Many businesses is cautious and avoid creating revelry or negative competitive environment between teams or departments within the business.
This is usually true for many small and medium size enterprises, created teams or departments duplicating each other functions by having the same responsibility or job scope with respect to bringing revenue to the business.
It is therefore important for the business to have an effective employee performance management system where the employees considered as fair but competitive in measuring the performance of both the team and individual.
A process for businesses to put in place employee performance management system must benefit both the business and its employees.
Objectives of this process is to increase business income by creating positive competition among teams to improve overall business effectiveness and efficiency, while generate healthy and effective working relations between teams or individual.
Creating different levels of Key Performance Indices
Make no mistake that an effective employee performance management system must ultimately improve not just the productivity of individual employee, but also the overall efficiency of the workforce.
This system must ultimately reap financial return for the company who is the pay master of its people while compensate substantially to the people who has work hard to make the return possible.
A combination of top down and bottom up system where the employees’compensationis taken into consideration in 3 key performance components over a period of time:
- Overall company financial performance
- Team performance
- Individual performance
It is important the system also create a positive and energetic working environment among teams and individuals, to improve productivity and efficiency, to encourage innovation and creativity within the business.
Thus, increase the business revenue ultimately.
Identified Key Performance Indices (KPI)
Key Performance Indices are critical to measure performance of the business, team and individual in a periodic bases.
An indices can be used to closely link with individual compensation, while improve the bottom-line of the company finances when apply it well. The same indices expected to improve individual and team productivity while generate enough motivation and challenges for innovation and creativity.
For simplicity for illustration and explanation, the compensation of individual employee depending on 3 levels of Key Performance Indices:
Level 1 – Company Level: the highest level of indices taken into account of the profit and loss of the business over a fixed period of time. (Below table example indicated at maximum X%)
“MUST” GOAL criteria – A minimum financial threshold that the company must met before the remuneration scheme to be effective? (Set minimum goal for profit that the company need to attain in a fixed measurable period correlated to remuneration scheme)
Minimum goal for company profit – A calculated company profit level where taking into account of the total expenses including the pay out of remuneration scheme package.
Level 2 – Team Level: overall performance of the team with all (or partial)common indices of measurement among teams.A maximum percentage of remuneration can be achieved if the team attained all the measuring factors at the ‘HIGH’ KPI target. (Below table example indicated at maximum Y%)
Level 3 – Individual Level: a set of defined key indices that measure the individual performance at work. At the individual level, most of the businesses will have groups of employees holding same of similar job function. (Below table example indicated at maximum Z%)
| Level | KPI | Measurement | Remuneration Weightage* |
| 1 | Company Financial Performance | Overall Company Net Earning | Maximum at X% (“MUST” GOAL) |
| 2 | Team Performance | Key Indices (Need definition) | Maximum of Y% |
| 3 | Individual Performance | Key Indices (Need definition) | Maximum at Z% |
Note: *Remuneration Weightage given to each level decided by the company’s management or board. There is no quick and fast rules or standard in setting the weightage at each level.
This example provided is for illustration purposes, the company’s management or board must come into consciences on the weightage that best reflect your company remuneration competiveness.
The remuneration weightage of all levels based on the original monthly pay of individual.
A comprehensive employee performance management system is a process by which organizations align their resources, systems and employees to strategic objectives and priorities.
Activities generated ensure that goals are consistently being met in an effective and efficient manner. The system allows the management to focus on the performance of an organization, a department, employee, or even the processes to build continuous quality products and service in meeting customers’ expectation as well as shareholder financial expectation.