25 April, 2024

How To Measure Management Performance

Managers, or team leaders, achieve results through others. Since they are accountable for their performance and the success of groups of workers, they can be measured on the basis of what their team achieves, as well as their responsibilities and the tasks they perform themselves.

Senior managers are often measured using business performance level measures. These include:

  • Achievement of strategic objectives
  • Sales revenue
  • Market share
  • Financial return
  • Quality
  • Quantity and volume
  • Efficiency / productivity
  • Value for money
  • Customer satisfaction
  • Employee satisfaction

Targets can be established for most of these items.

Business performance measures have frequently concentrated on financial results. Kaplan and Norton (1992) developed their ‘balanced scorecard’ approach as a way of encouraging a more rounded assessment of performance. Using a balanced scorecard, business performance could then be judged from the different perspectives of:

  • Shareholders
  • Customers
  • Internal response
  • Employees

Balanced scorecards can also be developed as a way of measuring individual performance in managerial roles such as…

Process Measures

Since the efficiency of processes affects overall performance, businesses can also measure processes in order to consider how to improve…

  • How will customers judge success?
  • What is the final output?
  • What are the key stages?
  • What output is required at each stage?
  • What activities can be measured?
  • What value is added by the process?

These process measures may also be adapted to assess individuals with responsibility for the process.

Typical Performance Measurement Problems

  • Adequate measurement information may not be easy to gather
    • Measurement may be difficult or not cost-effective
  • Quantitative measures may be subjective and the actual results open to interpretation
  • Qualitative measures may not be valid or reliable, especially when measures of behaviour are being used.
  • Performance ratings are the outcomes of social factors such as managers performance judgements, or political judgements in relation the business culture.

A Checklist of Good Practice

  • Ensure measures used reflect overall business priorities
  • Balance short and long term outcomes
  • Ensure measures are clearly understood by employees
  • Focus on what’s important rather than what’s easy to measure
  • Use to correct and improve not to blame
  • Continually review the measures

And finally, remember that performance measurement is used to…

  • Assess achievement of objective
  • Give feedback to an individual or group
  • Identify problems and areas for improvement
  • Identify training and development needs
  • Determine performance pay
  • Identify potential
  • Validate selection decisions
  • Generate standards for benchmark comparisons

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