Thursday, October 22, 2009

How to Measure Performance

Of the eight core competencies of effective management that we introduce and teach in our Accountability Management Workshop, the competency managers say they struggle with the most is measuring and monitoring performance.

Many managers either do not know how to measure employee performance or have the mistaken assumption that certain tasks cannot be measured. The fact is every job classification and every job duty can be measured – reliably and with considerable precision – even “white collar” job skills.

The accurate tracking and measurement of performance is critical to business success. Measurement is the first step leading to control, and eventually to performance improvement. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. And if you can’t control it, you can’t improve it.

Nothing is more critical to creating competence than establishing clear, valuable, and measurable goals. Measurement is the science of knowing where you are, where you want to be, and identifying the steps necessary to accomplish your goals.

The Nine Measurement Dimensions

There are nine measurement dimensions by which to assess individual performance. Some job classifications can be rated in each of the nine areas, while others may only be measured against a few of the dimensions outlined below.

The three broad categories of measurement are Quality, Quantity and Costs. Under each main category are three specific measurement dimensions.

The Quality measurement dimensions are Accuracy, Class and Novelty.

Accuracy is the degree to which an accomplishment matches a standard without errors of omission or commission. Omission is when something is left out. Commission is when something is inadvertently added. Examples of accuracy measurements are:
100% compliance with all OSHA regulations
Balance out within +/- $2
Within designated specifications
Hot food hot, cold food cold
Given correct change

Class is a comparative superiority of an accomplishment beyond mere accuracy. Market share, opinion polls, survey results, best of show, and other benchmarks are examples of class measurements. The following are class-type ratings:
Customer Satisfaction Survey scores
Five Star / Five Diamond hotel rating
The largest Chevrolet dealer on the West Coast
Voted #1 three years in a row
Two thumbs up

Novelty is a measurement of innovation and creativity without sacrificing any other qualities. Employees who develop leading edge technologies or patentable products add great value to an organization. An employee in the vault at a large bank in Las Vegas came up with a novel idea for breaking open wrapped coins by tossing them into a cement mixer. This saved countless man-hours of work. Other examples of novelty measurements are:
Number of employee suggestions placed in the company Suggestion Box
Number of Nobel Laureate professors at a college
Number of new patents
Improvements made to processes, procedures, practices, equipment, materials, etc.
Labor or cost saving ideas

The three Quantity measurements are Rate, Timeliness and Volume.

identifies the amount of items produced within a specified timeframe. These include such things as:
Being able to type 110 words per minute
Number of covers per shift in a restaurant
Average daily room rate for a hotel
Number of calls per PBX operator
Number of widgets produced per hour, per day, per week, per month, per year

Timeliness is a measurement of an accomplishment within a specified timeframe, where the emphasis is on the time rather than the amount. Examples of timeliness measurements are:
Get out of town by sundown
In by 8:00 out by 5:00
Shipped within 24 hours
One day turn around
Loans approved within 48 hours
Answer the phone within three rings

Volume merely is a measurement of the total amount produced. This is the simplest and most common measurement. It entails the simple act of counting something. For example:
Number of salt/pepper shakers refilled at the end of the shift
Total sales, total revenue, total costs, etc.
Number of managers who attended IMG’s Accountability Management Workshop
Number of rooms occupied
Number of butts in seats

Finally, the three Cost measurement dimensions are Labor, Material and Management.

Labor costs – the measurement most conscious to managers – are the costs associated with an accomplishment. These include:
Wages, benefits, overtime, etc.
Training and orientation
Travel and entertainment

Material is the measurement of the amount of resources and materials needed to produce an accomplishment. Employees who produce an outcome using less materials than their counterparts have greater value to an organization. Consequently, material measurements identify such things as:
Yield rates
Scrap rates
Amount of waste eliminated through automation
Paperless processes
Steps eliminated through process improvement initiatives

Management measurements are the costs associated with the managerial or supervisory support needed to accomplish a task. These include:
Management salaries and administrative costs
Supervisor to employee ratios
Number of days an employee works without direct supervision
Number of self-directed work teams
Number of layers of management

Someone once said, “That which gets measured, gets done.” Managers are paid for getting things done. Competent managers, therefore, are those who measure and monitor performance to ensure employees accomplish the things that need to get done the way they need to be done.

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