Too often management of employees is more subjective than objective. Instead, performance needs to be evaluated using performance-based outcomes, not the most recent interaction a superior had with their employee or the halo effect. The best way to get started doing this is by establishing SMART goals, then developing specific key performance indicators (KPIs) to track and verify achievement.
What is a SMART goal?
SMART is an anachronistic way to remember the key elements of goal setting: Simple, Measurable, Attainable, Relevant, and Time-bound.
Good SMART goals require thought and collaboration between the manager and employee. Employees will be more motivated and engaged if they have a hand in helping to determine the relevant measurables that they are being asked to deliver and understand their overall importance and impact to the department and/or organization.
Simple: Is the goal straightforward? Is it easily understandable and defined? Is the achievement of the goal important to the overall success of the department or company?
Measurable: Can the outcome be measured using specific, objective criteria? Is the data readily available and trackable? Is it visible to those responsible for its completion and tracking?
Attainable: Is it a realistic goal that can be achieved with the proper training and resources?
Relevant: Is achievement something that is important to either the department or company and within the responsible employee’s control?
Time-Bound: Does the goal have a due date or completion deadline?
When deciding what the goals should be, keep in mind the key functions the employee performs in relation to the department or organization. Review the deliverables expected for the position based on the job description, then ask the employee to add any functions they perform which are not accounted for or remove any which they are not responsible for. This task list will form the basis of the goals to be set.
Next, group the tasks into those which can be specifically measured and those that cannot. For example, it is nearly impossible to measure “perform other duties as required” objectively. It is possible to track and measure “keep receivables over 90 days to less than 3% of total outstanding receivables.” Focus on setting goals based on measurable responsibilities and spend the necessary time determining how success will be defined. This is not about measuring every single task an employee has, it is about determining which are the most critical to overall success in the position and which have the greatest impact on the department or organization.
Key Performance Indicators (KPIs)
Once the goals have been set, it is time to determine how achievement will be measured. Measurement should come in the form of KPIs that are specific to each goal. A KPI should show progress toward achievement of the goal at a glance, be easy to read and understand, and have parameters established for it that act as guard rails to keep performance on track.
For example, a KPI might be established for a goal that is “keep labor cost within 5% of budget”. The KPI could be a graph that shows actual labor cost overlaid on budgeted labor cost with a single number - % of budgeted cost – on the graph. The guard rails could be <=95% = green actual bar, 96%-100% = yellow actual bar, and >100% = red actual bar. With a KPI like this, it is possible to see at a glance whether labor is within the range established by the KPI.
Performance management is something that should be on-going, not a once-a-year review happening. Using SMART goals coupled with appropriate KPIs will allow employees and managers to always know exactly how performance is, where an employee is excelling or may need redirection, and what changes may need to be made to achieve a successful outcome.