Measuring employee performance – annual review metrics and KPIs

As a professional services firm owner, evaluating employee performance is crucial for the growth and success of your business. Here are five key categories for employee metrics that you can consider for an annual performance review:

1. Financial Metrics: this should typically be firm or business-wide – overall net profitability of the firm should be a baseline target.

Profitability: Measure the overall net profitability of the firm as a baseline target. For example, track the contribution margin of each employee or team to understand their impact on the firm’s bottom line.

2. Productivity Metrics: In professional services firm billable hours are critical, often referred to as utilisation rates they measure the % of an employee’s time which is allocated to customer work ( and therefore billable to a customer as opposed to internal tasks, training, admin etc. which are generally not billable. This category measures the output of employees and how efficiently they manage their workload.

Utilisation Rates: Calculate the percentage of an employee’s time that is billable to customers versus time spent on non-billable tasks like training or administration. For instance, an employee with a high utilisation rate is spending most of their time on client work, which directly contributes to revenue

3. Customer Metrics: Customer retention rate or repeat website visitors are vital indicators of how well employees are managing customer relationships and satisfaction. These are often measured by customer surveys, net promoter scores and similar – but could also include tracking projects completed on time for example.

Customer Retention Rate: Monitor the percentage of repeat customers or clients to gauge employee effectiveness in managing customer relationships. For example, a high retention rate suggests that employees are providing satisfactory service that encourages clients to return

4. People Metrics: Employee engagement score or retention rate can provide insights into the workplace environment and how it affects employee performance. This should be complimented by 360 – feedback, and peer reviews to provide direct feedback of the immediate group of employees influenced.

Employee Engagement Score: Use surveys or feedback tools to assess how invested employees are in their work and the firm. An example might be an annual survey that measures various aspects of employee satisfaction and engagement

5. Innovation and Initiative: in today’s environment, we want ( and need ) employees to come up with better ways to do things, better tools to use ( AI ) and the initiative to bring these to the table and improve productivity and efficiency.

Number of Implemented Innovations: Track the number of new processes, tools, or improvements suggested by employees that have been successfully implemented. For instance, an employee who regularly proposes and executes new ideas that enhance productivity would score highly in this category.

These categories can help you create a comprehensive framework for your annual performance reviews, ensuring that you cover all critical aspects of employee performance.

Employee Metrics Tracking Template

Financial Metrics

– Overall Net Profitability: [Employee’s Contribution]

– Revenue Generated: [Employee’s Contribution]

– Cost Savings: [Employee’s Contribution]

Productivity Metrics

– Utilisation Rates: [Employee’s Billable vs Non-Billable Hours]

– Task Completion: [Number of Tasks Completed]

– Project Delivery: [On-Time Delivery Rate]

Customer Metrics

– Customer Retention Rate: [Rate]

– Net Promoter Score: [Score]

– Customer Satisfaction: [Survey Results]

People Metrics

– Employee Engagement Score: [Score]

– Retention Rate: [Rate]

– 360-Feedback: [Summary of Feedback]

Innovation and Initiative

– Number of Innovations: [Number of Implemented Innovations]

– Initiative Taken: [Examples]

– Efficiency Improvements: [Details]

Instructions:

– Fill in the brackets with the respective data for each employee.

– Use this template to track and compare metrics across different review periods.

– Customise the template as needed to fit your firm’s specific metrics and KPIs.

Dr Craig West

Founder & Chairman | Succession Plus

Dr Craig West is a strategic accountant who has over 20 years of experience advising business owners.

With a background as an accountant in practice and two master’s degrees, Craig formed a strong view that the majority of business owners (and often their advisers) were unprepared and unaware of the steps required to prepare for exit. He then designed and documented a unique 21-Step Business Succession and Exit Planning process to assist owners and their advisers in navigating this process.

Craig now acts as a strategic business and financial mentor for mid-market business owners. Craig has written four critically acclaimed books educating business owners on employee incentives, succession planning, asset protection, and exit strategies. Additionally, he has completed doctoral research on Employee Share Ownership Plans (ESOPs) for succession.

Craig is a Member of the Forbes Business Council where he leverages his extensive experience to contribute valuable insights on helping business leaders navigate the complexities of growing and exiting their businesses.

In April 2024, the Exit Planning Institute admitted Craig to the International Exit Planning Circle of Excellence.