Managing Employees’ Performance With KPIs: Metrics Examples And Best Practices For Service Companies

Guidelines on key performance indicators and metrics to measure how effectively your team handles daily tasks. Design a set of KPIs that will encourage them to deliver more results.

Table of Contents

Why KPIs Are Important For Employee Productivity
Types of KPIs for Employees
Performance Metrics Examples For Service Businesses
Step-by-Step Guide on Starting Managing Performance of Employees With KPIs
Top 7 Mistakes Service Companies Make When Setting Team KPIs
Final Thoughts

Why KPIs Are Important For Employee Productivity

KPIs in performance management are key indicators for evaluating the effectiveness of employees and departments. 

By setting clear and specific KPIs, employees understand what is expected of them and what they need to achieve. This helps align their efforts with your organizational objectives, ensuring they work towards the desired business outcome.

KPIs also provide a basis for performance appraisals and feedback. Regularly reviewing and discussing an employee's progress toward their KPIs allows for constructive feedback and coaching to help them improve individual performance and stay on track. It also provides an opportunity to recognize and reward employees for their achievements and successes.

Furthermore, KPIs help to establish accountability and responsibility. When employees have specific performance targets to meet, and their work is being measured against those individual goals, it creates a sense of ownership and motivation to perform at their best. It helps to create a culture of performance excellence and a focus on continuous improvement.

It is crucial to keep in mind that the KPIs should always be linked to your organizational goals. For instance, if you want to improve service, you need to measure the customer satisfaction KPIs like net promoter and customer satisfaction score. You'll have to work on the turnover and the number of sales for stable revenue growth. Time standards for different stages of workflows will help speed up work order processing.

Types of KPIs for Employees

To ensure that you effectively measure and manage employee performance, select the right KPIs. Each type of performance measurement serves different purposes and can vary depending on the industry, job role, and strategic objective. Read further to explore the various KPIs you can use to evaluate employee performance, helping you make data-driven decisions and drive success within your organization.

• Productivity KPIs assess the efficiency and output of an employee's work. This could include metrics such as completed tasks, sales generated, or units produced. 
• Quality KPIs focus on the accuracy and excellence of an employee's work. This could include customer satisfaction ratings, resolution time, error rates, or adherence to quality standards.
• Behavior KPIs evaluate the actions and conduct of an employee. This could include metrics such as attendance, punctuality, teamwork, or commitment to company policies.

Performance Metrics Examples For Service Businesses

As a service business owner, you can come up with many types of key performance indicators. They will depend on your specialization, team size, and internal processes. E.g., for field techs, these can be the number of completed work orders or callouts, and for a sales team—the average sales, the average time of calls, or the total sales. If you have a marketing team, you should measure customer lifetime, customer acquisition cost, return on investment from marketing campaigns, etc. 

To develop your KPIs system, create a list of metrics on a team level, individual employee goals, set tasks and deadlines for your workers, and evaluate the results. You’ll get a clear picture of who has been productive at work and who hasn’t so much. Here are some common metrics you can use in your system:

• Shopkeepers: receiving and putaway productivity, receiving cycle time, rate of return, receiving accuracy
• Shop assistants: average customer spending, cross-selling rate, the share of sales of high-margin goods, and additional services
• Mechanics: the number of completed work orders, the percentage of overdue jobs, the average repair time
• Receptionists: speed of work order processing, knowledge of service standards (you can give a test, the results of which will affect commissions), pre-sales of accessories, handling complaints
• Department manager: daily meetings, work schedule control, creating individual growth plans for employees, employee turnover rate, performance reviews, monthly reports, collecting and analyzing feedback and employee satisfaction, etc.

The objectives you set for your employees should be clear, consistent, measurable, and achievable. For instance, to sell 100 cell phone cases by the end of the month, repair 30 garments, increase the average feedback score to 4.5, complete 90% of work orders within a given time frame, or pass the product knowledge test with at least 85 points. Then you need to set the commission amount, inform employees, and check their accomplishments at the end of the month. If you do everything right, after implementing KPIs, you will be able to:

• understand your team’s current level of performance
• evaluate the progress of individual tasks
• delegate responsibilities
• see how each indicator affects profit margin
• identify underperforming employees
• create a fair and transparent compensation system
• see growth points of your business

As you can see, you shouldn’t underestimate the KPI importance. Continue reading to find out what steps you should take to make it work at its best for your company.

Step-by-Step Guide on Starting Managing Performance of Employees With KPIs

You can either design a set of metrics by yourself or involve external consultants. In the first case, follow these steps:

Set Business Objectives

They should be worded and specific enough so you’ll instantly understand when they are achieved. Write down your main objectives and hierarchically organize them. Then divide your list into short- and long-term ones so you don't waste time and energy on low-priority tasks.

Define Measurable KPIs

When building your KPIs, consider the activities that affect your goals and which employees are responsible for those work areas. E.g., to increase revenue, you need to increase the average customer spending by 20%, and your salespeople can help with this. So, you need to link each goal with employees' KPIs (see examples for different roles in the previous block).

Decide on Rewards

Next, consider what variable part you are willing to pay your employees and how each indicator will affect it. For example, if you run a tailor shop, the quantity and quality of repaired garments are the most important KPIs. This means the commission of 70% for tailors can be charged for meeting the volume plan and 30% for not exceeding the acceptable defect rate.

The commission amount should depend on results that help reach the objective. If they are small, the employee will receive only a part of the incentive. Create a correlation scale between the incentive and the percentage of KPI fulfillment.

Deliver a Clear Message To Employees

Present the new incentive program to your team. Clearly communicate to each employee what your expectations and the company’s goals are and, of course, how the new system will enable them to increase their paycheck.

Monitor the Progress With KPI Measurement Tools

Track how well your team is coping with the set KPIs in your employee performance management software which allows you to generate a report on each worker. In Orderry, for example, you can see the number of sales and jobs completed, profit per employee, and overdue work orders by different employees for a time period. In addition, you can choose from 8 payroll scenarios to automate the calculation, accrual, and payout of base salaries, including commissions, bonuses, and penalties.

Screenshot of Payroll settings in Orderry

Evaluate KPI Results

It may happen that some employees won't reach the set objectives. Discover why: unrealistic targets, unforeseen events (e.g., sick leaves), etc. Or vice versa, the numbers were too easy to reach, and everyone is now supposed to get a big raise...

Fine-Tune Your System of Key Performance Measures

When analyzing the KPI data, the most important thing is to look for business-relevant data to help you make better decisions. If you can’t find any valuable insights, set new KPIs. 

And don’t forget to regularly update and challenge your KPIs according to new business goals.

Top 7 Mistakes Service Companies Make When Setting Team KPIs

After the implementation of KPIs, employees sometimes quit or start to perform worse. To prevent this situation in your company, avoid the following mistakes:

1. Unrealistic Goals. Try to objectively assess the skill level as well as the physical and mental capabilities of your employees to set reasonable challenges.
2. New KPI Approach Results in Less Take-Home Pay. Your employees should be able to earn more with a new motivation system. Otherwise, why try at all?
3. Double Standards in Team Productivity Metrics. If you implement KPIs, then do it for all employees and departments.
4. Performance Indicators That Your Employees Cannot Influence. Do not evaluate your employees according to indicators that do not depend on them.
5. No Transparency in Calculating KPIs. Calculate incentives as transparently as possible — everyone should know how KPIs are computing for their roles and understand what paycheck they will get at the end of the month so that it is not a surprise every time.
6. Excessive Metrics. Don't set too many indicators. When there are more than seven, it becomes difficult to control the achievement of goals.
7. No Time to Adjust to Changes. Let your employees know in advance that you will manage their performance in another way and the reasons for this decision. Make your company ready for changes: enroll employees in additional training, replace equipment (if there are issues), and develop new scripts for conversations or salespeople.

Final Thoughts

KPIs are an excellent practice to bring your company closer to achieving business goals. By implementing this approach in performance management, you can assess your team’s productivity and find new ways of challenging and encouraging them. Following the best practices above and avoiding common mistakes will make your KPI program your favorite decision-making tool.

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