The Three Types of Methods Used to Measure Performance

As a small-business owner, you want to make sure your employees perform their duties efficiently and effectively. Engaging in performance management helps ensure that your staff meets your expectations. Educate yourself on the variety of performance management options that exist and determine which one best meets the needs of your small business.

Your small business can utilize employee performance measurements to calculate merit increases, provide opportunities for advancement or to determine whether to retain or let go employees. These evaluations must be consistent, fairly administered and transparent. Communicate your expectations to your employees and define what it takes to meet or exceed them.

Graphic rating scales make up one of the most commonly used methods of performance measurement. With this approach, an evaluator indicates on a scale where he would rate a particular performance result. Typically on a five- to seven-point scale, these ratings can be used to evaluate job knowledge, responsibility or quality of work. While graphic rating scales are relatively quick to conduct, businesses should ensure that they conduct their evaluations objectively and consistently for all employees.

Management by objectives involves outlining a number of priorities for management, then measuring the obtainment of those set goals. In the beginning of the evaluation period, management identifies objectives and then, working with the employee, determines the steps necessary to achieve those objectives. At the end of the evaluation period, managers review the employee’s progress and measure performance based on her ability to accomplish the stated goals within the designated time frame. While this method works well for project-based businesses, this system may inadvertently provide incentive to skip steps or cut corners to meet deadlines.

Forced ranking requires managers to measure the performance of an employee against the performance of his peers. This approach contends that in order for a business to thrive it must identify its best and worst performers, nurturing the highest achievers and improving or discarding the least-effective workers. The goal is to reward and retain those who contribute the most to your success and cull the ones who hold you back. While arguably resulting in a more productive workforce overall, forced ranking may lead to a very competitive work environment and a lack of collaboration and teamwork between staff members.