Measuring Performance

Performance measurement is the use of statistical evidence to determine progress

toward specific defined organizational objectives

Measurement" encompasses the assessment of performance and results achieved

by individual employees, groups of employees or teams, and entire Organizations

Measurement provides a way to determine what has been accomplished and can
serve as a basis for deciding when those accomplishments deserve special
recognition

Measuring means determining the level of performance against a set of standards

The measurement and evaluation of performance are central to control
and mean posing 4 basic questions :-

1. What has happened ?

2. Why has it happened ?
3. Is it going to continue ?
4. What are we going to do about it ?

Measurement Issues

1. You can’t measure creativity or judgment, but you can measure the
impact of creativity or judgments

2. Measurement fails because they cannot consider things beyond control,

but measures or indicate change in performance level

3. Measurement is only possible, when results are quantifiable. They cannot

be applied when there is nothing to count
Performance Dimensions Types of Measures

Relative market share and position

Competitiveness
Sales growth, Measures customer base

Profitability, Liquidity, Capital Structure,

Financial Performance

Reliability, Responsiveness, Appearance, Cleanliness,

Quality of Service Comfort, Friendliness, Communication, Courtesy,
Competence, Access, Availability, Security etc.
Volume Flexibility, Specification and Speed of Delivery
Flexibility
Flexibility

Resource Utilisation Productivity, Efficiency, etc.

Performance of the innovation process, Performance of

Innovation
individual innovations, etc.
Criteria for performance measures

It is obvious that performance measurement criteria should be related to the Job

Categorized into Seven:

1. Quality
The degree to which the process or result of carrying out an activity
approaches perfection in terms of either conforming to some ideal ways of
performing the activity, or fulfilling the activity’s intended purpose

2. Quantity
The amount produced, expressed in monetary terms, number of units, or
number of completed activity cycles

3. Timeliness
The degree to which an activity is completed or a result produced, at the earliest
time desirable from the standpoints of both coordinating with the output of
others and of maximizing the time available for other activities
Criteria for performance measures
4. Cost effectiveness
The degree to which the use of the organizations resources (eg. human,
monetary, technological and material) is maximize in the sense of getting highest
gain or reduction in loss from each unit or instance of use of resource

5. Need for supervision

The degree to which a job performer can carry out a job function without either
having to request supervisory assistance or requiring supervisory intervention to
prevent an adverse outcome

6. Interpersonal impact
The degree to which a performer promotes feeling of self-esteem, goodwill and
cooperation among co-workers and subordinates

7. Community service
The degree to which an employee promotes community involvement in his/her
activities
Types of Measurement
 Organizational
 Team
 Individual

 Organizational

1. Balance Score Card

 Developed by Kaplan and Norton

 They have a view that “What you measure is what you get” and emphasize that
no single measure can provide a clear performance target or focus attention on
the critical areas of business

 BSC is a set of measurements and targets that are used to prioritize and
quantify goals
 Focuses on four indicators to monitor progress toward organization's
strategic goals which include:
1. Customer Perspective
2. Internal-business processes
3. Learning and growth
4. Financials

 BSC is a set of measures that gives top managers a fast and comprehensive
view of business

 BSC requires managers to answer five basic questions such as:

I. How do customer see us?
II. What must be excel at?
III. Can we continue to improve and create value?
IV. How do we look at shareholders?
 An effective HR Scorecard serves two purposes as an management tool:
• It gives the information an organization need to adjust HR’s actions and
behaviors to achieve better results
• It validates HR’s contribution to the company’s success in financial terms

2. European Foundation for Quantity Management (EFQM)

 It indicates that customer satisfaction, people satisfaction and its impact on

society are achieved through leadership (how the behavior and action of the
executive team and all other leaders inspire support and promote a culture of
TQM)

 This drives the policy and strategy, people management, resource and process
leading to excellence in business results
3. Economic Value Added (EVA)

 This measure represents the post tax operating profit and the cost of capital
invested in the business

 The theory of EVA is that, it is not good enough for a company simply to
make profit. It has to justify Certificate of Origin and Consignment (COC) and
the equity included

 Most companies measure company’s performance considering EPS

(A measure of how much profit a company is making for its shareholders)
alone and ignore COC in business
4. Other Economic Measures
a. Added value - The difference between the market value of company’s output
and the costs of its input

b. Market Value Added - The difference between a company’s market

capitalization and total capital invested. If it is positive, the stock market
wealth is created

c. Cash Flow Return on Investment - It compares inflation, adjusted cash flow

to inflation adjusted gross revenues, to find cash flow return on investment

d. Total share holder returns - What the shareholders actually gets, ie; Change
in capital plus dividends
 Team

The following steps can be taken to develop team measures:

1. Review and revise organization business measures
2. Review and revise business operational system measures
3. Identify team measurement points
4. Identify individual accomplishments that support team’s processes by listing
the key process steps taken by the team
5. Develop team and individual performance objectives
6. Develop team and individual measures
Measuring team Performance
Include:
1. Measuring process performance
 Output
 Waste
 Productivity
 Lead-time
2. Measuring teaming performance
 Absenteeism
 Decision making
 Problem solving
3. Measuring team management performance
 Transfer of best practices
 Individual
Measuring Individual Performance
Include:
1. Measuring process performance
 Parts made
 Service offered
 Timeliness
2. Measuring teaming performance
 Behavioural aspects (Trust, Supportive behaviour, Collaboration)