You are on page 1of 14

16 Ways to Measure Employee Performance

By David Hakala on February 19, 2008 Once an annual ritual, performance appraisal has become a continuous process by which an employees understanding of a companys goals and his or her progress toward contributing to them are measured. Performance measurement is an ongoing activity for all managers and their subordinates. Performance measurement uses the following indicators of performance, as well as assessments of those indicators. 1. Quantity: The number of units produced, processed or sold is a good objective indicator of performance. Be careful of placing too much emphasis on quantity, lest quality suffer. 2. Quality: The quality of work performed can be measured by several means. The percentage of work output that must be redone or is rejected is one such indicator. In a sales environment, the percentage of inquiries converted to sales is an indicator of salesmanship quality. 3. Timeliness: How fast work is performed is another performance indicator that should be used with caution. In field service, the average customers downtime is a good indicator of timeliness. In manufacturing, it might be the number of units produced per hour. 4. Cost-Effectiveness: The cost of work performed should be used as a measure of performance only if the employee has some degree of control over costs. For example, a customer-service representatives performance is indicated by the percentage of calls that he or she must escalate to more experienced and expensive reps. 5. Absenteeism/Tardiness: An employee is obviously not performing when he or she is not at work. Other employees performance may be adversely impacted by absences, too. 6. Creativity: It can be difficult to quantify creativity as a performance indicator, but in many white-collar jobs, it is vitally important. Supervisors and employees should keep track of creative work examples and attempt to quantify them. 7. Adherence to Policy: This may seem to be the opposite of creativity, but it is merely a boundary on creativity. Deviations from policy indicate an employee whose performance goals are not well aligned with those of the company. 8. Gossip and Other Personal Habits: They may not seem performance-related to the employee, but some personal habits, like gossip, can detract from job performance and interfere with the performance of others. The specific behaviors should be defined, and goals should be set for reducing their frequency.

9. Personal Appearance/Grooming: Most people know how to dress for work, but in many organizations, there is at least one employee who needs to be told. Examples of inappropriate appearance and grooming should be spelled out, their effects upon the employees performance and that of others explained, and corrective actions defined. Performance indicators must be assessed by some means in order to measure performance itself. Here are some of the ways in which performance is assessed from the aforementioned indicators. 10. Manager Appraisal: A manager appraises the employees performance and delivers the appraisal to the employee. Manager appraisal is by nature top-down and does not encourage the employees active participation. It is often met with resistance, because the employee has no investment in its development. 11. Self-Appraisal: The employee appraises his or her own performance, in many cases comparing the self-appraisal to management's review. Often, self-appraisals can highlight discrepancies between what the employee and management think are important performance factors and provide mutual feedback for meaningful adjustment of expectations. 12. Peer Appraisal: Employees in similar positions appraise an employees performance. This method is based on the assumption that co-workers are most familiar with an employees performance. Peer appraisal has long been used successfully in manufacturing environments, where objective criteria such as units produced prevail. Recently, peer appraisal has expanded to white-collar professions, where soft criteria such as works well with others can lead to ambiguous appraisals. Peer appraisals are often effective at focusing an employees attention on undesirable behaviors and motivating change. 13. Team Appraisal: Similar to peer appraisal in that members of a team, who may hold different positions, are asked to appraise each others work and work styles. This approach assumes that the teams objectives and each members expected contribution have been clearly defined. 14. Assessment Center: The employee is appraised by professional assessors who may evaluate simulated or actual work activities. Objectivity is one advantage of assessment centers, which produce reviews that are not clouded by personal relationships with employees. 15. 360-Degree or Full-Circle Appraisal: The employees performance is appraised by everyone with whom he of she interacts, including managers, peers, customers and members of other departments. This is the most comprehensive and expensive way to measure performance, and it is generally reserved for key employees. 16. MBO (Management by Objectives): The employees achievement of objective goals set in concert with his or her manager is assessed. The MBO process begins with action statements

such as, reduce rejected parts to 5 percent. Ongoing monitoring and review of objectives keeps the employee focused on achieving goals. At the annual review, progress toward objectives is assessed, and new goals are set. There are as many indicators of performance as there are companies and jobs. The various assessment methods can be used in combinations. It is important to choose indicators that align with your companys goals and assessment methods that effectively appraise those indicators.

Top of Form

What is most important to you for your future? Having a fulfilling career Having a family

Making lots of money Being a good person Being very popular or famous
Bottom of Form

Evaluating Employee Performance


Employee performance should be evaluated regularly. Employees want feedbackthey want to know what their supervisors think about their work. Regular performance evaluations not only provide feedback to employees, but also provide employees with an opportunity to correct deficiencies. Evaluations or reviews also help in making key personnel decisions, such as the following: Justifying promotions, transfers, and terminations Identifying training needs Providing feedback to employees on their performance Determining necessary pay adjustments

Most organizations utilize employee evaluation systems; one such system is known as a performance appraisal. A performance appraisal is a formal, structured system designed to measure the actual job performance of an employee against designated performance standards. Although performance appraisals systems vary by organizations, all employee evaluations should have the following three components: Specific, job-related criteria against which performance can be compared A rating scale that lets employees know how well they're meeting the criteria Objective methods, forms, and procedures to determine the rating

Traditionally, an employee's immediate boss conducts his or her performance appraisal. However, some organizations use other devices, such as peer evaluations, self-appraisals, and even customer evaluations, for conducting this important task. The latest approach to performance evaluation is the use of 360-degree feedback. The 360degree feedback appraisal provides performance feedback from the full circle of daily contacts that an employee may have. This method of performance appraisal fits well into organizations that have introduced teams, employee involvement, and TQM programs.

Methods for Evaluating Employee Performance


By Ellen Dowling, eHow Contributor

In the early to mid-20th century, most managers in United States companies evaluated their employees' work with simple descriptors such as excellent, good, fair and the like. Then the 1964 Civil Rights Act and the 1966 and 1970 Equal Employment Opportunity Commission dictated that workers must be evaluated according to objective, systematic and defensible measurements. As a manager in the 21st century, you now have many different methods of appraisal to choose from.

1. Trait Rating
To evaluate your employees according to specific traits, you devise a list of required abilities or qualities and then measure each employee's performance (usually on a numerical scale). For example, you might choose such traits as problem-solving ability, respect for others' work, or participation in group efforts. Then, you would decide what number to give each employee based on, say, a scale of 1 to 10 (with 10 being the highest). The problem with the trait rating method is the traits themselves may be too vague (what does "shows initiative" really mean?) and may be based more on personality than behavior. The advantages are the ratings are standardized (so results can be compared across your entire organization), and the system is simple to use.

2. Peer Ranking
When you use a peer ranking appraisal system, you rank your employees as to how well they perform compared to each other. This method allows you to identify your best performers (top 1 percent) and your least satisfactory workers (bottom 30 percent). The drawback to this method seems fairly obvious. It pits employees against each other and impacts their inclination to work together productively in groups. On the other hand, the competition inherent in this method frequently inspires the lower-ranked employees to significantly improve their performance.

3. Management by Objectives (MBO)


Use the MBO method if you wish to evaluate how well your employees meet (or exceed) specific goals. For example, a sales manager might set an objective for employees that requires them to reach a certain sales quota for a certain period. A manufacturing manager might set a goal to reduce product waste. At appraisal time, you then assess how close the employee came to achieving the goal: Did he meet, exceed or not meet expectations? This method's advantage is it relies on actual outcomes to judge performance, not an employee's potential for success. The downside is you must work diligently (with your employees' input) to devise objectives that are both realistic and achievable

Employee Performance Evaluation Common Rating Methods


Employee performance evaluation tips and techniques

What is the right rating method for my employee performance evaluations?

Rating Method Overview


The right rating method for your employee evaluations depends on the number of people you have doing the same job, the size of your organisation and the benefit you receive from investing

in your evaluation tools. Then you need to consider the resources that you have available to develop your rating methods. You will find that rating methods will vary considerably in their complexity ranging from a basic summation of performance written by the employees manager, though to the use of complex behavioural descriptors used to compare and contrast individual performance. Without a doubt the best way to rate employee performance also happens to be the most expensive method to use, see BARS below. However, before you decide to use this method you will need to determine if your business will benefit from its use. You are more likely to benefit from these more expensive methods if you have a large number of people doing a simular job, with large starting in the hundreds of employees. In practice you will find that most employee performance evaluations include a combination of two or more of the following rating methods.
Graphic rating scale Global Rating Essay Method Behavioural anchored rating scales (BARS) Management by objectives

Graphic Rating Scale


Graphic rating scales are used in many surveys, they normally consist of a line with four or five rating criteria listed, such as
Unsatisfactory Below expectation Satisfactory Above average Outstanding

An example of this type of rating criteria


Performance Criteria

Unsatisfactory

Below Expectations

Satisfactory X

Above Average

Outstanding

Productivity Quality Or
Performance Criteria

3 X

Productivity

Quality

Typically there will be a range of criteria such as productivity, quality, teamwork, customer service, or concern for safety etc. The team leader or manager will rate each employee based on their judgement of the employees performance, time their assessment is supported by data. This method is typically subject to considerable bias, which makes it hard to compare people doing different jobs or even the same job in different teams. There is generally no criterion to determine the difference between each of the graduations on the rating scale. To remove the bias some businesses assign criteria to some of the elements. For example, a sales person may score a 3 if they meet their sales budget, exceeding by 10% scores a 4 and by 20% of more scores a 5, If they miss target by 10% they score a 3 and by 20% or more they score a 1. You will find that most efforts to clarify the rating criteria tend to be on those rating criteria that are quantitative. Many people will also debate having 4 or 5 rating criteria, while there is some merit in the debate when this method is used in employee surveys and market research; there is no validity in the debate when this method is used for employee performance evaluations.

Global Rating
Some organisations use a single global rating of overall job performance to evaluate an employee. While this method would be expedient for the employer and may assist with decision such as paying bonus and allocating performance based pay increases, it is unlikely to provide the employee with any ideas on how to improve their performance. For example
Performance Criteria

Unsatisfactory

Below expectations

Satisfactory X

Above OutAverage standing

Overall Performance

Note: This is not recommended for your employee performance evaluations

The Essay Method


In the essay method the appraiser writes a statement to describe the employees strengths and weaknesses and to make recommendations about the employees developmental needs. This method gives the appraiser some freedom to describe the employees unique characteristics, promotability and special talents.

This method is reliant on the appraisers writing skills and their ability to express their thoughts through the written word. To ensure consistency and improve the content of this written evaluation a checklist of things to cover can be created and could include items such as
Job performance Quality of work Team work

However once this check list is created you could use it to create a graphic rating scale, and provide a comments section for appraiser to add additional comments. When used in conjunction with other methods, such as the graphic rating scale, the essay method does not require a lengthy statement and can add value to your employee performance evaluations.

Behaviourally Anchored Rating Scales (BARS)


The behavioural Anchored Rating Scale method is normally used only for part of your employee perfromance evaluations, that being the assessment of employee behaviour. For other performance criteria such as Judgement or decision making other methods of appraisal are generally used. As with the graphic rating scale, the behavioural anchored rating scale aims to assign a score to a range of performance criteria. However, the BARS method focuses only on observable behaviour and provides examples of the observable behaviour for each score. This makes it easier to have consistent rating across a large organisation. For example when assessing a leader on their passion for people you may consider
Score 7, 8 missed one on ones as a priority. or 9

Conducts one on one with each employee monthly, reschedules Actively seeks opportunities to give positive informal feedback to their employees Has several touch points with each employee each day Provides their employees with development opportunities Seeks opportunities to share their good people with others in the business Consults their team on decisions that effect them

Score 4, 5 Provides one on ones periodically to most employees or 6 Provides occasional feedback tot heir employees Communicated mostly to team in email Talks to employees mostly about tasks, and sticks to own team Score 1, 2 Arrives quietly and keeps to self or 3 Provides little direction to their team Communicates extensively in email

Tends to blame own employees for performance

Management by Objectives (MBO)


Management by objectives is a process where longer term goals are set, normally collaboratively, for the business as a whole. These goals are then cascaded down to each division or sub-unit of the business. These goals tend to be longer term, ranging from 12 month to three years. However, some shorter term objectives can also be set. You will find MBO is generally used to define the performance standards of people completing non routine tasks such as management tasks or short-term projects. How it works
The manager and employee (the employee is normally a manager too) agree on the employees goals and how they will be measured. Once the goals are set they meet regularly to discuss progress towards these goals. It is also a good idea to discuss the method by which the goals will be achieved. During the discussions the manager provides feedback on progress towards interim goals.

The manager and employee need to be open to removing goals that become inappropriate when new inputs are received and to add new goals that become required.
At the end of the agreed period the manager completes a review of the employees performance against the new and revised goals.

In MBO Programs there also needs to be an assessment of the way in which the goals were achieved, for example
Did the project manager follow the business project management processes? Were stakeholders engaged appropriately Did the manager meet objectives in an ethical manner? Was the brand or long term future of the business placed at risk?

In your employee performance evaluations, you will find that MBO programs tend to be used in conjunction with other appraisal systems to get a complete view of job performance.

Choosing the right method for your employee performance evaluations

You will now have an overview of the five common rating methods used for employee performance evaluation. Whilst here they are all presented here as discrete methods you will find that in most cases a combination of rating methods is used.
Graphic rating scale Global Rating Essay Method Behavioural anchored rating scales (BARS) Management by objectives

The ideal rating method for your employee performance evaluations is the one that makes sense for you. To determine the right method for your application you need to workout
How many people will be evaluated? What resources do you have to invest in developing your rating system? How much value will additional investment in the rating method deliver for your business? How frequently can you measure performance?

Next Steps
Your employee performance evaluations require you to assess your people against a performance standard, what is considered to be a fair standard? Click here to find out how you can determine a fair performance standard for your people.

Methods of Performance Evaluation

Each of the performance evaluation methods listed below may be used to varying degrees. We recommend that agencies analyze their specific needs and choose any combination of the following that best meets those needs. Human Resource Management Services will, upon request, assist agencies in their analysis.
- Multi-source Assessment (360-Degree Feedback, Full-circle Appraisal)

This method differs significantly from the traditional supervisor/subordinate performance evaluation. Multi-source assessment involves gathering information from a number of customers who actually deal with the employee providing feedback both internal and external. Internal

customers include the immediate supervisor, other managers, co-workers, and subordinates. External customers may include clients, applicants, consultants, staff from other agencies, legislators, etc. The basis of this method is to provide a broader assessment of how an employee is doing on the job. This method is viewed as an optimal tool for identifying areas for improvement, guiding behavioral change, and generally enhancing performance management capabilities because it is not dependent on a single individuals perceptions. It makes the employee much more accountable to the various customers because they now have input into the employees performance rating.
- Self-Appraisal

Provides the opportunity for employees to evaluate their own performance and express how they think theyve performed without being influenced by their supervisors judgements. Supervisors also evaluate performance on the same factors and use that as a basis to compare responses. This can reveal areas of agreement or highlight differences of opinion. The advantage of this method is that it provides more interaction between supervisors and subordinates, greater agreement on performance expectations, and greater accountability for performance through increased employee participation in the review process. Supervisors still have the responsibility to write reviews and provide the employee with honest communication about performance. They must also be able to provide explanations for differences of opinion about performance so employees can understand what they are doing wrong and how they can do things better.
- Subordinate Appraisal of Managers (Upward appraisal)

Supervisors are reviewed by those they supervise. This method serves to provide feedback on the qualitative aspects of management performance how well they communicate, provide direction, delegate responsibility, etc. Employees fear of reprisal may inhibit them from honestly providing feedback on their supervisors performance. However, providing anonymity and working with supervisors to handle constructive criticism may guard against that.
- Peer

This method involves coworkers evaluating an employee. It is based on the premise that individuals can relate to an employee as their equal and are in the best position to judge the employees performance because they understand the nature of the job and are familiar with the activities of the employee. This method is particularly useful in organizations having selfdirected work teams, but could be used in other settings as well. An advantage is that peer appraisal relates more to results than efforts. Disadvantages perceived are that peers are too lenient and tend to give high ratings to friends and low ratings to those they dislike.
- Management by Objectives (MBO)

MBO is a form of results-oriented appraisal. It is commonly used for supervisors, but may be used for other employees as well. It requires that both the supervisor and the subordinate agree upon specific objectives in the form of measurable results. The objectives are the standards of performance. MBO is intended to motivate stronger performance on the part of managers and employees. It is assumed that if employees meet their goals, supervisors will meet their goals, and organizations will then meet their goals. MBO has the following components: (1) major objectives to be accomplished within specified dates, (2) action plans and milestones for accomplishing the objectives, (3) periodic meetings with the manager and employee to review progress and make corrections if necessary, and (4) an assessment of employee performance at

the end of the MBO cycle. An advantage of MBO is that it is a participative approach in which employees have input in setting their own objectives, as well as being involved in decisions that affect the objectives of the organization. MBO has been criticized as being based on numerical quotas rather than continuous improvement process, and that it focuses on the performance of individuals at the expense of teamwork. It is also very time consuming, requiring a considerable amount of administrative work.
- Continuous Improvement Review

Concentrates on current day-to-day results that can be linked directly to organization-wide improvements in quality and productivity. However, the formal evaluation must accurately reflect the entire review period, i.e. probationary, annual, etc.
- Behaviorally-anchored Rating Scale

This is a method where standards are described in the form of behavior expected of an employee. The descriptions are based on critical incidents determined to be characteristic of the various levels of performance. The descriptions help to provide objectivity in rating. This tends to focus on activity rather than results.
- Trait Format

This format describes traits of an individual. Some examples are initiative, dependability, cooperation. Be aware that while those traits may be factors affecting an individuals performance, to evaluate traits alone becomes subjective and is, therefore, difficult to defend.
- Critical Incident Method

This involves observing and recording information about unusually good or unusually poor behavior. It is usually used in conjunction with another rating technique to support the evaluation and provides specific examples to discuss with the employee. Documentation should be factual, objective, and job-related.
- Essay or Narrative Format

This format is a simple approach that requires evaluators to write or answer questions about past performance, strengths and weaknesses, training and development needs, etc.. This format is very suitable to jobs in which there are few quantifiable results, and it provides opportunity for considerable detail about performance issues. The format, however, is difficult to use for comparing performance with other employees.