Performance Management and Measurement
Performance management aims to study and analyse performance, reflecting the approach of an entity to its achievement.
An effective performance management process sets the foundation for aligning the individual’s efforts with the organization’s goals.
Performance measurement is a process subordinated to performance management, which focuses on identifying, monitoring and communicating results throughout the use of performance indicators.
This implies results evaluation, while performance management comprises the decision-making process based on the results of the measurement, in order to obtain the desired performance.
Performance indicators are basic tools in evaluation, communicating important aspects in relation to the definition and achievement of objectives.
The benefits of measurement
Performance measurement is a consistent process used for sustained learning, with feedback helping to analyse achievements and make adjustments during activities. It is also used to ensure both the continuous excellence of activities and services and improvement in order to achieve the mission, vision and objectives of the organization.
Why do we need measurement?
Performance indicators are basic tools of the measurement process, being used to:
- Control: so that we can reduce variations.
- Self-assessment: used for assessing how well a process is going, taking into account the corrections already implemented.
- Consistent improvement: identifying the sources of defects, retouching opportunities, process trends, aiming at both error prevention and process efficiency.
- Management evaluation: the basic concept of performance measurement involves planning and achieving the set organizational objectives, detecting deviations from the desired performance levels.
Levels in performance management
In an organizational context, performance management was studied on three levels: strategic, operational and individual.
On a strategic level, it aims to achieve global organizational objectives, as the key processes related to performance management systems are the formulation of the strategy and its execution.
The evolution at operational level is related to the progress of accounting and management. The easiest way to accomplish this process is by using financial indicators, provided by the financial-accounting function of each organization.
The traditional level at which we use performance management is the individual level, which analyses employee performance in an organizational context.
From an HR perspective, performance management is an ongoing process of communication between a supervisor and an employee that occurs throughout the year, in support of accomplishing the strategic objectives of the organization.
The communication process includes clarifying expectations, setting objectives, identifying goals, providing feedback, and reviewing results.
In order to ensure good development, implementation and operation, it is essential that the performance measurement system complies with a minimum set of principles:
- Organizational correlation: this system is created to support the mission of the organization and its objectives.
- Assumed responsibility: appointing a formal leader to measure performance, able to coordinate the development and implementation of such a system within the organization.
- Active management support: the development, implementation and integration of a performance measurement system requires skills / expertise, effort, quality time, and especially the active support of senior management.
- Understanding the purpose: performance measurement is designed to highlight achievements and reveal strategic or operational constraints that impede progress towards the organization’s mission.
- Budget correlation: setting performance indicators according to the organization’s budget cycle planning, with performance measurement continuously providing meaningful information at any time during the financial year.
- Set of performance indicators: developing a balanced set of performance indicators, able to provide realistic perspectives on financial performance, business results, customers and employees.
- Role definition: establishing a clear register of roles and responsibilities for planning, implementing and maintaining the continuous operation of the performance measurement system.
- Sequential process: implementing the performance measurement system in stages, so that each stage is approved and completed before moving on to the next.
- Cooperation: a cooperation-based approach in the development and implementation of the performance measurement system within the organization is welcome, so that there is a common set of objectives, performance indicators and an agreed plan of the agreed project.
- A “Just do it!” mentality: adopting a direct, implementation-oriented mentality, using current sources of information.
- Clarity of purpose: knowing who will use the information, why and in what way.
- Focus: performance information needs to be focused primarily on the organization’s priorities.
- Overview: it is desirable for the set of indicators to provide a rational picture of the organization’s performance, also reflecting the balance between the cost of collecting information for the indicator and the value of the information provided.
- Periodic update: updating performance indicators to prevent changing circumstances.
- Consistency: the used indicators need to be robust and intelligible enough so that, in an independent control (internal or external), they provide clear and accurate information.
Key performance indicators specific to the Human Resources department
The most used key performance indicators in the functional area of Human Resources (HR) are:
• Personnel fluctuation
• Employee emotional involvement index
• Employee retention rate
• Employee satisfaction rate
• Average seniority of employees in the organization
• The cost of leaving the job
• The cost of staff turnover
• Applications received for open positions
• Reported employment for open positions
• Cost per hire
• Employment rate outside the organization
• Applications received per recruitment channel
• Job offer acceptance rate
• Duration of an open position
Compensations and benefits
• The value offered by reward systems
Efficiency and effectiveness
• Employees who perform exceptionally well
• Profit per employee
• Return on investment in human capital
• Time allotted to payroll processing
• Time allocated to accounting management of employees
• Participation rate in performance evaluations
• Work performed by over-qualified employees in terms of the complexity of activities
• It focuses on maximizing the potential of human capital in the process of developing and growing the organization.
- Course support on performance management at strategic level (Project “Strategic planning and performance management at the level of Arad Municipality through the tool Balanced Scorecard”, MYSMIS code 120637, SIPOCA code 86)
- Manual for the Human Resources Inspector course – Author Ane-Mary Ormenișan (Project: “Training of employees involved in management activities and human resources through integrated programs – INSTRUCT -SV”, ID: 118136, contract no. POCU / 227/3/8 / 118136)