Top Performance Management Metrics to Track in 2025

HR leaders are often tasked with creating, or revising/overhauling their organizations' performance management metrics strategy, and making recommendations to senior leadership about what they feel needs to be done. That can be a daunting task. Today’s HR professionals, fortunately, have access to the data and technology they need to help them not simply “come up with metrics,” but to design a performance management strategy aligned with corporate goals and strategic objectives. That’s the way to earn that coveted seat at the table and the respect of senior leaders and board members.

So how do you get there? Here we take a look at some best practices for building a performance management metrics strategy that will resonate with senior leaders. 

What are the four types of performance metrics?

Understanding and implementing the right performance metrics is crucial for any organization seeking to enhance employee productivity and achieve optimal results. These metrics serve as benchmarks and guideposts that help both employees and managers measure success and identify areas for improvement. To effectively manage performance, businesses typically rely on four primary types of performance metrics. These metrics provide a comprehensive view of an employee's contributions and the operational effectiveness of an organization.

Input Metrics: Measuring Resources Used for Work

Input metrics focus on the resources that are invested towards achieving a particular task or goal. This can include the amount of time, money, manpower, and materials utilized in the process. For example, in a manufacturing environment, the number of raw materials used in production is an input metric. These measurements are essential in managing and optimizing resource allocation, ensuring that the business operates efficiently and effectively.

Output Metrics: Quantifying Results or Achievements

Output metrics quantify the results of the efforts and resources invested. These metrics are easily identifiable and are often expressed numerically. Examples include the number of products produced, sales closed, or projects completed within a specific timeframe. Output metrics provide a clear picture of productivity and are especially useful in setting targets and evaluating employee performance against those targets.

Efficiency Metrics: Evaluating Resource Utilization

Efficiency metrics combine input and output metrics to assess how well resources are being utilized to achieve certain outcomes. These metrics are critical in identifying areas where processes can be improved to save time and costs, enhance productivity, and reduce waste. A common example is measuring the labor cost per unit of output or the time taken to resolve customer queries.

Outcome Metrics: Assessing the Impact or Results of Work

Outcome metrics focus on the long-term impact and effectiveness of the outputs. While output metrics deal with immediate and tangible results, outcome metrics look at the bigger picture and assess whether the results have achieved the desired strategic objectives, such as increased market share, customer satisfaction, or improved quality. These metrics help in evaluating the overall success of strategies and initiatives over time.

By leveraging these four categories of performance metrics, organizations can foster a culture of accountability and continuous improvement. The key to success is determining which metrics align best with company objectives and adapting them to fit specific roles and industries. PerformYard offers powerful tools to integrate these metrics into everyday performance management processes, enhancing both employee engagement and organizational effectiveness.

Alignment to Strategic Objectives

This is where it all begins—or where it should. What your organization is trying to achieve should serve as the starting point for your consideration of the metrics to be used in performance management. Where can you find this information? In your annual report or strategic plan if your company has one. If not, through conversations with your CEO, CFO, and other members of the leadership team.

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What is the organization’s mission, vision, and values? What’s important to the organization? How does it make money (this is important for not-for-profit as well as for-profit organizations)? Unless you understand the answers to these critical questions it will be literally impossible to develop a performance management system that matters.

Focusing on Both Tactical and Adaptive Performance

Organizations long ago learned that they could quickly focus on tactical metrics to measure performance—things like absenteeism, showing up on time, etc. Some even progressed into more business-related metrics like sales, customer satisfaction scores, etc.

There’s nothing inherently wrong with these types of measures. However, they don’t really give a full picture perspective of performance. Worse, they don’t provide any insights into to what extent the organization is building capabilities for innovation and future success. These are adaptative performance measures which high-performing companies have learned to build into their performance management metrics strategies.

Are you looking for people who just show up consistently? Or, are you looking for people who can adapt to a dynamic environment? Only you can answer those—or other—questions to help you determine what it is that your organization truly values in employees. Based on the answers, you would then come up with metrics to help you measure how well your employees are delivered on that value.

Overall Performance or A Focus on Key Competencies?

What constitutes a great employee in your organization? What are the core competencies and capabilities they possess that leads them to perform well? Do you know?

Many organizations manage performance at an overall level. This is the most simple way to manage performance and, again, there is nothing inherently wrong with taking this approach. However, the more you can drill down into the sub-elements of performance that really drive success, the more you can customize metrics across divisions, departments, roles, etc.

Goal Driven Performance Assessment

Another approach that organizations take to performance management is evaluating performance based on goal attainment. Those goals might be organization-wide (e.g., quarterly sales goals), division or department-specific (e.g., error rates, quality outcomes), or individual (e.g., achieving specific outcomes or deliverables).

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What are KPIs in performance management?

Understanding Key Performance Indicators (KPIs)

Key Performance Indicators (KPIs) are quantifiable measures that organizations use to evaluate how well they are achieving their critical business objectives. Within the realm of performance management metrics, KPIs play an instrumental role. They provide a framework for measuring success and highlighting areas that require improvement, ensuring that every aspect of employee performance is aligned with organizational goals. KPIs are not static—organizations need to regularly review and update them to ensure they remain relevant amid changing business landscapes.

Role of KPIs in Tracking Employee Performance

KPIs serve as a vital tool in performance management by setting clear criteria that employees can measure their performance against. They are invaluable in helping employees understand their contributions to the organization's success. By focusing on specific metrics, KPIs enable managers and employees to have fact-based discussions about performance, enhancing objectivity and accountability. This systematic approach helps pinpoint individual and team strengths, directly informing employee development and organizational strategy.

Examples of KPIs Across Different Job Functions

Different job roles demand different KPIs based on the unique objectives and responsibilities of each function. For instance, in sales, KPIs may include sales volume, conversion rates, and customer acquisition costs. In customer service, KPIs might involve customer satisfaction scores, resolution times, and ticket volumes. In finance, key KPIs could be related to revenue growth, profit margins, and expense ratios. Understanding these distinctions is essential for crafting KPIs that accurately reflect employee performance in each specific domain.

Best Practices for Developing and Using KPIs

Developing effective KPIs requires a keen understanding of organizational goals and employee roles. The best KPIs are specific, measurable, achievable, relevant, and time-bound (SMART). Involve employees in setting KPIs to ensure they are invested in meeting them. Regularly review KPIs to adapt to new challenges and opportunities. Give employees access to real-time data related to their KPIs, fostering a sense of continually being engaged with their performance objectives. Ensure KPIs are neither too cumbersome nor too few—focusing on the most impactful metrics is crucial.

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Finding the “Right” Approach

Your company and its strategic priorities, as well as your internal capabilities to gather and analyze various metrics, will determine the appropriate approach for you. There is no handy “one-size-fits-all” solution. And, in fact, despite widespread coverage of trendy performance management approach—like OKRs or “objectives and key results”—there is no one “right” approach, there is only your approach.

It can be helpful, though, to consider how other organizations have approached performance management, and the approaches they use to identify and use meaningful metrics while monitoring performance over time.

Wells Fargo is an example of an organization that once focused on tactical execution. An overly aggressive and singular focus on earnings led employees to take any means necessary to meet their numbers—including opening accounts without customer authorizations. That was in 2016, when the company agreed to pay $185 to settle a lawsuit with federal regulators and the county of Los Angeles. Over time, Wells Fargo has changed its approach to performance management. They provide a good example, unfortunately, of what can go wrong when companies focus only on tactical metrics.

Netflix is an organization with a strong commitment to culture. So strong, that back in 2009 then Talent Officer Patty McCord and CEO Reed Hasting, published a Netflix Culture Deck to provide clarity to the organization—all members of the organization—around what Netflix valued. They then took what some believe to be a radical approach to performance management—they were one of the first companies to boldly do away with the traditional annual performance review. Instead they shifted to a performance management process that focused on what they felt was most important—their cultural norms—and created a 360-degree, transparent (reviews are made public), and ongoing form of evaluation.

Deloitte approaches performance management somewhat differently. Like Netflix, they also eliminated annual reviews, and they eliminated cascading objectives. They shifted to a new approach that, according to an article in Harvard Business Review, has hallmarks that include “speed, agility, one-size-fits-one, and constant learning.” It’s an approach made possible by the availability of reliable performance data.

Keep in mind, though, that the approaches that have worked for these organizations may not work for yours—in fact, what worked for them probably won’t work for yours. Why? Because you’re different. You have a unique culture, unique market, unique product or service, unique vision/mission, and unique strategic objectives.

In determining the right approach for you, there are some important things you need to consider.

• Your purpose. Your starting point in considering the right approach for your organization is your purpose. Why are you doing performance management? What results do you believe it will drive in your organization?
• Can reviewers actually and accurately measure what you’re trying to measure? It’s not uncommon for organizations to measure leadership potential. But will your organization’s managers actually be able to measure leadership potential among their employees?
• Can you capture the data cost-effectively? Just because something can be measured, doesn’t mean that it should. You need to consider how it will be measured, the cost of measurement and the value of the information you’re gathering.
• Do metrics tie back to key organizational goals and objectives? Do you have a performance management system that can not only track progress against these objectives, but shift and adjust as priorities evolve?
  

So once you’ve considered all of these factors and come up with a performance management metrics strategy, your job is done, right? Wrong! Performance management isn’t a static organizational function. It’s iterative and ongoing. As you monitor metrics and have discussions around them, and as your internal and external environment changes based on anything from new emerging competition to global pandemics, your metrics will need to change. What’s important today may not be important tomorrow.

Having a process though for clearly and carefully considering the tie between performance metrics and organization performance, the options available to you, what your organization needs, and your organization’s capacity to capture the right information will help you develop a flexible approach for today and tomorrow—an approach that your organizational leaders will clearly see the value of.