Strategies for Measuring Performance

1. Human Capital

According to the Society of Human Resource Management’s Research Quarterly, “A company’s human capital asset is the collective sum of the attributes, life experience, knowledge, inventiveness, energy, and enthusiasm that its people choose to invest in their work” (Weatherly, 2003).

As you can tell by the definition, such an asset is difficult to measure because it is intangible, and factors like “enthusiasm” are subjective and open to interpretation. The challenge for managers, then, is to develop measurement systems that are more rigorous and provide a frame of reference. The metrics can range from activity-based (transactional) metrics to strategic ones. Transactional metrics are the easiest to measure, such as units processed, sales generated, or customer satisfaction.

But these transactional measures don’t get at the strategic issues, namely, whether the right employees are being hired and whether they are being trained to develop the skills and knowledge they need to do the job. Employee performance should be measured in the scope of organizational performance at developing its human capital.

terms to know

Human Capital

The collective sum of the attributes, life experience, knowledge, inventiveness, energy, and enthusiasm that an organization’s staff invest in their work.

Transactional Metrics

The easiest data to collect, such as units processed, sales generated, or customer satisfaction.

---

2. Time and Motion Studies

Time and motion studies are one way to identify goals and measure performance. This concept has its roots in Taylorism and was furthered by Frank and Lillian Gilbreth, who ultimately diverged with Taylor in the use of scientific methods to organize work. While Taylor was focused on maximizing efficiencies, the Gilbreths had a more humane goal of simply helping workers do their jobs better and with less physical stress.

Conducting a time and motion study has several steps.

1. Study goals are set before any measurement or analytics are done. These identify the areas where improvement may be possible, or where the best methodology isn’t clear. Simply put, the study goal refines the question that will be answered by the study.
2. Monitors familiar with the work observe and measure the time on task, usually with different workers on different days. Time measurements can be done with a stopwatch, but motions often require filming to study at length.
3. When different processes are considered, experimental design may be done to see which is most efficient; experimental design is a process of measuring the outcomes from two different processes or applications, usually a control group (in this case, the way the job is done now) and an experimental group (in this case, a new or alternative way of doing things).
4. The data collected is analyzed to fully understand the correlation of time and task performance, particularly to determine the ideal processes.
5. The findings are reported so the organization can set appropriate time allowances for the tasks performed.

In the modern context, time and motion studies may be done by the employees themselves, by computerized systems with the employee in control, or done with the employee's participation in setting goals. This work can thus be aligned with HPWS and improve organizational performance. While time and motion studies are typically done for jobs that are rather routine, some time and motion study elements can be performed personally, too. For example, if you are at your desk for 8 hours a day, you can record how much time you spend checking email, taking breaks, working on a spreadsheet, and other similar tasks. You might realize you spend lot of time switching tasks, such as looking at your phone, or switching between tabs. Thus, to save time, you might decide to leave your phone in another room and purchase another screen to save time finding and switching tabs on your computer. Thus, the principles of time and motion studies are useful to just about every job and industry.

EXAMPLE

While we often may think of time and motion studies being performed in businesses that have repetitive motions, they can be used for most positions, even in the service industry. Suppose a manager of a coffee shop is getting complaints from customers that getting drinks is taking too long. The manager could do an informal time and motion study to identify the steps needed to complete a transaction. Those steps might include taking the order, taking payment, getting the cup, making the shot, frothing the milk, making the drink, calling the customer, then waiting for the customer to pick up their drink and handing it to them. The manager would time the process and identify how long it takes, and through observation, make adjustments to the way things are done to be more effective. For example, if the barista has to walk several steps to get the cup, then go back to make the shot, the result of the study might be to move the location of the cups to save time. The manager might also decide the baristas need to call the customer and just leave the drink on the counter, with the customer's name on it, in order to save time as well.

terms to know

Study Goals

The identification of specific areas where improvement may be possible, or where the best methodology isn’t clear, which will be explored through a study.

Experimental Design

A rigorous process of measuring outcomes of different processes or applications by having a control group and one or more experimental groups and controlling (standardizing) all other variables.

---

3. Balanced Scorecard

The balanced scorecard is a tool that helps managers measure what matters to a company. Developed by Robert Kaplan and David Norton, the balanced scorecard helps managers define the performance categories that relate to the company’s strategy. Specifically, the scorecard has four dimensions that should be measured:

• Financial Perspective: How does the employee contribute to the value of the company? In terms of productivity, this is the one that is most often measured.
• Customer Perspective: How does the employee reflect positively on the company in interacting with customers and clients?
• Internal Business Perspective: How is the employee in interacting and collaborating with others? The quality of interactions, timeliness in responding to requests, and other qualities that affect the overall operations of the company are considered.
• Innovation and Learning Perspective: How does the employee contribute to the innovation and growth of the company, through learning and through mentorship or training others?

The managers then translate those categories into metrics and track performance on those metrics. Besides traditional financial measures and quality measures, companies use employee performance measures to track their people’s knowledge, skills, and contribution to the company.

The employee performance aspects of balanced scorecards analyze employee capabilities, satisfaction, retention, and productivity. Companies also track whether employees are motivated (for example, the number of suggestions made and implemented by employees) and whether employee performance goals are aligned with company goals.

---

4. Workforce Scorecard

The workforce scorecard is an elaboration on the balanced scorecard that seeks to reveal and monitor underlying qualities of the organization that drive success. In this model, a company may identify behaviors, skills, and mindsets that help employees thrive in the other measures. For example, being an excellent communicator will help an employee with customers and colleagues, make a better coach or mentor, and ultimately affect the success of the company. In specific, the four dimensions the workforce scorecard emphasizes are:

• Mindset and Culture: First, does the workforce understand the strategy and embrace it, and does it have the culture needed to support strategy execution?
• Competencies: Second, does the workforce, especially in the strategically important positions, have the skills it needs to execute strategy?
• Leadership and Workforce Behaviors: Third, are the leadership team and workforce consistently behaving in a way that will lead to attaining the company’s key strategic objectives?
• Workforce Success: Fourth, has the workforce achieved the key strategic objectives for the business? If the organization can answer “yes” to the first three elements, then the answer should be yes here as well.

IN CONTEXT

The Bank of Montreal has taken this step. “What we’re trying to do at the Bank of Montreal is to build learning into what it is that people are doing,” said Jim Rush of the Bank of Montreal’s Institute for Learning. “The difficulty with training as we once conceived it is that you’re taken off your job, you’re taken out of context, you’re taken away from those things that you’re currently working on, and you go through some kind of training. And then you’ve got to come back and begin to apply that. Well, you walk back to that environment, and it hasn’t changed. It’s not supportive or conducive to you behaving in a different kind of way, so you revert back to the way you were, very naturally.” To overcome this, the bank conducts training such that teams bring in specific tasks on which they are working so that they learn by doing. This removes the gap between learning in one context and applying it in another. The bank then looks at performance indices directly related to the bottom line. “If we take an entire business unit through a program designed to help them learn how to increase the market share of a particular product, we can look at market share and see if it improved after the training" (Rush, 1995).

As we can see, organizations need employees to apply the knowledge they have to activities that add value to the company. In planning and applying human capital measures, managers should use both retrospective (lagging) and prospective (leading) indicators. Lagging indicators are those that tell the company what it has accomplished (such as the Bank of Montreal’s documenting the effect that training had on a business unit’s performance). Leading indicators are forecasts that help an organization see where it is headed. Leading indicators include employee learning and growth.

REFERENCES

Rush, J. (1995, July). interview by Andrea Meyer, Fast Company.

Weatherly, L. (2003). Human Capital— The Elusive Asset Measuring and Managing Human Capital: A Strategic Imperative for HR. Research Quarterly, Society for Human Resource Management. www.researchgate.net/publication/238106421