Establishing Performance Standards

“How can I avoid making common mistakes when setting performance standards?”

For many managers determining the right performance criteria and then establishing acceptable levels of performance can be seen as a challenge.

You will find these tips and techniques should make it a whole lot easier for you.

What's on this page?

• Determining what to Measure, Important Considerations
• The Performance Criteria Puzzle
• Establishing Performance Criteria
• Establishing Performance Standards
• A Final Note

When establishing performance standards you first need to determine what to measure, it is only once you have determined what to measure that you can start to determine what level of performance is acceptable.

Determining what to Measure, Important Considerations

Ok, it is time to determine what to measure, let’s make sure you don’t make any of these common mistakes

Performance standards must be about the individual

Performance expectations must be about the individual, not the team or the business. This is not to say that you cannot have team based metrics and targets, however they should not be included in your employee performance appraisal.

You can assess an individual based on their team behaviors and their contribution to the team. However, the output of the team is not the responsibility of any one team member. Team performance is clearly the accountability of the team leader.

Many companies include elements like increase in shareholder value or profit as part of a bonus system, which is fine. However, it is not reasonable to include a weighting of employee performance based on these criteria.

Employee performance must be assessed, in a performance review, based on the work and behaviors of the individual.

Ensure the performance standard is relevant to the employee’s job and are within the employees control

This may seem intuitive, however many business adopt a one size fits all approach to creating performance standards and as a result everyone in a certain job classification has the same set of performance standards.

While this is good for the majority of employees, it is not good for those employees whose roles do not fit with the standard set of measures. Common examples are

• The employee who resolves the more complex customer requests, this employee tends to be in contact with fewer customers and takes considerably longer with each customer. Though they often have the same targets as other employees who deal with mainstream customer issues.

• Employees in senior roles with no direct reports are often measured on employee engagement, while this may seem ideal, if they have no direct reports they have less ability to influence outcomes than leaders with direct reports.

• Some companies insist on everyone having customer satisfaction as a measure, which sounds great, however the accountant has less ability to influence customer satisfaction than the customer service team. At best you can describe a tenuous link between back office functions and customer satisfaction, these measure are unlikely to motivate back office staff.

One example: A numeric target, such as “serving 6 customers per hour” sounds good, however if you do not control the rate of customer arrivals then the measure is not within the employees control, as there maybe times when less than 6 customers per hour arrive. 

The measures must be free from contamination

The measurements that you rely on need to be absolute rather than indicative, you need to be sure the measurement reflects the performance of the individual. You will find that there are areas where you cannot accurately measure individual performance. A couple of common examples

The measures should be motivational

Motivating people is a challenge, one that is help by developing performance standards that are motivational. You can ensure that your performance standards are motivation by avoiding these common killers of motivation.

Targets are too soft

Too much of a stretch

If your people do not believe that they can achieve their goals, they will not be motivated to try.

Measures are too complicated

All to often measurement systems are too complicated and not understood by the employees that they are designed to measure.

If your people do not understand how they are being measured you will not be able to motivate them to achieve the required level of performance.

Employees do not know what they are measured on

Sometimes managers do not adequately communicate the performance measures to their people. Whilst they may communicate the performance standards once at the beginning of the year, they often do not revisit the measures and current results throughout out the year.

Reinforcement is required to ensure your people understand their measures, and how they improve their results.

Leadership Tip:

One way to determine a reasonable target is to have no target. Instead take the average output for the team (only counting appropriate quality outputs) and make the average the new minimum for the next 12 months.

Then during the year you can measure individual performance and advise your employees if they are either, high, middle or below average performers.

If the team performance improves then the average will also improve. 

Note:

You should adjust your expectations based on changes in the external environment, if you have additional competition or a reduction in price it may make repeating last year’s performance unreasonable.

On the other hand if you have an increase in price or a reduction in competition then expectations should be higher.

The measures must not encourage your people to make bad choices

Performance standards need to motivate your people to do the right thing rather than the wrong thing.

A common debate is if you push productivity you will increase error rates or reduce quality. This need not be the case, especially if you only count the items of productivity that were of appropriate quality.

In a contact center having a focus only on average handle time you may drive people to embrace behaviors that reduce their average handle time, such as transferring calls quickly. So, it is best to have a complete measurement system rather than one or two basic measures.

The measures must be clear

When setting performance standards it is easy to be too concise and to overlook some critical details in how these standards are described.
For example, for a sales person: Meeting sale targets, may seem simple, however do you require a sales person to meet their annual sales target or all 12 monthly targets?

Examples, Templates, How to Guide, it's all here

• Appraisal Home Page

Phase 1

• Rating methods
• Establishing performance standards

Phase 2

• Measuring results
• Rating Errors
• Prepare for your appraisal interview

Phase 3

• The performance interview
• After the performance interview

Process Map

Tips & Techniques

Free Templates

• Rating Scale
• Essay Style
• MBO
• BARS
• Download

Appraisal PowerPoint Presentation

Examples

• Good Performer
• Average Performer
• Poor Performer
• Intangible Measure

The Performance Criteria Puzzle

When setting performance criteria you will need to look at documentation used in your business such as job descriptions, company policies, codes of conduct, business metrics and budgets.

Whilst an idealist will argue that these are all in alignment you need to determine which you will use to develop your performance standards.

In reality, setting performance criteria comes down to one thing, determining how you will know if a job is being done well. You develop your performance standards by identifying the elements that you are looking for from a job role and describing these elements specifically.

For example:

Establishing Performance Criteria

A Handy Process that Works!

One of the easiest ways to determine what you should measure your people on it to ask them. However, do your homework first.

Once you have determined what performance criteria to measure, you can again ask your people to assist in determining an appropriate performance standard. Here’s how

Establishing Performance Standards

A handy Process that works

It is very hard to determine what level of performance is possible from a person if you only have one person in a specific job role, especially if you are new to leading someone who does that function. Though there are a few things you can do

If you have a group of people performing the same job function it is easier to set performance standards, in addition to the actions identified above, you can also 

• Identify the current average performance within your group and make this the new minimum, or

A Final Note

When setting performance standards it is best if you are consultative with your people, listen to what they have to say and listen to their concerns.

Once you have worked with your people to develop the performance standards you should trial them for a few weeks, maybe six or eight weeks. During this trial period give your people feedback on their performance – according to the system you developed together.

Then, listen to your people again; see if they have any issues or if there is anything they don’t think is fair about the new performance standards. Assess their concerns and make changes where it makes sense to make the change.

You will get higher productivity if you let you people have some influence over the way that they are measured and what they are required to achieve than if you insist on developing the standards in isolation and trying to force compliance.

Leadership Tip:

Next Steps

Now, you have developed your performance standards. It might be an idea to understand the key rating errors that occur during performance evaluation so that you can avoid making these common mistakes.