Yet out of a desire to gather as much information as possible at points of contact, companies routinely ask customers to include personal data, and in many cases the employees who provided the service watch them fill out the forms. How surprised should you be if your employees hand in consistently favorable forms that they themselves collected?
Bad assessments have a tendency to mysteriously disappear. Numbers-driven companies also gravitate toward the most popular measures. The question of what measure is the right one gets lost. Similar issues arise about the much touted link between employee satisfaction and profitability. The Employee-Customer-Profit Chain pioneered by Sears suggests that more-satisfied employees produce more-satisfied customers, who in turn deliver higher profits. Or they may actually enjoy what they do, but their customers value price above the quality of service think budget airlines.
A particular bugbear of mine is the application of financial metrics to nonfinancial activities. Anxious to justify themselves rather than be outsourced, many service functions such as IT, HR, and legal try to devise a return on investment number to help their cause. Indeed, ROI is often described as the holy grail of measurement—a revealing metaphor, with its implication of an almost certainly doomed search.
Typically, he or she would ask program participants to identify a benefit, assign a dollar value to it, and estimate the probability that the benefit came from the program. Think about this for a minute. How on earth can the presumed causal link be justified? Assessing any serious executive program requires a much more sophisticated and qualitative approach. Once the program has ended, you have to look beyond immediate evaluations to at least six months after participants return to the workplace; their personal feedback should be incorporated in the next annual company performance review.
The moment you choose to manage by a metric, you invite your managers to manipulate it. Metrics are only proxies for performance. Someone who has learned how to optimize a metric without actually having to perform will often do just that. To create an effective performance measurement system, you have to work with that fact rather than resort to wishful thinking and denial. Clifford Chance replaced its single metric of billable hours with seven criteria on which to base bonuses: respect and mentoring, quality of work, excellence in client service, integrity, contribution to the community, commitment to diversity, and contribution to the firm as an institution.
Metrics should have varying sources colleagues, bosses, customers and time frames. Horizon 1 covered actions relevant to extending and defending core businesses, and metrics were based on current income and cash flow statements.
Horizon 2 covered actions taken to build emerging businesses; metrics came from sales and marketing numbers. Horizon 3 covered creating opportunities for new businesses; success was measured through the attainment of preestablished milestones. Multiple levels like those make gaming far more complicated and far less likely to succeed.
You can also vary the boundaries of your measurement, by defining responsibility more narrowly or by broadening it. To reduce delays in gate-closing time, Southwest Airlines, which had traditionally applied a metric only to gate agents, extended it to include the whole ground team—ticketing staff, gate staff, and loaders—so that everyone had an incentive to cooperate. Finally, you should loosen the link between meeting budgets and performance; far too many bonuses are awarded on that basis.
Managers may either pad their budgets to make meeting them easier or pare them down too far to impress their bosses. Both practices can destroy value. Some companies get around the problem by giving managers leeway.
The office supplier Staples, for example, lets them exceed their budgets if they can demonstrate that doing so will lead to improved service for customers. When I was a CFO, I offered scope for budget revisions during the year, usually in months three and six. Another way of providing budget flexibility is to set ranges rather than specific numbers as targets. As the saying goes, you manage what you measure. The question is, how do you move the needle in a positive direction?
For example, improving your general quality of hire can significantly improve employee performance in your organization. By adopting hiring tactics that help you improve your quality of hire, you can start to see positive changes. One way to start is by incorporating more data driven hiring factors that are better at predicting job performance.
Pre-employment tests, for example, are one of the most predictive hiring factors. Cognitive aptitude tests in particular are far more predictive of job performance than interviews and resumes. By administering pre-employment tests in the hiring process, employers can gain data-driven insight into their candidates that help them make more informed hiring decisions.
The correlation component is key. Because pre-employment tests are significantly correlated with job performance, using tests in the hiring process translates into tangible and dramatic improvements in employee performance. Measuring the performance of your employees is a necessary measure. There are a wide variety of ways in which performance can be measured, whether individually, as a whole, internally, or from an external perspective.
If you are looking to measure employee performance in your company, consider a variety of industry-accepted approaches. To measure performance, compare quantitative data, like production rate, cycle time, or customer wait time, to target measurements in those areas. Alternatively, gauge performance by assessing more qualitative information, like customer feedback. However, be aware that these criteria can be highly subjective, so you may want to use them with other measurements.
For tips from our Business reviewer on how to use time tracking or random quality control checks to measure performance, read on! Did this summary help you? Yes No. Log in Social login does not work in incognito and private browsers.
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Related Articles. Article Summary. Co-authored by Michael R. Lewis Last Updated: March 29, Approved. Method 1. Gather appraisals from subordinates. Ensure the appraisals are anonymous, so the employees have no fear of reprisal. Perform a self-appraisal. Self-appraisals are a great option.
Employees are given the opportunity to appraise themselves. An employee is likely to look at their own strengths and weaknesses differently than others.
Most will overstate their performance. The major benefit to the evaluation is that the self-appraisal is complemented by the mix of ideas from other evaluations. Collect colleague feedback. Feedback from your peers helps you improve at your job because they know the type of dedication and work that is required for the position. Compile supervisor evaluations. They also assess employee production. They would best know whether an employee is ready for a promotion or demotion, based upon their quality and output.
Understand the limitations of degree evaluations. Accordingly, you should never use a degree appraisal as your only appraisal method. Method 2. Use quantitative measurements. Performance appraisals of this type are typically subjective, rather than objective. They are most valuable when objective criteria such as as production rate, cycle time, cost, and error rate are used.
Each department should have its own quantifiable measurements so work can be compared to pre-determined standards, group norms, trends, and employee-to-employee. Collect the data systematically, and determine if the guidelines being used to conduct business are adequate.
For example, you might track the amount of time a customer waits in line. Regularly document the number of items or reports an employee can produce in an hour. Be sure to clearly communicate performance measures and expected performance to employees before measurement begins.
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