Your employees are your greatest asset as a project manager and leader of a small business. They are more valuable than all your software, computers and coffee machines combined.
Without you, computers, coffee machines, and cargo vans will rust away.

Your employees are smart and have a strong brain. They can manage traits like charm, versatility, resolve and basic humanity. You can’t teach computers to have these skills or other qualities.
Your employees have their good and bad days. They may get sick, have kids, take vacations, or have other interests that can sometimes spill over into their work hours.
Also, you shouldn’t be able to run diagnostics on employees to determine their efficiency on an 0-100 scale.
You should have a system that establishes a baseline for acceptable performance so that you can compensate the highest performers for going beyond.
Although it may not be the most enjoyable part of running a small business, measuring employee effectiveness is crucial to your company’s success.
You can measure employee effectiveness by following the guidelines in this article without treating your employees as machines.
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Five Critical Elements for Measuring Employee Effectiveness
How can you measure employee effectiveness?
Five Critical Elements for Measuring Employee Effectiveness
If you use the old punch clock method to compensate employees by logging the most hours, you are doing things wrong. An employee who surfs the internet for eight hours per day could be rewarded more than someone who does their work efficiently and goes to bed.
Although you can quantify “work units” and determine the productivity of each employee each day, you are not yet capturing the full picture.
Take, for example:
Imagine that you own a sweater factory, and Employee A produces 15 sweaters per day while Employee B produces 12. Employee A should be given higher ratings, right? It’s not necessarily true. If seven sweaters from Employee A pass quality inspection, and eleven sweaters from Employee B pass, it’s clear that a model that measures effectiveness solely based on output is flawed.
It takes a holistic approach to accurately and fairly measure employee effectiveness. If you keep these five essential elements in mind, you will be on the right path.
1. Define effectiveness
Without understanding what “effectiveness” means to your team, you can’t measure it. This definition should align with one or more organizational goals. This goal could be a quarter’s growth in revenue, or it could be a quarter’s improvement in quality.
Find out how each employee can contribute to that goal (e.g., adding clients if a salesperson or producing usable codes if a programmer). Then weigh their effectiveness based upon that metric.
Eileen O’Loughlin, senior project manager at Capterra, suggests that you should only track three to five metrics at a time. This guide will show you how to track return on investment, cost performance, schedule performance index, resource capacity, and more.

O’Loughlin’s chart demonstrates how key performance indicators can be used to determine employee effectiveness (Source).

2. Prioritize achieving your goals over working hours
Fred Flintstone had to punch in at the rock quarry with a stone card, a dinosaur’s jaw and a stone card. But this is 2018 and we work differently. Your employees are able to work remotely using their mobile phones and laptops.