What is performance? The most accurate productivity calculation formula in 2024

Work performance is an important factor in human resource management, directly affecting the development of the business. Therefore, businesses are always looking for ways to improve employee performance to achieve business goals. In the article below, 1C Vietnam will clarify the concept of performance , the formula for calculating performance as well as how to improve performance in businesses. Let's follow along!

1. What is performance?

Work performance (productivity) is a term used to refer to the level of work completed by an individual or a group of people in a fixed period of time. Performance is measured by the results achieved and the resources (time, capacity, material resources, consumable costs...) used to achieve those results. Work performance is an important factor in evaluating work efficiency, managing and developing a business. Efficiency helps improve product/service quality, while optimizing resources and minimizing production costs, helping to increase business competitiveness.

Example of work efficiency : In a car factory, a car assembly worker is required to assemble 10 cars within an hour. If this employee produces 10 cars within one hour, his efficiency is 100%. However, if this employee can only install 5 cars/hour, his work efficiency is 50%.

2. Standard and accurate performance calculation formula

To track the performance of each employee, businesses need to use performance formulas. The final measurable results will show how effectively existing human resources are working. The formula for calculating working efficiency is as follows:

Work performance = Results achieved by employees / Costs used by the business.

Through the above formula for calculating performance , businesses can deduce the following factors:

• In the process of measuring work performance, the results achieved and the costs used by businesses are two extremely important factors.
• The measured results will be proportional to working performance . The higher the final result achieved, the greater the performance index will be. Conversely, low results but high costs will result in lower performance.
• To achieve high final performance, businesses need to cut costs and improve work results.

3. Methods of evaluating employee performance

Through evaluating employee performance , businesses will know the human resources gap and find ways to fix it, thereby reducing costs and increasing profits. Below are common work performance assessment methods that business owners can refer to:

3.1. Cross-assessment within the company

Peer review is a simple method to measure each employee's performance . For large-scale companies, observing and approaching each employee will be very difficult. Supervision and tracking among employees will create work motivation, improve self-awareness, and reduce a large amount of work for administrators. However, management should select accurate information to avoid unfairness and dishonesty by some employees.

3.2. Use the scale to evaluate

When using a scale to evaluate employee performance , management will have to apply evaluation forms with many separate criteria. Then, add up the results of each criterion and give each individual a performance rating . The advantages and disadvantages of using a rating scale are:

Advantage:

• Results are often more quantitative and objective.
• Summarize results easily, helping management propose specific improvement methods.
• Less cost and time.

Defect:

• The method requires managers to have expertise and qualifications to evaluate.
• The method is only suitable for managers who have worked and had direct contact with employees.

3.3. OKRs method

OKRs (Objectives and Key Results) are a method that helps companies track the goals and performance of each employee. The similarity between OKRs and KPIs is that they both have specific numbers for accurate evaluation. However, OKRs are often more goal-oriented while KPIs will focus on indicators.

When using ORKs, each employee will be updated on goals, results and points to note while completing assigned work. The ORKs method has been successfully applied by many large businesses around the world such as: Google, Intel, YouTube, Twitter, Amazon,...

3.4. Behaviorally anchored assessments (BARS)

BARS is a rating that helps companies evaluate each employee's behavior. This scale will measure performance and metrics available on the rankings directly. The advantage of using BARS is that it allows managers to make qualitative and quantitative assessments. Especially if this performance is accompanied by specific data, it will help businesses have a clearer view of employee performance.

3.5. Management by Objectives (MBO)

Management by Objectives (MBO) method will direct employees to achieve goals according to the SMART model. Criteria according to MBO goals will include specificity, measurable performance, feasibility, timeliness and relevance. Specifically, employees will have their performance evaluated by comparing the final results with the goals set from the beginning.

4. How to improve employee performance

The process of improving employee work performance requires efforts from many sides of the business. Below are ways to improve employee performance that businesses can refer to:

4.1. Define clear goals

It can be seen that employee performance will increase significantly when they clearly understand the direction of the business. Therefore, the company should set clear goals that each employee can understand.

​For example: Businesses should set a goal: "Attract 1000 consumers in the next 2 months". The specific number and time will be a measure to help each employee determine the exact goal that needs to be achieved. If the specified limit is exceeded, it proves that the kernel's performance will be highly appreciated.

4.2. Training and improving qualifications

Employee performance will increase if they are motivated at work. Therefore, businesses should consider and understand the needs and desires of each employee to find timely and quick solutions. Enterprises can apply forms of reward and honor to encourage employees to work. Thanks to that, the level of work completion, goals and revenue of the business will increase.

For example: Management can give respect to its employees by listening and absorbing each individual's opinions. This will help each employee feel understood and appreciated. This is also an opportunity for businesses to build trust and loyalty of key personnel.

4.3. Constructive discussion and evaluation

At work, communication is the key to helping the company shape its position. Therefore, businesses should exchange opinions and organize employee evaluations more frequently. This will help employees clearly see their own working capacity and ability to perform their job. When receiving positive feedback, employees will work more enthusiastically, and negative reviews are also a way to encourage productivity. However, businesses need to be careful with these negative reviews to avoid causing unfortunate conflicts.

Evaluation should be conducted in a way that contributes to better work improvement. Management should not criticize or be too harsh with its employees. This causes negative attitudes and makes employees feel uncomfortable and angry. Negative comments can even make employees feel self-conscious and lose enthusiasm for work. Therefore, businesses should know how to communicate and evaluate delicately and flexibly so as not to offend employees.

4.4. Continuous performance management

The Board of Directors focuses on monitoring, tracking, creating goals and evaluating the results achieved by personnel. Thanks to that, each department will clearly understand its working performance and promptly improve in the right direction of the organization. Conducting performance management just once or twice a year is often ineffective. The company should organize continuous management by period, quarter, month or week. Regular frequency will encourage employees to improve their work performance .

Performance evaluation is an indispensable item in the human resources management process. Thanks to that, businesses can clearly understand the capacity and ability to complete each employee's goals. To control the work performance of each member of the organization, businesses can consider using 1C:Document Management software - a solution that supports objective and transparent monitoring and evaluation of KPIs. Contact 1C Vietnam immediately for software advice.