A brief primer on team performance measurement
Working in a team can create synergy, since a good team will likely produce better results than individuals working separately. However, measuring team performance is even more challenging than measuring the performance of each employee separately, since you have to take into consideration each and every member’s performance, in relation to the others’, as well as the overall team’s.
In general, employees are members of departments. A department is a subdivision of an organization and an individual, generally, can only be part of one department. That being said, nowadays, teams are more flexible in how they are formed and how they operate: a team can be a temporary group formed to work on a specific task or project. Therefore, employees can be members of only one department, but several teams.
The first step is to link the team results to the organization’s goals, by cascading the objectives and KPIs from the organizational level to the team level. It is not very productive to have a well-performing team whose work does not help the organization reach higher performance goals.
Key aspects of team performance measurement
There are many indicators and measurements that can be useful when considering measuring your team’s results. In what follows, we’ve put together a list of the most widely employed benchmarks, so that you may get a general feel for what is considered useful to keep track of.
Employee attendance: Employee attendance is an important aspect of team performance since absenteeism incurs excess costs and will have an unwanted effect on team productivity & employee morale.
Moreover, late employees can be the source of annoyance or frustration, which will reduce team cohesion and further reduce a working unit’s effectiveness. Therefore, attendance related KPIs should be the first ones to track, when we talk about team performance:
- % Absenteeism: Indicates the percentage of employees within the team who are repeatedly and/or unexpectedly absent, out of the total team members.
- $ Lost time accounting: Measures the potential revenue lost because of idle workers or wasted hours within the team.
- # Time lost by starting work late: Measures the volume of time lost due to employees starting their working hours late.
Client satisfaction: Every team has an internal/external customer, which is why satisfaction can be a good measurement unit. Improving customer satisfaction will eventually result in a more efficient production process, better service and ultimately, lead to more satisfied external customers. The most important KPI to measure in this regard is the following:
- % Customer satisfaction: Measures the level of satisfaction exhibited by the team’s customers (current employees, distributors, vendors, departments, or external clients), towards the inter-functional services provided, be it communication, productivity and/or responsiveness.
Employee retention within the team: A low retention level or a high turnover level is usually connected with low levels of efficiency and productivity, which in the end can lead to a negative impact on an organization’s overall results.
This aspect can be influenced not just by the team performance, but also by the HR department’s performance, the working environment and work policies, the supervisor, as well as the promotion and professional development opportunities for the future. However, high level of employee turnover within a specific team could indicate team-related problems. The most important employee retention KPIs to measure are the following:
- % Employee turnover: Measures the rate at which employees leave the team in a given time period (e.g., month, quarter, year).
- % Employee retention rate: Measures the total number of employees retained at the end of the reporting period, expressed as a percentage from the total number of employees that were in the team at the start.
Employee satisfaction: Studies suggest a direct correlation between employee satisfaction, employee engagement and increased performance. Employee engagement can be increased through various company efforts, such as facilitating the development of skills for its employees, giving them a sense of trust and integrity, and clarifying their opportunities for future career development. The most important indicators to take into consideration, when looking to improve or maintain employee satisfaction, are the following:
- % Employee satisfaction: Measures the employees’ satisfaction and motivation level, with aspects regarding their job and working environment: job responsibilities, team and management, workplace, and professional development.
- # Employee Engagement Index: Measures the engagement level of employees in their work activities and responsibilities, in terms of enthusiasm, commitment and discretionary effort.
Productivity of individuals: Productivity of individuals is a key element of team performance. The following KPIs help measure a team’s contribution to the organizational goals, and the contribution of its members to the general team results:
- $ Profit per employee: Measures the team’s contribution to the overall profit pool. It is a particularly important ratio in customer-focused businesses, such as those in the service sector.
- $ Sales per employee: Measures a team member’s productivity and efficiency in generating sales.
- % Human Capital Return on Investment (ROI): Measures the return on investing in a team’s human capital, after adjusting for the cost of financial capital.
- $ Human capital value added: Measures the value added through productive activities, by a team’s members. Reflects the adjusted operating profitability figure, calculated by subtracting all expenses except for labor expenses, from revenue, and dividing the adjusted profit figure by the total headcount.
OKRs or KPIs?
In some specific cases, where the productivity of a team is not directly linked to the organizational revenue or profit (ex. support teams), it is more advisable to use OKRs (Objectives and Key Results), instead of KPIs (Key performance indicators), to measure productivity. OKRs contain a well-defined objective and one or more key results. OKRs help define how to achieve a goal through concrete, measurable actions. So, in case of the support teams, these results should be measured to track team performance, as they will be able to paint a more accurate picture of their efforts.
It is a complex process to measure team performance; therefore, it should be analyzed from numerous angles, according to each team’s specialization and workload. It should be noted that the aforementioned indicators are not the only ones which can portray a group’s results. However, if you are looking for a quick introduction into this topic, these KPIs will serve as a sustainable foundation on which you can build your employee management system.