What Are Performance Metrics?

Performance metrics refer to measurements that provide information you can use to assess the performance of your company, employees, processes, and systems. With regular review from company heads and stakeholders, performance metrics act as kind of a control panel for your company. 

While performance metrics differ between industries, all help drive organizational success through quantitative methods. Knowing more about performance metrics can help you optimize business operations, improve employee productivity, and achieve strategic objectives. 

Get further insight into performance metrics by exploring different types, uses, benefits, and drawbacks. Then, discover where you can learn more about boosting business performance.

Types of performance metrics

To gain a better understanding of performance metrics, it is helpful to learn about different types. Four common types of metrics measure business performance, employee performance, sales performance, and project management.

1. Business metrics

When you set a goal, metrics that measure business performance can help you monitor progress toward goal achievement. Tracking these metrics can also help you decide whether to continue with a business strategy, modify it, or do away with it altogether. 

Specific business performance metrics include:

• Productivity: Metric that measures work efficiency vs. the resources needed to complete work

• Profitability: Metric that calculates how much company revenue exceeds expenses

• Return on investment (ROI): Metric that calculates the quality of an investment in terms of a ratio (investment benefit/benefit cost)

2. Employee metrics

You can use employee metrics to evaluate how well your employees contribute to company success. Tracking these metrics can help you set expectations for employees and hold them accountable, assist them in goal achievement, lower employee turnover, and know when to incorporate training.

Specific employee performance metrics include:

• Quantity: Metric that calculates how much work output an employee produces

• Quality: Metric that measures the level of work an employee produces compared to other employees

• Efficiency: Metric that compares input (e.g., time and money spent to produce a product) to output (e.g., number of products produced)

3. Sales metrics

When you want to evaluate how well individuals, teams, or the organization as a whole execute sales, you can use metrics that measure sales performance. Tracking these metrics can help you determine if your sales methods work, where to allocate your sales budget, and whether to make compensation adjustments. 

Specific sales performance metrics include:

• Activity: Metric that tracks sales activities like emails, calls, meetings, and demonstrations

• Lead conversion: Metric that tracks how often sales leads convert to sales

• Productivity: Metric that tracks how quickly individual salespeople, sales teams, or the organization as a whole meets sales goals

4. Project management metrics

You can use project management metrics to keep projects on schedule and on budget. Tracking these metrics can help you monitor project progress and know when to make changes in strategy. 

Specific project management metrics include:

• Scope of work: Metric that defines project goals, deadlines, deliverables, and end products and includes a project timeline 

• Project cost: Metric that defines and monitors the project budget

• Gross margin: Metric that compares the project cost to the revenue it brings in

What can you use performance metrics for?

Primarily, performance metrics can help you measure company efficiency and effectiveness and determine how much your company strategies and goals align. Performance metrics can also give you a concrete way to:

• Hold employees to account

• Measure progress

• Make better business decisions

• Identify areas for improvement

• Increase revenue

• Grow your business 

You can use performance metrics to measure:

• Employee performance

• Team performance

• Business performance

• Operational performance

• Sales and marketing performance

• Computer network and software performance

Who uses performance metrics?

A wide array of professionals utilize performance metrics to help contribute to organizational success. Types of professionals who use them include:

• Business executives

• CEOs

• Financial analysts

• Human resource (HR) managers

• Project managers

• Marketing directors

• Operations directors

Industry use of performance metrics

As mentioned, performance metrics also span a variety of industries. Just some of the industries that use performance metrics include:

• Banking and finance

• Education

• Government

• Health care

• Manufacturing

• Retail

• Technology

• Transportation

Pros and cons of using performance metrics

Using performance metrics offers many benefits to companies, but it can also present a few challenges. 

Benefits of using performance metrics

Some of the more common benefits of using performance metrics include:

• Better definition and achievement of strategic goals

• Higher employee satisfaction and engagement

• Greater communication throughout the organization

• A more positive company brand and reputation

Challenges of using performance metrics

Some of the more common challenges of using performance metrics include:

• Budget limitations for developing and incorporating metrics

• Getting buy-in from leadership, including upper management and supervisory staff 

• Making sure employees clearly understand the performance metrics that affect them

• Ensuring staff members who conduct performance measurements have proper skill sets

Key strategies for creating and managing performance metrics

When used properly, the right performance metrics can help companies in a variety of ways. For optimal success in creating and managing performance metrics, try a few key strategies:

• Consider your most important goals and targets for tracking with metrics.

• Think about how your metrics affect your customers or clients and align with your desired customer or client outcomes. 

• Choose S.M.A.R.T. (specific, measurable, achievable, reliable, and time-bound) metrics. 

• Boost motivation by choosing forward-looking metrics that inspire action. 

• Conduct a peer review of potential metrics before incorporating them.

• Be open-minded in regard to suggested changes.

• Review metrics regularly to make sure they still have relevance.

• Define the purpose of a metric, so you'll know when to change it or when you no longer need it.

• Stop using metrics when you've achieved the goals they pertain to.

Learn more about company performance on Coursera

Understanding the role of performance metrics and knowing how to use them in different scenarios can help improve business decisions, achieve strategic objectives, boost employee morale, and ensure company success. To gain more information on successful company management and organizational leadership, explore learning opportunities on Coursera designed for beginners. 

The Strategic Leadership and Management Specialization offered by the University of Illinois at Urbana-Champaign features seven informative courses that you can typically complete in two months with a commitment of just 10 hours per week. You'll get valuable tips for leading teams, designing and managing organizations, creating effective corporate strategies, and more.