What Are Time Tracking KPIs? - Explained with Examples

All organizations prosper when their employees maximize their productivity in a given time. Various tools measure the employees’ productivity; they are known as key performance indicators (KPIs for short).

Using KPI tracking allows the company to monitor even its microscopic progress, thus allowing it to use its resources more efficiently.

Time Tracking KPIs record the time it takes for an employee to finish a specific task. This enables accurate performance evaluation. Some examples of time tracking KPIs are:

Time spent completing the task
Schedule adjustments
Project time estimation
Actual hours KPI tracking
Return on time investment

Time tracking KPIs is one of the many vital types among various KPIs. This article will explain all you need to know about time tracking KPIs. We will tell you about their importance and tips on incorporating them into your organization.

So let’s dive right in!

What is a KPI?

A key performance indicator (KPI) is a measurable value that demonstrates how effectively a company achieves key business objectives.

Organizations and businesses use the data obtained via KPIs to evaluate success in reaching targets.

KPIs cover a broad range of departments and teams in an organization. The definition of KPIs and business metrics can sometimes overlap, leading to confusion. KPIs measure progress towards a specific goal. In contrast, metrics are measurements of overall business health.

KPIs help to define an organization’s strategy and keep it focused on its target. Metrics give an overall summary of the business processes. Still, they don’t carry as much value in the comprehensive strategic plan as KPI monitoring.

KPIs should be written such that they are aligned with a critical objective. If not, it will be a redundant KPI as it will provide data for a perimeter that has no positive impact on your organization.

people sitting on chair

Some of the most important KPIs are listed below:

Sales revenue (net profit margin)
Marketing KPIs
Operations success rate
Customer service feedback
Finance projections (financial health of the organization)
Human resource reports
IT project management
Social Media (they utilize certain KPIs, for example, outreach or customer engagement KPIs).

Out of these, project management and customer satisfaction KPI monitoring are the most time-dependent areas that evaluate performance by considering the time spent.

However, performance indicators are also used elsewhere, like HR departments, to measure employee absentee time or on-time completion percentage. But time isn’t as important a perimeter for these teams as they usually work with real-time data, instead of historical data, to make informed decisions. This is why they generally incorporate multiple different KPIs.

Organizations need to be clear about who their audience is; they need to set up KPIs according to what they want and how they will use it. This results in customer satisfaction; only then can productivity be maximized.

KPIs are not set in stone when defined; they can always be removed or altered according to the needs of your business. Review your business objectives and don’t hesitate to alter redundant/wasteful KPIs.

Here are some techniques to review and evaluate your current KPIs:

Analyze your current business performance to set new key performance indicators (KPIs): Compare your current growth and pace to the past to understand where your business stands, preferably going back 5-10 years. Analyze these trends, look for areas of improvement and review your KPIs accordingly.
Set long and short KPI targets: Set long-term targets, preferably quarterly and yearly. After that, backtrack and analyze the long-term targets to design short-term KPIs to reach your milestone. This approach makes it easier to analyze your strategy and review your KPIs.
Review targets with your team: Keep everyone in your team up-to-date so everyone reviews KPIs with a common result in mind. Put emphasis on the leading indicators to ensure that every team member knows they have to be especially mindful of the objectives that will help the right KPIs.

The easiest way for employees to check their KPIs is via a KPI dashboard. A KPI tracking dashboard has a very user-friendly interface, and it provides an instant update at a glance on your progress.

It visualizes how your current performance stacks up against the provided objectives. They can also print a KPI report which summarizes their important metrics in paperback form.

What is a time tracking KPI?

Time tracking KPI is a performance indicator that records employee time to enable the organization to keep track of their performance transparently.

As mentioned previously in the article, time tracking KPIs are extensively used in project management and customer service teams compared to other KPIs.

people sitting on chair in front of computer

Other than these teams, they are incorporated throughout an organization because they are very useful in saving time and improving performance. Here are some examples of employee time-tracking KPIs. We will elaborate on them further to clarify their use:

Daily productive time

This KPI tracks the amount of time spent working each day. It also gives access to the employee’s previous productive time data, allowing the managers to analyze and make decisions on his performance.

Overtime absenteeism

A team member not showing up for work unnecessarily is cause for concern to the business and the whole team. It can reduce productivity and team morale. This KPI enables managers to easily track the days an employee is absent.

Overtime work

Working overtime can negatively affect an employee’s health and reduce productivity. By using KPI tracking tools, this harmful trend can be tracked and resolved early.

👉 Check also our article: Signs of Overworking and How to Beat It

Utilization rate per employee

The utilization rate is obtained using a simple formula which is:

Billable hours/Total hours logged by an employee.

It allows the company to track employee performance and determine if they are headed in the right direction – which is important to achieve a good conversion rate per employee.

Average task completion rate

This KPI calculates this perimeter using the formula below to measure efficiency:

Average task completion rate = Total time taken to complete tasks/number of attempts.

It allows the company to figure out the overall performance of an employee

Revenue per employee

This KPI can estimate how much a team member earns for the business. It gives a clear net profit margin to the organization per employee.

Many businesses use this KPI to calculate one’s yearly earnings, but this can be altered to quarterly or monthly earnings according to the set targets.

It is also important to be wary that some employees will consider it a breach of privacy to trace their time and data.

Everyone on the team must be on the same page. The aim of these tools is only to increase productivity and analyze trends to improve performance. This message should be clear to all the teams in a company.

This can be achieved through informative seminars and presentations.

👉 Read also our article: 29 Time Tracking Best Practices – Helpful Examples

What makes time tracking KPIs effective?

5 main characteristics make time tracking KPIs effective:

Simple to follow

Time tracking key performance indicators are simple and use straightforward calculations to give results. This is why it is easy for the staff to understand it; hence, desired outcomes are easily achieved.

Specific for each team member

Time tracking key performance indicators are also relevant to specific teams and organizations. This relevance ensures that the target-specific employee performance KPIs are being instated, thus ensuring successful outcomes.

Aligned with the organization’s strategy

An effective KPI should always be aligned with and consider the organization’s strategy. If not, they may undermine other KPIs and compromise the whole strategy. Fortunately, that is not the case with time-tracking key performance indicators as they trickle down from the overall strategic goals of an organization.

Actionable steps that complete objectives

Organizations are always looking to create KPIs with realistic goals so that more teams can reach them. That is possible by setting up short-term goals so that employees complete tasks and don’t get overwhelmed. Time tracking key performance indicators fit in this description very well by measuring the performance for each short-term goal.

Easily measurable

Time is one of the most easily measured quantities available today, which is why time tracking key performance indicators are so popular. Moreover, they can be automatically measured using time tracking software, which makes them very easy to incorporate into the digital corporate world.

Why it is important to use time tracking KPIs

Time tracking KPIs are one of the most important practices to follow as it touches on some of the most important areas of your business. For instance, it helps in managing inventory effectively by providing insights into the time taken for various stages of inventory management, which is crucial, as it ensures you have adequate stock levels to meet customer demand without overstocking, which ties closely to effective financial management.

Measurements from time tracking KPIs are used as one of the bases of performance estimation. This data, combined with several other metrics, can track if you are using up cash or making a profit.

It lets you forecast if your task will be completed at the given deadlines, helps you analyze your current pace, and allows you to identify areas that can be fortified.

Some examples of how time-tracking can help us are as follows:

Billing clients with hourly contracts

Suppose an organization adopts an hourly model to bill their clients. In that case, tracking the time is vital so you don’t end up overcharging or undercharging your client.

Keeping projects profitable even in case of unforeseen events

Every business aims to be profitable, so the total price being charged must be greater than the internal cost.

Even if an organization doesn’t charge hourly, it is still essential to track the hours taken to complete a project. Let us explain it further with an example.

Consider a software development agency that sells blocks of work for $50,000. They don’t need to track time to bill their client because they already know how much they will be charged.

However, they need to track the average number of hours spent to know how much effort is being put in.

Imagine paying $50 per hour to your team. If it takes them 300 hours to finish the sprint, that is profitable for the agency. But if they are delayed and unexpectedly take 550 hours, they lose money.

With time tracking KPIs, these hiccups can be avoided, and one can anticipate if projects will be finished within the profit margin or not.

Improving your pricing using historical data

Many businesses don’t charge by the hour, so they guess how much time a typical project will take. Sometimes they don’t guess this correctly, and the entire business suffers.

This issue can be resolved by using time tracking software. They will enable a business to build a library of past projects. One can then easily analyze how long it took to complete a previous project and if it accumulated in a profit or loss.

This information is vital in refining pricing because it demonstrates the cost of different types of projects. This data can be used as your base price when you launch a similar project.

This does not guarantee that a business will make money, as there is always the risk of projects missing their deadlines. However, it still makes one great estimator, to begin with.

If businesses keep tracking the time, they will have a vast project library to reference for more accurate pricing using machine learning models. Leveraging machine learning development services can enhance the accuracy of these time-based predictions and help businesses make data-driven decisions. That’s a powerful incentive to keep utilizing time-tracking KPIs.

Making better estimates about deadlines

Because of time-tracking KPIs, businesses can make better estimates and not over-promise to deliver earlier than they can to their clients. It also comes in handy when distributing work across staff, preventing over-burdening.

It helps create a better schedule and makes businesses confident that they are taking on projects their team can fulfill before the given deadline without affecting the team’s morale or mental health.

Managing your team more efficiently

Time tracking enables you to track a team’s work and pace and ensure that they don’t burn out due to excessive work. When a team knows that the manager is using timesheet data to maintain a healthy work-life balance, they will positively respond to time tracking measures and complete their work on time.

Sometimes individual departments within a larger company track time so they can reject incoming work if it’s overburdening their employees or hire someone new. Access to this data makes the conversation more productive and professional.

With timesheet data in your inventory, the higher-ups will be more cooperative and sympathize more with your concerns. This is vital in ensuring productivity and maintaining positive team morale.

An automatic documentation tool

Time tracking KPIs record all the work an organization has done on a specific project. This comes in handy a lot in certain situations.

For example, sometimes, clients will ask for a detailed explanation of how long it took to complete the project. Clients always want to make sure that they get their money’s worth.

Time Tracking KPIs enable businesses to generate a PDF report with all the appropriate details. This data makes it easier to have tough discussions with clients because you can show them exactly how long great work takes.

How to align time tracking KPIs with the strategy of our organization?

There are various ways to incorporate time tracking KPIs in an organization, as it mostly depends on business type and strategy.

If your organization wants quick growth, it would be wise to implement aggressive and short-term KPI tracking. For example, instead of a quarterly evaluation of employees, do a monthly evaluation.

This can help you forecast if the current pace of your employees is enough for your projected fiscal growth or not.

person sitting beside table

While using short-term KPIs, it will be possible for you to quickly make decisions. You can decide which type of staff suits your pace and help you form your team accordingly.

An example of that would be that you should analyze the daily productive time and the average task completion time. Anyone underperforming in that department would not be ideal for your vision of quick growth.

Similarly, if you adopt a relaxed approach, incorporate the KPIs mentioned above in a relaxed manner. You can then analyze the data over a long period to evaluate overall productivity and form your team accordingly.

Tips to create smart and effective time-tracking KPIs

The easiest way to create effective time-tracking KPIs is to use the SMART method!

Use the SMART method to define KPIs

As per this method, your KPIs should be:

Specific: Know your goal! To fulfill the first step, you need to understand the what, why, how, when, and where of your goals.
Measurable: The next step is using a KPI that can be easily tracked – time tracking is obviously a popular choice.
Attainable: Don’t get too ambitious with KPIs. Set a target value that you can attain.
Result-oriented: Your KPI isn’t just a tracker; it needs to drive results. Ensure that your KPI drives your team forward and not just provide a qualitative assessment.
Time-based: Add deadlines to ensure you can track the conversion rate efficiently, even using simple sales.

Identify your strategic objective

A business should be clear in what the contract demands from it. It should adopt a strategic mindset. Practically, it should measure the achievement of its goal whilst considering the following filters:

1. Cost of the project
2. Average operational performance
3. Potential risk
4. Achieving specific targets and goals (how much time would it take?)
5. Stakeholder accountability
6. Alignment with your strategy (will it generate new customers?)

You can use a business plan to outline all these factors and how the company intends to achieve its primary goals.

Make sure the data is measurable

An important characteristic of an effective KPI is ensuring its data is measurable such as revenue recognition and can be used for comparisons.

Some important comparisons include relative or comparative analysis, comparing the time taken for project completion against other competitors and changes from past projects.

Set attainable goals

There’s no point in using a KPI that measures the success of an unrealistically ambitious project. To ensure that your employee performance is realistically scaled, you must emulate a realistic working environment with achievable goals.

Ensure that your KPIs are result-oriented

Just because you are setting realistic goals doesn’t mean that you can’t measure your employee productivity. Your KPIs are not just numbers on a screen – they need to drive results.

people doing office works

Some additional KPIs you can use to ensure that you are getting the results you want are:

Net promoter score (NPS): The NPS score evaluates the company’s performance and its customer relationships.
The number of accurate deliveries within a service window: This KPI tracking software will help a business determine if its internal processes are efficient and satisfactory.
Gross profit margin: The Gross Profit Margin KPI measures the company’s net profit on each dollar of sales before expenses. This ratio is calculated by calculating the difference between production costs (excluding overhead, payroll, and taxes).
Monthly recurring revenue: A single number (Key Performance Indicator; KPI for short) that can be used to track all recurring revenue over time in monthly steps. Often this is a byproduct of a subscription business – a service that is billed (and paid) monthly.

Adapt and alter because your KPIs are time-based

Don’t be afraid to experiment if an initial KPI is not up to the mark. Businesses should be willing to adapt and evolve, and this applies in the case of effective KPIs as well.

If something doesn’t work for you, don’t linger around to find out if it will magically start working. You are on a tight schedule, therefore, alter and adapt new strategies as you go.

Conclusion

Time tracking software allows you to make more intelligent decisions about how businesses set their base price and run projects, manage employees’ time, and even how they spend their day.

It’s perfectly normal for some team members to resist or feel uncomfortable tracking their time. However, their fears can be eased through one-on-one discussions and informative seminars highlighting the primary aim and importance of time tracking KPIs.

Following the “SMART” principle and the other tips mentioned above is vital to create effective time tracking KPIs. If done right, they provide valuable data that can be analyzed and compared to evaluate employee performance, target expectations, and increase productivity.

There are many options to go with regarding time tracking software. However, you need to choose something secure. Of course, always do your homework before subscribing to a plan.

But if you want our expert advice, we suggest this great time tracking app! It’s free and offers unlimited users on both desktop and mobile apps.

Lorea Lastiri Lorea is a freelance SEO writer and has spent the last five years researching and writing about time management, productivity, and SaaS. She's an avid traveler, skier, and surfer; when not in the office, you can find her riding waves or exploring the alps.

What Are Time Tracking KPIs? – Explained with Examples