Page 2 - Lesson Note 2

Step 2: Measurement of Actual: Performance: Once performance standards are set, the next
step is measurement of actual performance. Performance should be measured in an objective and
reliable manner.

There are several techniques for measurement of performance. These include personal
observation, sample checking, performance reports, etc. As far as possible, performance should
be measured in the same units in which standards are set as this would make their comparison
easier. It is generally believed that measurement should be done after the task is completed.
However, wherever possible, measurement of work should be done during the performance. For
instance, in case of assembling task, each part produced should be checked before assembling.
Similarly, in a manufacturing plant, levels of gas particles in the air could be continuously
monitored for safety.

Measurement of performance of an employee may require preparation of performance report by
his superior.Measurement of a company’s performance may involve calculation of certain ratios
like gross profit ratio, net profit ratio, return on investment, etc., at periodic intervals. Progress of
work in certain operating areas like marketing may be measured by considering the number of
units sold, increase in market share etc., whereas, efficiency of production may be measured by
counting the number of pieces produced and number of defective pieces in a batch. In small
organisations, each piece produced may be checked to ensure that it conforms to quality
specifications laid down for the product. However, this might not be possible in a large
organisation. Thus, in large organisations, certain pieces are checked at random for quality. This
is known as sample checking.

Standards used in Functional Areas to Gauge Performance

Step 3: Comparing Actual Performancewith Standards: Thisstep involves comparison of
actualperformance with the standard. Suchcomparison will reveal the deviationbetween actual
and desired results.Comparison becomes easier whenstandards are set in quantitativeterms. For
instance, performance of aworker in terms of units produced in aweek can be easily measured
againstthe standard output for the week.