Performance plans are action plans, not static documents. Effective performance plans must detail the specific actions leaders and employees must follow to accomplish the goals and objectives set within it. Leaders understand that without meaningful performance standards, measuring and evaluating individual performance becomes difficult if not impossible. Once the plan is implemented, meaningful performance standards allow leaders to modify and adapt their plans to actual conditions.
Leaders must use solid standards to monitor and evaluate all aspects of performance. Any measurement used should determine and create an action both on the part of the employee being evaluated and on the part of the leader performing the evaluation.
There is a natural tendency for a leader to focus his or her activities on more prominent areas that will be highlighted and spotlighted, yet every element of the performance plan must be fully addressed.
It should be noted that any standard a leader creates will direct, limit, and change the behavior and performance of their employees. This is important for leaders to understand because what and how they choose to evaluate can have either a positive or negative effect on the performance of their organizational unit.
A common pitfall in establishing performance standards is overdoing them. It burdens all involved with excessive factors and controls. Leaders know that to be effective, they need to set performance standards that are relevant and meaningful. It is far better to have fewer meaningful standards than to establish many useless ones. When applied, these standards will present a true picture of the performance of their organizational unit at any given point in time. Four areas to focus on in creating meaningful performance standards are:
What to Measure
The specific elements that need to be measured will vary by organizational unit. Typically, performance standards are set around productivity and profitability. Most leaders establish performance standards by setting specific performance expectations. Examples include:
- Progress is evaluated by the reaching of specific milestones linked to individual goals and objectives.
- Profitability is evaluated against the budgets established for each activity.
- Efficiency is evaluated by the resource utilization within the organizational unit.
Each organizational unit has key factors that determine their success. Leaders identify these factors as indicators of performance and look for trigger points that are early indicators of the success or failure of these factors.
How to Benchmark
Once leaders know what they want to evaluate, they need to benchmark each critical measurement. This establishes degrees of confidence and reliability in their numbers. They review these statistics over a meaningful period of time to establish a benchmark of past performance in each area. The longer a leader reviews the past performance of a specific area, the higher the degree of confidence and reliability he or she establishes.
Once key performance standards are benchmarked, leaders establish "triggering events" that result in taking immediate action. Since the benchmarked statistic is the standard, a triggering event can be predetermined. This event or "flag" occurs when performance rises above or falls below a specific percentage of the benchmarked standard. This provides leaders an early warning system to proactively deal with performance problems before they get out of hand.
How Frequently to Measure
Leaders are careful not to overburden themselves with needless information. They use performance standards as a means to keep their finger on the pulse of their unit's performance. They can easily determine the frequency for receiving reports of their unit's performance. Some statistics are meaningful on a daily basis, some hourly, and still others only when reported over prolonged periods of time.
What Measurements Indicate
Key performance standards need to inform leaders of the overall performance of their organizational unit. Specific measurements can trigger corrective actions, while others indicate the progress of the unit against performance plan goals and objectives. Effectively utilized, solid performance standards lead and direct the leader's actions to fine-tune his or her unit's performance. The right balance of key standards points the way to improved overall performance and productivity.
Excerpt: Planning to Maximize Performance: Pinpoint Leadership Skill Development Training Series (Majorium Business Press, Stevens Point, WI, 2011) $ 16.95 USD
Timothy F. Bednarz, Ph.D. is an accomplished author, speaker, radio personality, and creator of over 125 books as well as a wide variety of high quality business content.
His latest book is entitled Great! What Makes Leaders Great, What They Did, How They Did It and What You Can Learn From It.