A growing business need to be closely and carefully managed to ensure the success of new investment decisions and expansion plans. However, as business grows, many business owners are over whelmed by business operations resulting into paying less attention to employees performance.
Putting performance measurement systems in place can be an important way of keeping track on the progress of your business. It gives you vital information about what’s happening now and it also provides the starting point for a system of target-setting that will help you implement your strategies for growth.
There can be several reasons in favor of monitoring. First, it can help protect your company from theft or other harm. Second, it can also help affirm compliance with regulations, secure evidence in case of lawsuits and ensure the workplace is free of harassment.
All in all employees monitoring is very important for prosperity of any business. In Tanzania however the traditional approach to almost every human resource management is to conduct annual employee performance appraisal. But this practice rise questions as to why is the appraisal done annually? Stakeholders suggest that it is critical to conduct employee performance appraisal every now and then because of the below factors:
- Poor performance needs to be identified and corrected immediately
- Good performance needs to be rewarded – any time it occurs
- Performance that gets rewarded will surely be recognized and repeated
- Poor performers are often your fault
- Pay for performance is a great idea
- Making delayed bonuses is not a great idea
- You can change employee status and pay based on performance
However, when doing monitoring, as an employer, you need to be aware of the potential pitfalls of monitoring employee performance. You could create a morale problem and hurt employee performance, if your workers feel a distrustful boss lurking over their shoulders. You could inadvertently learn about people’s religion, sexual orientation, political views and medical problems, creating potential privacy dilemmas or even opening your firm up to discrimination lawsuits.
Managers should consider the difference between monitoring and surveillance, says Andrew Walls, security and risk analyst at Stamford, Conn.-based research firm Gartner Inc. It isn’t controversial or obtrusive to monitor events on a company’s computer system to ensure proper use and protect the company’s assets and reputation.
But surveillance, defined as tracking an individual’s activities, has “a creepy factor” that can cause pushback from employees, he says. Avoid such trouble by engaging only in focused surveillance of a person if you have well-founded suspicions of policy or legal violations and have the documented agreement of top managers and your attorney.
Performance measurement and target setting are important to the growth process. While many small businesses can run themselves quite comfortably without much formal measurement or target setting, for growing businesses this is very important.
The benefits of performance measurement
Knowing how the different areas of your business are performing is valuable information in its own right, but a good measurement system will also let you examine the triggers for any changes in performance. This puts you in a better position to manage your performance proactively.
One of the key challenges with performance management is selecting what to measure. The priority here is to focus on quantifiable factors that are clearly linked to the drivers of success in your business and your sector. These are known as key performance indicators (KPIs).
Bear in mind that quantifiable isn’t the same as financial. While financial measures of performance are among the most widely used by businesses, non financial measures can be just as important.
For example, if your business succeeds or fails on the quality of its customer service, then that’s what you need to measure – through, for example, the number of complaints received.
If you’ve identified the key areas that drive your business performance and found a way to measure them, then a natural next step is to start setting performance targets to give everyone in your business a clear sense of what they should be aiming for.
Strategic visions can be difficult to communicate, but by breaking your top-level objectives down into smaller concrete targets you’ll make it easier to manage the process of delivering them. In this way, targets form a crucial link between strategy and day-to-day operations.
Deciding what to measure
Getting your performance measurement right involves identifying the areas of your business it makes most sense to focus on and then deciding how best to measure your performance in those areas.
- Focusing on key business drivers
Your performance measurement will be a more powerful management tool if you focus on those areas that determine your overall business success.
This will vary from sector to sector and from business to business. So put some time into developing a strategic awareness of what it is that drives success for businesses like yours.
It’s crucial that you tailor your measurement to your specific circumstances and objectives. A manufacturer producing and selling low-cost goods in high volume might focus on production line speed, while another producing smaller quantities using high-cost components might focus instead on reducing production line errors that result in defective units.
- Finding your specific measures
Once you have identified your key business drivers, you need to find the best way of measuring them. Again, your priority here should be to look for a close link as possible with those elements of your performance that determine your success.
For example, you may decide that customer service is a strategic priority for your business and to therefore start measuring it. But there are many ways of doing so.
You might consider measuring:
- the proportion of sales accounted for by returning customers
- the number of customer complaints received
- the number of items returned to you
- the time it takes to fulfill an order
- the percentage of incoming calls answered within 30 seconds
None of these is necessarily better than any other. The challenge is to find which specific measure (or measures) will enable you to improve your business.
This type of measurement unit is often referred to as a key performance indicator (KPI). The two key attributes of a KPI are quantifiability (i.e. you must be able to reduce it to a number) and that it directly captures a key business driver.
- Using standardized measures
There are standardized performance measures that have been created which almost any business can use. Examples include balanced scorecards, ISO standards and industry dashboards.
- Choosing and using key performance indicators
Key performance indicators (KPIs) are at the heart of any system of performance measurement and target setting. When properly used, they are one of the most powerful management tools available to growing businesses.
There are a number of key criteria that your KPIs should meet:
First, they should be as closely linked as possible to the top-level goals for your business.
Second, your KPIs need to be quantifiable. If you can’t easily reduce your measurement to a number, there will be too much scope for variation and inconsistency if different people carry out the measurements at different times.
Third, your KPIs should relate to aspects of the business environment over which you have some control. For example, interest rates may be a crucial determinant of performance for a given business.
Getting the most from your KPIs
The purpose of performance measurement is ultimately to drive future improvements in performance. There are two main ways you can use KPIs to achieve this kind of management power.
The first is to use your KPIs to spot potential problems or opportunities. Remember, your KPIs tell you what’s going on in the areas that determine your business performance. If the trends are moving in the wrong direction, you know you have problems to solve. Similarly, if the trends move consistently in your favour, you may have greater scope for growth than you had previously forecast.
The second is to use your KPIs to set targets for departments and employees throughout your business that will deliver your strategic goals.
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