Performance Measurement: People are the most valuable assets

Mr Gulbahar Singh
Ms Ruchi Katiyar
NITIE, Mumbai


Ask any HR guy of any damn company. They will talk endlessly about their employees. They will say people are their most valuable assets. Even then they are not able to harness their abilities to the maximum. A survey said almost 70% of the employees are not satisfied with the promotion policies of the company. Why does this happen? First and foremost reason is unlike robots and other machines you cannot measure the performance and efficiencies of people to the exact figure. And anything which cannot be measured how can we evaluate them? Or how can we promote people or give increments and compensations without comparing their abilities or work done. Here we have tried to come up with some reasons or excellence and failure, how to measure them and on what basis the measurements for performance of employees should be developed. Also some of the steps, which should be followed to get maximum output from employees of a particular company, are listed.

The Typical workforce diagram

Excellent Employee characteristics:

Some of the major characteristics which could help in the distinction between an "average" employee and an "excellent" employee could be as follows:

    1. Knowledge & Skills:

      Technical Ability
      Understanding of Business Requirement

    2. Motives:

      Intrinsic Motives

    3. Abilities:


Reasons of Excellence

    1. Limited pool of talent to be selected from (Compromise)
    2. Employees selected much earlier for the jobs which does not exist today

Why training does not help?

Most of the people at this stage could argue in favor of training, being provided to all the employees before they actually join the company, in improving the performance at work. But the reality is somewhat different. Training does not achieve the results in proportion to the time, resources and money utilized for delivering it due to following reasons:

    1. Mostly "skills" are not the cause of poor performance
    2. No follow up of training done
    3. No on-the-job training
    4. Training designed for average employee
    5. Lesser attempts to update training with changing business and organizational needs

Management of Excellent Performance

There could be various ways to ensure that employees perform excellently. Some of the ways to ensure and manage excellent performance can include:


Dissemination of information and communication amongst employees, management and organization can ensure good performance. This could be achieved in several ways as:

    • Shared values and business strategies
    • Linked missions and goals
    • Measures and feedbacks
    • Identification of critical behavior


Management could associate some sort of incentives with task done excellently and this will also hone performance of employee because it gives motivation to perform better. Incentives could be:

    • Social Reinforcement
    • Contingent Awards
    • Pay for performance


Involving employees in decision-making or making attempts to develop atmosphere conducive to synergistic relationship between employees is another way to ensure god performance at work.

    • Non-voluntary Involvement
    • Cross functional task force
    • Management directed teams

Synergism of Information, consequences and involvement is a must for managing performance.


Gap Between values strategies and what people do

Measurement failure

    Measurement failure in manufacturing company

    Too many measures lead to overwhelming volume of performance-measure numbers. Among these measures many are outdated numbers and have very little relation with current corporate strategy.

    Measurement failure in Services Company

    Obsessive concerns with finding single measure for performance, encompassing all the activities.

Developing Performance Measures

It has been very appropriately said that "What gets measured gets done" and so there is a need to develop some sort of criterion to measure the performance, which would then help in evaluating the quality of the task being done.

Criteria for all performance measures are that they should be:

      Accomplishment based.
      Group or team oriented measures not individuals.
      Changeable with review and with strategies.

All new performance measures should include:

      Number of times accomplishment achieved.

      Number of times accomplishment achieved divided by number of times accomplishment could be achieved.

      "Ratio" out of 100 opportunities

      Dollar Amount:
      Dollar impact of achieving or failing to achieve an accomplishment

Setting performance goals and objectives

Goals  which are set either by company or employee should be challenging, attainable, ensure 100% participation of employees, and related to the organization vision/mission statement and so there can be multiple goals to be set and measured.

Multiple goals are at three levels:

        Long term
        Short term


Consequences have strong influence on behavior. They are important because of reflexive behavior-psychology of human i.e.  tendency of people to associate consequences with performance measure. Companies should:

      Provide for continuous improvement of impact of consequences
      Arrange positive consequences for accomplishments.
      Never provide negative consequences for failure to attain an accomplishment.
      Schedule the timing of consequences.

"What gets measured gets done"- Performance measurement

Every organization around the world dreams of 100% of their workforce performing excellently. But measuring the performance of most precious assets i.e. people is the toughest task Instead of having their own well analyzed and perfected systems for performance measurement and for performance improvement most of the time organisations fail in measuring performance of their own employees. Failure of measurement systems in manufacturing companies is due to overwhelming volume of performance-measure numbers. Services industry is no better where they are obsessively concerned with finding single measure for performance (encompassing all the activities). If divided according to performance; 90% of the workforce falls under possible and typical performance category, only 5% in excellent performance and rest in problem performance.

Qualities differentiating between excellent and average performance of employees are knowledge and skills (Technical Ability, Understanding of business Requirement, Education and Training), motives (values, beliefs, drives, needs, intrinsic motives) and abilities (physical and mental). Now generally the problems faced by organizations while selecting the employees are limited pool of talent to be selected from (Compromise) and employees selected much earlier for the jobs which does not exist today. Also most of the times training is not of much use because mostly "skills" are not the cause of poor performance, following up of training is not done, lack of on-the-job training, training which is designed for average employee and lesser attempts are made to update training with changing business and organizational needs.

Development of performance measures should be based on accomplishment, group or team orientation not individuals orientation and should be changeable with review/strategies. Also the goal setting for employee should include at Long term, Short term and Minimum/Standard performance expected. Now for getting better performance continuously from employees consequences play a very vital role. Companies should provide for continuous improvement of impact of consequences, arrange positive consequences for accomplishments, never provide negative consequences for failure to attain an accomplishment and schedule the timing of consequences.

Now how to manage excellent performance is the million dollar question. Ways to ensure this include synergy of information, consequences and involvement. Dissemination of information can be done through shared values/ business strategies, linked missions/goals, measures/feedbacks and identification of critical behavior. Consequences include social Reinforcement, contingent Awards and pay for performance. Involving employees in decision making involves non-voluntary involvement, cross functional task force and management directed teams.

Mr Gulbahar Singh
Ms Ruchi Katiyar
NITIE, Mumbai

Source : E-mail August 30, 2005




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