Performance management has an absolutely fascinating history. According to Harvard Business Review, there are three main lenses through which you can look at performance management: as a tool for developing accountability, as a tool for employee development, or a third way, which incorporates elements of both. Companies have tried going numberless, tweaking how they manage performance-based reporting, and going back to the “old way” of doing things – each with different measures of success.
The benefits of performance-based reporting are vast. There are downsides, too, but those downsides won’t be the focus of this post. The main advantage of putting a number to performance is that it quantifies something that’s otherwise pretty abstract. The value of an employee is almost impossible to understand because concrete, number-based metrics like how many sales an employee gets in a week must be contrasted with soft skills like how well the employee works in a team. By giving hard values to a number of soft skills, it’s easier to spot places of weakness where employees or teams might improve.
Performance-based reporting alleviates a lot of stress for the HR department. As we all know, it can be difficult to let go of an employee – even if you’ve got a good reason to. With performance-based reporting, you can analyze an employee’s performance over time; when it’s consistently under the company’s standards, you have a much better case for letting the employee go. Performance-based reporting can also make hard conversations about performance management plans easier – you can identify weaknesses with real numbers.
A lot of people have negative associations with the word accountability; when you’re accountable for something, you’re the person others go to when things go wrong. Realistically, however, you should also be rewarded when things go right. Performance-based reporting allows you to align the goals of the company with the goals of individuals. Broad, company-wide goals can be broken down into department goals, further broken down into team goals, then broken down again into individual goals. By associating individual metrics with company goals, employees can understand why they’re accountable for certain responsibilities and how they’re helping the company.
Stakeholders will also appreciate performance-based reviews. Imagine a report that said “Our company is doing great; profits are up and losses are down” with no tangible metrics to back those statements up. Your reports need to be based on actual performance metrics so that people will know whether or not to invest in you; vague statements are insufficient. To generate real buzz about your company, you need to generate real numbers.
Figuring out exactly what metrics you should use to evaluate performance can be difficult; it’s part psychology, part business, and part accounting. A CPA accountant in Winnipeg can help you with the last part – by helping you determine what your overarching goals should be, you’ll be more readily able to break those goals down into performance metrics. When you are exceeding or falling short of your targets, CPA accountants can help you adjust your metrics and find your strengths and weaknesses.