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The Master Measurement Model of Employee Performance
This is a much-needed guide for measuring performance in the workplace. If you’re a creative executive or manager, and you’re constantly seeking ways to improve productivity and quality in the workplace, this guide will help you.
With today’s emphasis on energizing employees toward greater performance — especially in the service sector — the job of gauging and improving output has become paramount. And while many have deemed “performance” an immeasurable intangible, this guide shows how every job and every task can be measured, improved and rewarded.
The American Productivity & Quality Center (APQC) received a grant from the SITE Foundation (now known as The Incentive Research Foundation) to prepare the 10 measurement models in this guide. The models display a step-by-step process for selecting criteria to measure all kinds of workers, converting these measurements into concrete numbers and dollar values that can be used to create incentive program budgets.
Once these budgets have been established, the exact nature of the program and the awards to be offered can be determined. While it is not our objective here to guide the reader in award selection, we do draw your attention to the APQC study “People, Places & Performance,’ which indicates that incentive travel awards produce the most tangible results.
Corporate America’s quest for greater productivity, quality and morale is heightening. And while “employee involvement” has become the catchword in many forward-thinking organizations—with their quality circles and labormanagement committees—many companies are pushing their commitment to employees a step further. They’re turning to incentive programs in the workplace.
These aren’t the traditional programs that target only dealers and sales forces, but programs that take aim at the very soul of the company: its employees—factory workers and field workers. With increased productivity and quality as their goals, savvy managers have begun looking to incentives to boost efficiency, morale and creativity.
This corporate enlightenment comes with its problematic baggage. For its salespeople, companies can measure the number of units sold, dollars made, and percent-of-goal. The same with its dealers. But how does one measure the progress of field service representatives? By the number of customers in a day? Number of complaints? Complexity of the job? And how can a hospital gauge its nurses’ performance? By their tardiness, enthusiasm, number of patients? What measurements convey the improvement of performance of production line workers? The amount of suggestions, training hours, items processed?
In each case, the answer is simple. Measurements are everywhere, but first they have to be identified. With some ingenuity, managers can devise incentive campaign goals and measurements for almost any job and level. As with salespeople, every occupation sells “products” and serves “customers.’ True, these may not be immediately apparent to the naked eye, but this guide shows how a little insight can help detect them, and how objectives and measurements can be sculpted around them. And most important, this guide shows how to translate measurement results into the funding of an incentive program.
The American Productivity & Quality Center received a grant from the SITE Foundation (now known as the Incentive Research Foundation) to prepare the 10 measurement models in this guide, which is designed for today’s creative managers. The models display hundreds of ideas for selecting criteria to measure employees and workers, converting these measurements into concrete numbers and finally, translating them into progress (or regress) and incentive dollars.
A Measure of Caution
Before excavating their calculators and tape measures, managers should first understand that the world of measurement abounds not only in numbers and percentages, but in perplexing dilemmas.
One manager might decide to log the number of units produced, but what happens when “units” are open to debate? For example, what are a teacher’s products? Students, books, test grades? What does a nurse purvey? A critical service, certainly, but how does one quantify it—by the number of patients, hours on duty, number of emergencies? When measuring service-oriented functions, it is best to develop a family of potential measures to gauge the quality— not just the quantity—of the service.
In Measurement Model #3 for teachers, for instance, early measurement considerations aim at teachers’ involvement in the community, their students’ test scores on national exams, and the number of new materials they furnish per school term. In similar cases, only carefully thought-out measurements will be able to track quality-oriented tasks.
Another problem may surface: too many products and/or services to measure. For customer service representatives, for instance, one could track any of a dozen factors: number of contacts per rep, customer waiting time, avenge “cycle time” (time from initial contact through solution), percentage of errors passed on to order fillers, etc. When this happens, planners need to prioritize all measurements, weighting them by degree of importance.
There are problems on the customer side too, since “customers” often connote all kinds of groups. In the teaching model, we decided that parents—not children—were the customers. Only when the children grow up and take a more active role in their education do they become customers. There also can be “internal” customers, as in the case of field service representatives (Model #1). In addition to responding to their customers in the field, reps have to answer to their own bosses, who are concerned about costs per call and customers’ equipment.
These are all critical judgments, but resourceful managers won’t be making them alone. They can form worker focus groups, “nominal group techniques,’ interviews and questionnaires to help establish objectives and ways for measuring them.
The nominal group technique deserves special mention. This is a popular tool used by many corporations. Organizations gather together a small, “nominal” portion of the group targeted for the incentive, and bring in an outside facilitator. The group works together to supply prospective measurements and objectives for an incentive program. The meeting is a structured affair usually lasting several hours, with bosses and supervisors absent. In the end, the group’s final family of five or six measures is submitted to management for its consideration.
A Few Terms
After conducting numerous corporate brainstorming sessions and interviews, managers likely will discover that most product/service objectives fall into two major categories: productivity and quality.
Put simply, productivity is the relationship between what is put into a piece of work (input) and what is yielded (output).
Productivity naturally increases when more output derives from the same input, or when the same output comes from decreased input. Productivity measurements (calls per day, number of completed projects, cycle time, for example) will yield concrete numbers.
Some corporate cultures speak of efficiency instead of productivity, but the terms are interchangeable. Utilization, another concept, refers to the amount of input that is actually used compared to the amount allocated for that use. This especially applies to vehicles, floor space, computer capacity and other fixed assets.
Quality refers to excellence, and its variegated meaning is reflected by a spectrum of potential measurements. In our 10 models, we suggest measures for timeliness, creativity, innovation, customer satisfaction, absenteeism, staff turnover, market share, new product/service introduction, safety, recognition (from the outside world), record completeness and downtime. Unlike productivity measurements, numerical measurements here often have to be “created” via ratios, test scores, customer evaluations, internal audits, etc.
After hammering out a number of productivity and quality objectives, management will encounter the next question: How can these things be measured? Or, put another way: What measures or indicators should improve if we do better work for this objective?
If the goal is to “reduce the rate of errors:’ one can easily measure the number of errors against total units handled. If an engineer’s goal is to complete as many projects as possible, then designs per engineer (weighted by difficulty) will offer an indication of progress.
It is not a good idea to devise dozens of measures for each occupation. A “family” of three to measures will do, especially since most occupations are too complex to capture all facets in just one or two dimensions. On the other hand, people really can’t focus on more than five or six measurements without having their priorities muddled.
Once workers have proposed a number of basic measuring ideas, managers or facilitators can ask them to vote for their favorite ideas, rating them from best to worst. This final, prioritized list can be submitted to division or department managers, who can review it and perhaps alter the priorities. The final set of measures should possess “balance.” That is, some measure should address productivity and some should tackle quality. Some should take aim at inside operations while others target customer issues.
When considering the final measures, managers should weight them differently, since different factors play varying roles affecting productivity arid quality. We strongly suggest “weighting” each measure of the family with percentage weights from 10 percent to 50 percent (adding up to 100 percent, of course). Also, managers may have to make some adjustments along the way mainly to deal with “mix effects” and “price effects.”
Mix effects. An analyst may write “reports,” but it would be misleading to use “reports per person” as a measure, since some reports are simple and others more time-consuming. It would be like rating 10-meter divers for their number of dives, rather than the complexity and quality of each plunge. It would be best, then, to devise point systems, allotting more points for difficult reports and fewer points for easy reports. One benefit of point systems, especially during an incentive program, is that management can change point weights at any time to stress different products or accent different areas of performance.
Price effects. Still another common adjustment is for price effects or inflation. A dollar measure such as “$ Sales per Salesperson” can rise two ways: from an increase in sales price per unit, or from an increase in the number of units sold. But only the latter effect belongs in a productivity measure. So, to ensure consistency, all sales figures across all time periods need to be translated into base-period dollars. If a program employs measures without this adjustment (a common mistake) it won’t provide an accurate reading on the cause of the upswing.
Family of Measures
In all our measurement models, we use a set “family of measures” to gauge progress (see Table 1). There are, of course, more sophisticated and complicated ways to structure a report, but all analyses should include these vital elements:
- Numbers from a previous time period (Base Data).
- New numbers from the current period of the same length (New Data).
- The percentage change (New/Base).
- The pre-assigned Weights.
- The relative importance of that change (Weighted Result).
Both the Base and New Data can be expressed as numbers of units, dollars, hours, points, percentages, etc. The measures can span any period of time -- hours, months, years.
The New/Base Data (new data divided by base data) yields a percentage that shows the increase or decrease for the particular objective. In Table 1, Measure A improved by 3.4 percent (103.4), while Measure B declined 4.4 percent (95.6). One hundred percent is considered “par.”
Weighted Results are derived by multiplying Weight times the New/Base. In essence, the weighted results are weighted averages -- mathematical calculations that give insight into the progress of each objective. Adding them together produces the total weighted result, 101.8, which reveals that for these measures, the group’s overall productivity and quality rose 1.8 percent.
In each of our 10 measurement models, we will see how managers also can employ Base Data and New Data figures to approximate a potential budget for an incentive program and awards.