Measuring and Evaluating Performance

Posted by Nia Dwi Astuti

Introduction

Putting performance measurement systems in place can be an important way of keeping track on the progress of the business. It gives a vital information about what's happening now and it also provides the starting point for a system of target-setting that will help to implement the strategies for growth. 

Why evaluate performance? Evaluate Performance is an essential part of the management process. The purpose of performance evaluation is to understand and continuously improve the way in which the function works and the results that it achieves. Performances evaluation helps to:

• Understand to what extent customers (external as well as internal) are satisfied
• Understand different factors that may be causing problems
• Focus attention on priority areas when seeking solutions to problems
•  Take corrective action wherever problems exist
• Improve decision-making
•  Develop better relationships with customers, including suppliers and other functional area in the company
• Identify the resources or organizational arrangements that may be needed to improve performance
• Recognize high or low performing staff and teams, and identify needs for training and better work organization
• Motivate people to do the best possible job

What makes a good evaluation system?

There is no single best performance evaluation system applicable to every company. Each enterprise must find its own solution, tailored to its particular needs and context. A good performance evaluation system must respond to a number of requirements, for instance:

• Support and consistent with the company’s goals and objectives
• Reflect customer satisfaction level
• Allow for control but focus on improvement
• Contribute to effective decision making
• Take account of the external & internal environment
•  Be adaptable to changing circumstances
•  Measure results against target performance
• Have a balance of quantitative and qualitative measures

Behavioral Impact

Evaluating performance has an impact on the way people behave. The effect is particularly noticeable if the results of the evaluation have an influence on the person’s remuneration or other form of incentives. If some aspect of your work is being monitored and assessed, it is natural to want to ensure that it is properly completed. This will ensure that the reports on your work are favorable. Nobody wants to be seen to be doing an unsatisfactory job.

Not everything can be evaluated, so performance evaluation must necessarily be selective and focus on what is important. Performance evaluation can also have a positive or negative effect on people’s motivation. The motivation is likely high if performing well will result in positive recognition, has ability to achieve he target even if they require extra effort, have been involved in setting the performance target or at least agree with the importance of reaching the targets.

Otherwise, performance evaluation will be de-motivating if the target not realistically achievable, or that there are too many other factors beyond control that determine whether the targets will be achieved, the excessive focus on quantifiable targets restricts and restrains the creativity and ability to find innovative solution in daily work.

Achieving a good performance can help the function to “sell itself” more effectively within the organization. This is because its contributions will be seen as more concrete, and therefore more believable.

Reference:

International Purchasing And Supply Chain Management Modular Learning System Module 12, ITC

http://www.controlglobal.com/assets/Media/Whitepapers/2009/090312_Osisoft_KPI.pdf