KPIs for Remote Employees: Three Pillars of an Effective Distributed Team

An ability to hire and manage employees remotely is becoming a competitive advantage these days[1]. More highly qualified talents prefer to work remotely to achieve a better work-life balance. How do you find the right employees? How do you manage remote teams? What KPIs will help to track the performance?

Pillars of effective remote employee managementWe’ll start the discussion with:

The BSC Designer team is formed by members that are working remotely. Based on our experience, we’ll formulate and discuss the best practices (the pillars) of a good remote team:

Finally, we’ll summarize the findings of the article in:

Remote Team Vocabulary: No Single Term

There is no agreement about the term for remote team (also called virtual team, distributed team) or for a person working remotely (also called remote employee, teleworker, freelancer, outsourcer).

There are, of course, some important differences. For example:

  • A third party company that does something for you (outsourcing model) already has some internal management and is easier to deal with
  • A freelancer is generally a person who works with different clients

Also, there are some nuances, depending on how the relationship between the person and the organization are formalized:

  • By remote employee, we generally refer to a person who is officially employed by the organization (social payments, retention plan, etc.), but is working remotely.
  • An independent contractor is not employed by the organization but works according to the established contractual relationship.

For example (I’m not giving any legal advice here), as a European company, we cannot hire a person who lives in Japan as an employee, but he or she can be our contractor.

The legal details will vary depending on the jurisdiction of the organization and location of the person to work with, but general management principles will remain the same.

Office Imitation vs. Independent Remote Team

While the term “remote team” might be the same, I see two fundamental options of how the management of such teams can be organized. Let’s call them:

  • “Office Imitation” and
  • “Independent Remote Team”:

Office Imitation

In this case, teams are using video conferencing and instant messages as a main communication means. Sometimes, screen recording software is installed to track the activity of remote employees (see my opinion about this practice below). Basically, this approach imitates the office environment remotely.

Constant control from the management reduces the benefits of the remote team that works in the format of office imitation.

Independent Team

That’s the format we are using actively at BSC Designer. In this case, the communication tools don’t require an immediate answer (think about email, stories on Kanban boards and similar).

If we want to leverage the benefits of remote work (especially their personal benefits), then we need to focus on the independent team

In this case, the manager is not specifically interested in how the employee spends his/her time, what is important is that the task is completed on time and according to the established quality standards.

The Advantages and Disadvantages of Distributed Teams

Why do we need a distributed team? That’s an interesting question. I believe any organization should answer this question according to the market conditions, regulator requirements, product, business model, etc.

Advantages of Remote Teams

At BSC Designer, we rely on the remote team model a lot, and here are the advantages that we see.

Business side:

  • Having access to talents globally (it became one of our official core values)
  • Possibility of entering new markets more easily
  • Communications are more disciplined “by design”
  • Team members are more independent and don’t require constant guidance
  • Save on salaries (so-called geographic arbitrage)
  • Save on office costs

Personal aspect (applicable to the manager as well as the remote employee):

  • Better work-life balance
  • A possibility to travel more

Disadvantages of Remote Teams

When working with a person remotely, we miss a lot of non-verbal communications. What is obvious during normal communications won’t be that clear when working remotely. Team engagement and communication are some of the important problems[2].

Here are some typical disadvantages of having a remote team:

  • Lag in communication due to time difference
  • Might not be allowed by legislation (if you work in the regulated industry)
  • Might not be possible due to physical limitations (healthcare industry, manufacturing)
  • Less personal contact, less socializing, fewer possibilities to track the “pulse” of the team
  • Intellectual property and other legal issues become more complex
  • International invoicing and payments require additional attention

Trust Index Indicator

When explaining our approach to managing a remote team, I find it useful to introduce the idea of trust index:

Trust index is an indicator that shows the level of trust between the remote employee and the manager.

Below, I explain what factors impact trust index and how it can be calculated.

Calculating Trust Index

When we start working with a new member of a remote team, the trust index is on zero level (or might even be in a negative zone if the freelancer or manager had some negative experience working remotely).

An example of remote team dashboard

What affects the trust index?

From the employee side:

  • +5 walking extra-mile for a task
  • +3 delivering in full on time
  • +1 effective communications
  • -1 when employee says, “Sorry, I have not seen your email”
  • -3 when employee was not able to work on your project and did not tell manager about this

From the manager’s side:

  • +5 payments made in full on time
  • +2 unambiguous requirements
  • +1 clear standards
  • -2 delays in feedback and task reviews
  • -5 when manager says, “That’s not exactly what I had in mind”
  • -10 when manager says, “Sorry, I don’t have money to pay according to the contract”

The trust index is applicable to any team structure, not just the remote team, but in the case of the remote team, it is less tangible but much more important.

Risk Control with Trust Index

I was discussing the remote team management at some conference and got an interesting comment:

“… so I guess in your remote team you hire people that you trust.”

I wish I could do so, but normally, at the beginning of the relationship, the trust index is on zero level.

How can you make it grow? Well, let’s skip the obvious part (do all the good things and avoid all the bad things).

A risk control strategy, in this case, is to increase the scope of the job gradually:

  • We start with a small paid test task – a small chunk of what will be needed in the future. Our risks are limited by the cost of the test task. The risks of a candidate employee are low and can be leveraged with escrow service.

If successful:

  • The employee’s trust level increases (we know that he or she can deliver what is promised on time)
  • Our trust level (from the viewpoint of employee) increases as well (employee knows your management style better and knows that you pay on time in full)

How do you feel about working with this candidate? Feels good? Repeat the steps with a bigger chunk of requirements.

Getting Started Strategy: Focus 90% of the Efforts On the Hire Period

Most of the problems occur with distributed teams exist because you hired the wrong people. We are normally good at testing hard skills, but soft skills are even more important in the case of a remote team.

My ideal remote employee is a person with these qualities:

  • Pillar 1. Self-discipline (ability to work without direct control)
  • Pillar 2. Communication skills (ability to communicate effectively with manager and with customers)
  • Pillar 3. Learning skills (ability to follow the instructions and learn new things quickly)

We call these soft skills the pillars of a remote team. Below, I share some examples of what we do to build great remote teams. And let’s not skip the classical HR metrics.

Pillar 1. How to Quantify Self-Discipline

How do we know that a candidate has a required level of self-discipline? You might be thinking about complex social studies and surveys that we need to conduct, but according to my practice, there is no need to overcomplicate things in this case.

We start by looking at small things. Here is an example:

  • We ask to send the results of a test task by email by a certain date/time
  • We ask to use a specific subject line in the email and add required details

We are looking at these basic indicators:

  • Was it on time?
  • Was the subject as expected?
  • How was the grammar and punctuation in the email?

The goal is not to have everything 100% as expected (actually this could be a red flag); having a 80-90% score is a good sign.

Too simple, right?

You might be surprised, but according to my experience, about 60% of emails don’t arrive on time.

That’s a quick test of a person’s self-discipline.

Can a person improve? Obviously! But probably, your remote team won’t be the best place to do this.

Were there false positive or false negative cases? I have some stories to share… Unfortunately, the candidates that were not able to follow the schedule in the beginning are much harder to manage later than candidates who were more disciplined.

Pillar 2. Effective Communications Beyond Responding Fast

What about effective communications? Being efficient (responding quickly) doesn’t mean that these communications are good. Let’s talk about effective communication in the context of two stakeholders – an employee and a manager.

Effective Communications for an Employee

Imagine that you start working with the person. You agree on the scope of the task and agree about the timeline (let’s say it is 3 days).

What might happen within these 3 days?

  • Case 1. The task is delivered in full on time, and the quality is as expected – it’s a good result.
  • Case 2. The task is delivered on time, but the quality is not as expected – we need to do a root cause analysis – was it because the requirements were not clear? Was it because the person didn’t have enough skills or didn’t have enough time?
  • Case 3. The task is not delivered on time, but the person let you know about this.

If I get the “sorry” message on the delivery day, then it’s not a good signal. The person knew that there was some problem coming (probably on the day 1), but has not informed me about this that day.

  • Case 4. The task is not delivered on time, and the person doesn’t bother to explain why to you. Anything could have happened, but it’s a bad sign, especially at the beginning of the relationship.

Effective Communication for a Manager

It is not just about the team, the manager should also improve. In the case of a remote team, the ability to set specific and clear tasks is a really important skill. Any task where requirements are ambiguous will not go well.

Can the manager improve? Absolutely! For example, here are the questions that I ask myself when articulating a new task:

  • Did I have enough information when formulating the task?
  • Was I clear enough explaining my thoughts?
  • What will my colleague actually understand?
  • Should I add a screenshot here?
  • Should I add/remove the preamble part?
  • What thoughts/feeling does my message induce?

Pillar 3. How to Quantify Learning Skills

When the basic level of trust index is reached, you can go ahead in your relationship with the employee.

How do you feel about working with your new team member now? You have some common experience, and the risk model now evolves. On this stage, we prefer to focus on the tasks that will show:

  • How well the person is learning
  • How well the person is following the instructions
  • How creative the person is
  • How well the person is communicating with the manager and the clients

All these tasks will increase the trust index of the employee. I guess the same happens on the employee side – my management style becomes more clear, and the values of the company are becoming clearer.

How do we quantify the learning skills of the employee?

In the 10 Step KPI System book, we discussed some important ideas about measurement:

  • If we want to know more about the world around us, we have two methods – observation or interaction
  • It’s better design systems that are measurable by design

Back to managing remote teams… We need to formulate the first tasks in the way that we know the person is learning. And the best way to know that the person actually learnt something new is to see that this new knowledge or skill was applied in practice (see the four level model for training evaluation).

How does it work in our case? Let’s take customer support people as an example:

  • We use video tutorials for the product when onboarding new members of the team
  • We ask new team members to solve simple tasks with the software
  • We ask new team members to make a short video explaining this task as this helps to validate creative and communication skills
  • Some learning challenges don’t have any obvious solution, so we are looking at the reaction of the team member and the way he or she approaches the problem

Observing the behaviour of the employee and asking some follow up questions gives us an idea about the persons’ strengths and weaknesses. Respectively, the learning curve and management style can be adjusted.

KPIs for Distributed Team

We talked about different aspects of managing a remote team. Let’s summarize how all these factors can be quantified.

We can group KPIs according to these three stages:

  • Stage 1. Find and Test Candidates
  • Stage 2. Earn Trust, Adjust Communications
  • Stage 3. Keep Your Team Happy

KPIs for Distributed Team

Remote Team KPIs
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Stage 1. Find and Test Candidates

The leading metrics on this stage are:

  • In full on time deliveries, %
  • Communication index. It can be quantified on this scale: 100% – no delays; 70% – delay communicated beforehand; 40% delay communicated on the deadline day; 10% delay is communicated after the deadline.
  • Learning capabilities, % A subjective index that shows how well the person follows the existing instructions and is learning something new.

This lagging metric will help to quantify the results:

  • Freelancer-project fit. Subjective estimation of the manager: does the candidate look like the best person to solve the required challenges?

Stage 2. Earn Trust, Adjust Communications

The leading metrics for the remote employee are:

  • Extra-mile metric. Shows how the person worked in stressful situations (solving critical problems, being proactive with possible problems).
  • + metrics from stage 1

The leading metric for a manager is:

  • Unambiguity of the requirements. Can be quantified by the famous WTF/page metric.

The success in earning trust and improving communications can be validated with these lagging metrics:

  • Trust index metric (as seen by manager). Formed by experience of dealing with freelancers.
  • Trust index metric (as seen by employee). Formed by the impact of the manager’s behaviour on freelancers.
  • Communication style match. Subjective answer to the question: “Do we understand each other well?”
  • Remote employee task-related performance, % The metric quantifies the results of the task completion. Specific metrics will depend on the tasks and the business domain. You can find some examples

Pillars of effective remote employee management

Remote Team KPIs
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Stage 3. Keep Your Team Effective and Happy

The leading metrics (mostly focused on manager) will help to make sure that you keep doing the right things to keep the remote team happy and effective.

  • [Binary] Control points (quality, time) implemented
  • [Binary] Team has challenging tasks
  • Complexity score, % (see this article for some quantification ideas)
  • Tools and materials availability – an index of:
    • Access to the software licenses
    • Access to the internal business systems
    • Up to date internal standards
  • [Binary] Regular feedback
  • + Metrics from the previous stages

The lagging metrics that will validate the achieved results are:

  • Task-specific performance metrics
  • Employee satisfaction rate, %
  • Turnover rate among top performers, %

Administrative Challenges Metrics

Last but not least, there are certain administrative tasks related to managing a remote team.

Binary measure units: Framework agreement signed

Remote Team KPIs
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Required Legal Paperwork

Metrics that show that framework agreements were signed to regulate IP rights, NDA, payments.

  • [Binary] Framework agreement signed
  • [Binary] NDA agreement signed

Time spent on monthly administrative tasks

Ideally should be reduced to paying one invoice per month.

  • Time spent on invoicing and payments, hours

Monthly running costs

The costs associated with a virtual workplace – software licenses, hardware, renting co-working, etc.

  • Software licenses, $
  • Equipment, $

Tips and Tricks for a Remote Team

Here are some practical thoughts that I’d like to share about managing a remote team.

  • Disclaimer: This is how we manage remote teams at BSC Designer, and there’s no guarantee that the same management style will fit your organization.

Communication Tools – More Writing, Less Calls

I like using Skype for calls with clients. The context is important there, it’s important to read between the lines and understand what the client actually means.

Dealing with a remote team is a different case. My current opinion (it has not changed in the last 15 years, but it doesn’t mean it won’t change in the future) is that text-based communications are best for the remote team.

Writing text implies some important homework: you need to formulate your thoughts, make sure the logic flows correctly, rewrite it again to remove contradictory parts and make your ideas sound better. It takes time and some writing skills, but it pays back.

Many companies try to solve all issues with a remote team by making communications more “effective.” They invest in video conferencing, live chats, meetups, etc. See the “Office Imitation” model explained above.  For me, it looks like asking for a faster horse.

Effective communication is not about being 24 hours online; it’s about formulating your thoughts in a way that requires little or no additional clarification.

Our current choice is a simple Kanban board (we are using Clubhouse platform).

No Time Tracking – Positive Impact on Trust Index

Another thing that surprises many people is that we are not using any time tracking software or trackers that would record a screen.

I understand why outsourcing companies use this, but we are a product company focused on creating more value for our customers, so in our case, I simply don’t see any sense in doing time tracking seriously.

Here is what we do instead:

  • We agree with our employees about the estimated cost of a certain task (some hourly rates are involved, but we are not controlling them)
  • For standardized tasks, we simply re-use the historical estimations
  • At the end of the period, the employee calculates the total sum to be paid
  • Manager’s activity is focused on reviewing the task results
  • Manager’s administrative activity is reduced to paying the invoice

Productivity Hack for Users of BSC Designer

  • You can start with the scorecard template that we discussed in this article
  • Use the data series function to evaluate different employees using the same metrics
  • Use custom measure units to quantify qualitative indexes (like communication index that we discussed above)
  • How do remote employment trends affect your organization in general? In the article about PESTEL analysis, we used this trend as an example of social environmental changes. The findings of the PESTEL analysis were presented on the strategy map. It’s a good idea to have your response strategy ready.

Remote employment trend analyzed on strategy map

View View Trend Analysis Example online in BSC Designer Trend Analysis Example online - sign-up with a free account for immediate access to 23 scorecard templates.
What's next?

  • Access templates. Sign-up with a free plan at BSC Designer for immediate access to 23 scorecard templates, including Remote Team KPIs discussed in this article.
  • Master skills. Check out free video tutorial for the Balanced Scorecard. Master your strategy planning and execution skills with Strategy Execution training.
  • Automate. Learn what Balanced Scorecard software is and how it can make your life easier by automating strategy execution, KPIs, and strategy maps.

References

  1. ^ 2019 Challenges And Benefits Of Global Teams – an HR Perspective, Findings from Spring 2019 SHRM/Globalization Partners Global Teams Survey
  2. ^ Global Talent Trends, 2019, LinkedIn Talent Solutions

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