Employee performance management is basically a small part of a performance management system. Most often business does not differentiate between both. In reality, employee performance management is just a module of a very large scale performance management system that measures the KPIs of the entire organization or enterprise. The performance management system not only includes an employee performance management module but it includes a lot many other modules that when put together forms an enterprise performance management system. For example, the performance management system includes the performance of the supply chain, production units, marketing, sales, customer support, customer retention, leads and conversions, revenue and finance, operations, IT and infrastructure, transport and everything else which is a part of the enterprise. However, the employee performance management module only measure and monitor the performance of the employees.
Here are the details of the two tools:
1. Employee Performance Management
The main objectives of employee performance management are to understand the efficiency of the employees, which could be further narrow down to their job roles, projects, behaviour, and much more. There are different KPIs (key performance indicators) that are used to monitor and measure the performance of an employee, team/group, and department. These KPIs will help the business in taking employees related decisions such as promotion, compensations, bonuses, personal development, career development, transfers, and termination. The best approach is to set clear and discrete expectations and goals and then measure the performance and achievements against those expectations. Employee performance management is a part of the enterprise performance management system which is connected with a lot many other enterprise systems and organizational tools to collect data and feedback, then all the inputs are carefully analyzed through a very powerful software engine and at the end, the reports are being generated which are very clear and realistic measurements of the performance of an employee. On the basis of these reports and data, the management can easily take vital decision to improve their overall efficiency and output. The only right person for the right job will be able to produce desired results.
An effective employee performance management includes the followings:
Goals and Expectations
The performance should be measured by the achievements and accomplishments of the employees and the achievements are weighed against the goals. The goals are set as per the expectations, and the expectations are based on the employee role, experience and skills or education. This is how KPI management works. You analyze and weigh the employee then set up expectations and KPIs to measure their performance. The goals and expectations related to KPIs are in fact a set of multiple KPIs:
Project Goals
These goals and related KPIs are based on the employee performance in different projects which are being measured and monitored for a year. There could be multiple projects in a single year or a single project could also last for multiple years.
Job Role/Description
These goals are based on the job description or title of the employee. Obviously, the goals and KPIs of a crane operator will be different from a construction supervisor. So each job role and title have their own objectives, contributions and expectations depending solely on their job role/description.
Response to Challenges
This often knows as stretched goals too. These are the goals and expectations set for unusual or challenging conditions and scenarios. The measurements are taken of how well or bad the employee respond or act in challenging conditions on the basis of the outcome of their actions.
Behavioural Expectations
These are the expectations of the enterprise from an employee towards the people, assets and resources around them or under their command. For example, how an employee behaves to their colleagues, subordinates, team lead, manager, supervisor, etc. The behavioural goals also include KPIs that provide data about “how” a goal can be achieved through a particular employee.
Monitoring and Performance KPIs Measurement
Once the goals are set, then there is a need to establish a system of KPIs that can measure the performance of the employee toward the set goals and the expectations from them. The performance management includes a complete review of employee performance in all relevant topics. Along with various KPIs, a continuous feedback process is established and the monitoring process is also continuous or for a particular employee review cycle. In most cases the monitoring and the KPIs measurement is continuous. The management notes down those indicators and held regular dialogues between the employee and their manager to keep improving the outcome for the rest of the review cycle. The dialogue should be two-way communication in which the employee should also be allowed to express their concerns, needs and opinions. Then the organizations can take accurate steps to boost the employee’s performance.
No matter what format or type of the review methodology has been used, the reviewer must have a very clear understanding of each stage of the review and the parameters they are evaluating an employee against. There are so many different approaches and methodologies that are very commonly used in Dubai, UAE and each one of them have some advantages and some drawbacks too. Hence, the performance should be measured on various scales to get a definitive answer.
Multi-source Feedback or 360 Feedback
This is the most popular review method. Not only in Dubai, UAE but all over the world enterprises and organizations are using this method to measure employee performance. It includes feedback from the supervisor, manager, co-workers, subordinates and people around the employees. The objective of this feedback to understand the employee behaviour towards work and its impact on his performance and others’ performance or work too.
Management by Objectives
Management by Objective or also known as the MBO KPI is the process of evaluating the performance of an employee towards the individual goals and their contribution to the team, departmental and overall organizational goals. Usually, the MBO is for managers, team leads, supervisors, project coordinators and people with non-routine jobs.
Ranking Scale
The ranking scale is basically a process of distributing or putting employees in a discrete set or sub-set on the basis of their performance. Although ranking a group of employees or teams is very easy but the results are not so accurate. However, ranking individual employees in a certain group could be difficult as there would be a lot of different levels and the differentiation between those levels would be narrow to get meaningful results.
Competency Scale
The competency scale measures the performance of the employee for different routine tasks based on their job role/description. As the goals and expectations are set for each job role, so the KPIs can be set easily and accurate data can be collected by measuring the employee performance in their routine tasks and job responsibilities.
Employee Capacity/Productivity
Employee Capacity or Productivity is not a very linear KPI, the result of this scale are usually used to distribute the workload in different employees, teams and/or larger groups. This KPI help understanding which employee is working on their maximum output level and which employee can handle some more work.
Employee Billable Percentage
The employee billable percentage KPI is also known as utilization rate, this process measures the billable and non-billable work hours required or been taken for a particular task. This could be a great help in determining the internal cost of a particular project and also the performance of the employees/teams.
Graphic Rating Scale
This scale is basically a set of various KPIs such as attendance, quality of work, the number of tasks against a given period of time, dependability and also behavioural KPIs. These KPIs are easy to set and the data collected is highly accurate.
Revenue and Profit per Employee
These are very basic and very important KPIs to measure the overall employees’ performance. For the employees the measurement is simple, total revenue or profit divided by the number of employees. It is critical to understand what your employees are bringing in. Both KPIsindicate to the organizations and enterprises that what their workforce is costing them and how much revenue and profit they are generating.
These are some of the very basic KPIs used to measure employee performance. There are literally thousands of KPIs which are available and can be used. Only after a careful examination and understanding of both the ‘Goals’ and ‘KPIs’ businesses should choose the KPIs that completely align with their objectives. There are a lot many other factors that can cause errors or inaccurate assessment such as insufficient data collection, favouritism, lack of differentiation or intertwined KPIs, and many more. So, it is always wise to seek the help of professional Employee Performance Management Solution providers, such as RSI Concepts.
2. Performance Management System
The Performance Management System also referred to as Corporate or Enterprise Performance Management System is a system that measures and manages the performance of the entire business or enterprise. It includes the performance management of all departments, employees, key players, and key factors that contributes to the overall performance of a business. All the data has been collected from various KPIs, processes, matrices, methodologies and tools is gathered and analyzed in a Performance Management System. The goals, objectives and expectations are being set for not only individuals but for teams, departments, production units, sales and marketing campaigns and much more. The operational cost and performance, the effectiveness of the entire infrastructure of the enterprise such as the technology, human resource, supply chain, resources, revenues, cost, profits and everything in between is closely monitored and measured under the umbrella of the performance management system. The Performance Management System in itself is a very huge system and cover a lot of topics that is why we will only list some important KPIs that are used to determine the performance of an entire business, corporation or enterprise:
- Financial KPIs: Financial KPIs include revenue, cost, profit, internal costs, raw material costs, cost of the product or services sold, sales, sales for a particular product/service category, cost of resources and raw materials, operational cost, per employee cost and return and so on.
- Employee KPIs: Employee KPIs include all the above-mentioned indicators which help business understand the cost, profit, gains and performance of the individual employees as well as of team and departments.
- Marketing KPIs: Marketing KPIs include marketing campaigns, cost, return, leads, quality of leads, sales as the result of a particular marketing campaign and all details to assess and review the performance of the marketing department.
- HR KPIs: HR KPIs include the performance of the HR department, staff and services, employee turnover rate, employee satisfaction, and recruitment performance. These KPI also include the indicators of expenses and returns and overall performance of the HR department.
- Customer KPIs: Customer KPIs include a number of happy and unhappy customers, returning customers, customer churn rate, new customers, customer lifetime, customer acquisition cost, and customer support and so on.
These are just a few major KPIs used to assess the performance of an entire enterprise or corporation via a Performance Management System. There are a lot more KPIs that are used to further narrow down various variables to closely monitor and measure the performance of various factors which when concluded represent the overall performance of an entire enterprise.
See More: How a KPI Software can help provide better Customer Journey?
Conclusion
Businesses most often confuse Employee Performance Management with the Performance Management System. Employee performance management is just a small module of a performance management system. The Performance Management System measures various indicators which starts from the lowest level which is individual employee’s performance and ends at the overall performance assessment of the entire business or enterprise. Business and enterprises invest heavily in order to ensure their growth. These investments include all sort of technological solutions, infrastructure, human resource, employee development and training, customer retention programs, marketing and a lot more. It is very important to closely monitor each and everything to understand whether your efforts are in the right direction or not. Another important thing is to ensure your employees and customers are happy and your employees and other elements are working on their maximum potential to ensure the low operational cost of the business and maximum profit.
RSI Concepts is a well-reputed brand in providing performance management systems, KPI and OKR management solutions. If you need to know more, or if you are interested in a quote, feel free to reach us out through our Contact Us page.
Check this out: How Performance Management System helps in Customer Journey improvement?