What Methods are Used to Measure Business Performance?

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Performance management is an essential part of any business as it offers a platform for managers and decision makers to quantify business and employee performance. Whether or not employees are meeting the company’s expectations can only be determined by devising methods for checks and balances. In order to measure business performance, there are various available methods. However, the best method for you can only be determined by analyzing your work environment, business type, and various other factors.

The data obtained from these methods can help decide employee compensation packages, employment status, career advancements and roles in the organization. This is the reason why performance management must entail approaches that allow just and accurate evaluations of employee performances. A standard performance measuring system must be followed across the organization to measure business performance. Performance standards quantify the results that are expected of them to meet the company’s expectations.

Every business uses it’s own methods of measuring their performance, however, the methods listed below can be applied to many businesses according to their needs.

Methods to Measure Business Performance

Graphics Rating Scales

Graphics rating scales are perfect for manufacturing-oriented businesses as well as other workplaces that deal in high volume products, such as the food and beverage industry. A list is placed on a scale of 1 -5 for each trait and employees are measured against each indicator. You will have a generalized overview of the employee’s capabilities and level of efficiency with very little effort. This method requires nothing but planning and a little bit of effort, and the results are pretty satisfactory. This is also time efficient, which allows you to measure business performance in no time. It can be applied to a wide set of people with consistent results and little ambiguity. No matter what size of business you are in, you can apply this method and acquire first-hand data quickly, which can be further used to make vital business decisions.

Management By Objective (MOB)

Management by objective is used to measure the performance of your senior employees, managers, and supervisors. All of the goals are recognized and listed along with the required resources to achieve them. Goals are timeline based, which means that they must be completed within a specific time period. Employees are measured by their ability to achieve those goals in the given time. The goals can be revised or updated depending on market conditions and other variables. If the goals are too ambitious and need rescheduling, they have to be discussed and redesigned.

Management by objective ensures that your managers and supervisors are clear about their objectives, which helps them perform according to expectations. It is fairly easy to identify someone who is not able to achieve the objectives. Although this is a good measure of your employee performances, this method is time-consuming and would require you to patiently wait for results.

Forced Ranking

General Electric applied forced ranking to a great effect, however, there has been a significant decrease in its popularity since then. Though it may have lost it’s initial significance, this method to measure business performance can be quite effective for certain types of businesses. The method works by categorizing your employees according to top performers, average performers, and low performers. It is estimated that about 20% of your workforce is made of top performers, 70% fall in the average category, while 10% are the lowest performers.

Forced ranking measures employee achievements relative to their peers instead of their past performances or KPI’s. This kind of method creates a competitive work environment that works well for certain organizations. However, it might not be suited for others. Therefore, this method to measure business performance should only be used after thoroughly analyzing your business needs and requirements. 

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