companies, one of the greatest challenges is planning the work for an employee by taking into account their:
- Availability (ensuring that they have the right amount of tasks at hand)
- Skills and professional experience
- Hourly rate and revenue rate.
To build high engagement and motivation, you need to make sure that people are working on tasks they find interesting and, to some extent, challenging. To increase an employee’s performance, you need to track and manage their professional development.
This is what you get in Primetric
Tracking + planning
In Primetric, tracking working time is directly correlated with planning working time. This means that each employee can log their working time but also see how many days their manager has planned for them. This offers a view into how planning translates into implementation. What's more, the employee knows what projects they will be working on in the future.
All of this data is mapped on a user-friendly calendar that visualizes the time range and number of hours allocated to specific projects in the style of a Gannt chart. This is a great help in employee performance tracking.
Time logging and predictive timesheets
Primetric allows logging work time in real time or by entering the number of worked hours at the end of the day. Thanks to predictive timesheets, managers can see how much time should be logged today and check how that compares to reality. The employee can simply accept the scheduled time as logged in instead of adding time entries on their own.
Curious to try Primetric? Sign up here and improve your employee performance.