How to Measure People Performance

What to consider before you set up KPIs and metrics to measure employee performance.

I’ll be honest, right up front. I don’t believe in measuring people’s performance. There’s just too much anecdotal evidence and research evidence that suggests it does more harm that good. The best of this research is Jerry Z. Muller’s book, The Tyranny of Metrics.

Measuring people actually constrains their performance, it doesn’t improve it.

I find it useful not to think “how should I measure employee performance?” but rather to think first about “what results are important for employees to help achieve for the organisation?”

Then help teams to set up performance measures or KPIs that they use as tools to work on the business, rather than as rods to judge people. Have you heard that saying that comes from the quality movement that 95% of the performance problems are in the work processes, and only 5% are with the people?

To learn how KPIs can be powerful tools to drive collaboration and continuous improvement for the whole organisation or business, read on for my suggested steps (or email this page to yourself or a friend):

• Step 1: Clearly define, and make sure all employees understand, the true purpose of measuring performance.
• Step 2: Increase employee buy-in to measuring performance and ownership of KPIs.
• Step 3: Remove KPIs and performance measures from employee performance appraisals.
• Step 4: Upgrade your definition of accountability for performance.
• Step 5: Focus teams on measuring their impact on business performance and strategy execution.

Step 1: Clearly define, and make sure all employees understand, the true purpose of measuring performance .

Quantifications of performance work best when they are used for learning, not for judgment. But too many organisations and businesses focus on using measures and KPIs for judgment. This means that they use the measures to decide things like:

• who was responsible (whose fault it was)
• who deserves a reward or recognition or promotion (and who deserves punishment or firing)

Holding judgment as the purpose for KPIs is why people fear KPIs, not matter who they are. Leaders are scared of KPIs. Employees are treated badly with KPIs. The fear has to go. And the first step is to change and embrace a better definition of the purpose for measuring performance.

Judgment is not the only – nor the ideal – choice for the purpose of measuring performance. The true purpose is to continually and collaboratively improve business performance. If your organisation has suffered from a culture of judgment with KPIs and performance measures, then you cannot say this often enough, or to enough people. The true purpose of measuring performance is to continually and collaboratively improve business performance.

Step 2: Increase employee buy-in to measuring performance, and ownership of KPIs.

Buy-in is that state when people are committed to something. It’s when they are convinced of its worth for them. It’s when they no longer have objections or fears that get in their way of adopting it. Buy-in is when people feel a sense of ownership for it. Most of us want our people to feel this way about KPIs and performance measurement, but we don’t realise that we might be getting in the way of buy-in naturally occurring.

Buy-in has to be given; it can’t be taken. When we have buy-in to measuring performance, people give their brilliance to measuring the right things, implementing and reporting the measures, and using those measures to improve business performance. Isn’t this what we really want: for people to do their best to improve business performance?

And we need buy-in to measuring performance from people at all levels in the organsiation or business:

• We need leadership buy-in to measuring performance, to give it importance.
• We need manager and supervisor buy-in to measuring performance, to give it resources.
• We need employee buy-in to measuring performance, to get it done.

Step 3: Remove KPIs and performance measures from employee performance appraisals.

Performance Appraisal, Individual Performance Review, Personal Performance Development Plan. There are numerous names for this, but they are names for basically the same concept: the measurement, review, evaluation and management of the performance of each employee. And the most common experience managers and employees have with it is a downward spiral of performance.

For KPIs and performance measures – or any quantification of performance – to work, they must be separated from individual employee performance.

The late Tom Coens, and Mary Jenkins, describe a series of assumptions that most performance appraisal systems are based on, and they offer up some more useful (and more reality-based) assumptions that provide the foundations for a more effective alternative (not an improvement – a completely different concept altogether). Read my review of “Abolishing Performance Appraisals” and consider buying this book.

Step 4: Upgrade your definition of accountability for performance.

Someone has to be accountable for performance. I won’t argue with that. But accountable in what way? It’s easy to throw around words like ‘accountability’ without testing assumptions about what they mean. Too often, the assumption is that accountability for performance means hitting targets. But is any one person ever really in control of hitting targets for measures of business performance? No, because the business system will always constrain what performance is possible.

A more constructive thing to hold people accountable for is the way they use KPIs to focus on business improvement. Getting more KPI accountability means removing the obstacles that stop people wanting to use KPIs. And amplifying the reasons why they would want to.

So before you can be confident that people will maintain their buy-in to measuring performance, you will need to have a constructive definition of accountability.

Step 5: Focus teams on measuring their impact on business performance and strategy execution.

One of the reasons managers might want to set KPIs for their employees is to get them aligned to the organisation’s purpose and direction. But personal KPIs don’t help achieve that. What does help is a clear line of sight for each person, from the team they work in, through to the top outcomes for the organisation. We use the Results Map in PuMP to achieve this.

With this kind of line-of-sight alignment, it’s easier for people to work collaboratively rather than competitively, to focus on their own performance results, to measure them, and to improve them (by following a KPI process like this one).

Bonus: Read the latest on the relationship between people and performance measures on the Measure Up blog.

Get a current list of all the articles I’ve written on the relationship between people and performance measures here.

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