Managers must do more than simply set objectives. They must consistently monitor operations to ensure feasibility and provide guidance to get failing operations back on track. Tools for this kind of management include budgeting, determining effective management strategies, finding areas that need improvement, and determining potential areas for collaboration.
Measuring performance is a vital part of assessing the value of employee and management activities. Performance measurement provides useful insights for conducting annual reviews of managers and employees and is also important for understanding how a company is performing compared with its competitors. This requires two types of measurement: individual (employee) evaluations and organization evaluations.
Employee Evaluations
Employee performance evaluations should be done on a quarterly, semi-annual, or annual basis. This ensures that everyone in the organization understands when the next evaluation will take place, gives the company regular measures of performance, and provides opportunities to take corrective action in a timely manner (if necessary).
Measurement Tools
There are many different performance measurement tools available, such as organizational and employee performance evaluations. Some are included as part of enterprise systems and some are standalone programs. Developing performance metrics usually follows a process of:
- Establishing critical processes/customer requirements
- Identifying specific, quantifiable outputs of work
- Establishing targets against which results can be scored
Some useful attributes to consider for assessing employee and management quality include:
- Effectiveness: Determined by outcomes: did the organization produce the required results?
- Cost-effective: When outcomes are divided by input, how efficient was the organization's performance?
- Impact: What value did the organization provide?
- Best practices: In the context of evaluating internal operations (comparing core processes to effectiveness and efficiency standards), how does current performance compare to benchmarks of past performance, performance in the industry, and political expectations?
Organizational Evaluations
For organizational information, the focus is on the outcomes of the agency's performance, but input, output, process, and benchmark factors are important as well in creating a comparative framework for analysis. Outcomes should be directly related to the public purpose of the organization.
Measurement Tools
While there are a wide variety of perspectives on controlling performance, each more or less appropriate depending on the objectives and industry of the organization, a few key metrics exist.
- Margins - Organizations setting objectives must carefully consider expected margins and ensure that they stay in the black (i.e., do not incur losses). Measuring profitability margins indicates the cents-per-dollar the organization makes by investing in operations.
- Growth - Raw revenue growth is also important, as it indicates expansion and potential economies of scale and scope.
- Market share - Generally described as a percentage, this indicates success relative to the competition. Higher market share means a deeper brand awareness.
- Customer satisfaction and/or retention - It is much cheaper to keep existing customers than to find new ones. Customer retention rates underline brand loyalty and product quality.