What Is Organizational Performance? (With How-to Steps)

By Indeed Editorial Team

Published November 11, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Evaluating performance can help organizations improve their processes and procedures. Organizational performance reviews can help companies identify areas of opportunity for improvements and provide insights regarding current employees' capabilities and skills. Learning how to measure and improve an organization's performance can help you leverage your available resources to achieve set goals. In this article, we explain organizational performance, outline steps for measuring an organization's performance, and highlight methods for improving it.

What is organizational performance?

Organizational performance refers to how well an organization is doing and how much of its daily tasks and set objectives it successfully completes. Measuring an organization's performance involves comparing its actual outputs or results with the intended ones. This comparison helps organizations determine if they're achieving what they set out to do. Business owners, strategic partners, and managers typically conduct this performance evaluation, and the process includes recognizing and implementing processes that can help improve the company's performance.

Significant reasons managers or business owners evaluate an organization's performance are to justify the use of capital, identify problem areas to direct managerial decision-making, and ensure the effective use of organizational resources. A company's interpretation of success can vary according to its purpose. Regardless of industry or goal, an organization's performance evaluation typically includes:

  • Operational performance: An organization's operational performance includes an evaluation of its marketing, customer satisfaction, product quality, and competitive advantage. It also reviews market share strengths and company sales numbers.

  • Financial performance: This is an evaluation of an organization's finances, including revenue and profit margins. It determines a company's liquidity, investments, returns on assets, and cash flow.

  • Shareholder return performance: A company's shareholder return performance is an evaluation of the shareholders' profit over a period of time. It assesses the growth of an investor's company shares during that pre-determined period.

Related: Performance Review Goals (Definition, Types, and Importance)

How to measure an organization's performance

To get a general overview, you can measure an organization's performance at different levels. Here are the steps to follow when measuring organizational performance throughout an organization's structure:

1. Evaluate employees' individual performance

Since they're the determining factor in the effectiveness and efficiency of an organization's processes and operations, employees are valuable assets. You can begin the evaluation process by measuring individual employees' performances. You can use the following factors to complete your evaluations:

  • Task performance: This refers to the successful completion of assigned tasks, including the quality and quantity of work. You can also assess employees' managerial abilities, such as organizing, monitoring, decision-making, and problem-solving skills.

  • Adaptive performance: Employees' adaptive performance refers to their responsiveness at work. You can measure this through their flexibility, innovation, the pursuit of continuous learning, and open-mindedness.

  • Contextual performance: This is employees' ability to complete tasks outside of their designated responsibilities. You can monitor their enthusiasm, resourcefulness, the strength of their interpersonal relationships, and commitment to excellence.

  • Counterproductive work: These are behaviours or characteristics that can hinder an employee's performance. They include absenteeism, tardiness, and a general disregard for safety and instructions.

Related: How to Improve Team Performance (With Definition and Tips)

2. Assess team-level performance

An organization can measure its performance according to its project success rate. Teamwork and practical communication are essential elements of successful project completions. Your team's task proficiency can indicate their level of performance. Team members that are proficient at completing higher volumes of tasks in a timely manner generally achieve higher performance levels. Methods that can help you increase team-level performance include:

  • Team training: This involves understanding and learning work practices. You can determine if team training sessions are successful according to the results they yield.

  • Team building: This is helpful for building relationships and establishing roles for team members. You can improve team-building results by encouraging employees to problem solve as a group.

  • Leadership training: With effective leadership training, you can empower employees to take initiative when working on projects. This type of training encourages team members to deliver excellent results even without direct supervision.

  • Simulation training: Introducing practice protocols can help employees handle real-world crises or situations. This improves their flexibility and ability to deliver better results.

  • Team debriefing: A consistent exchange of ideas and well-communicated feedback on a project or event can help build employees' skills and knowledge. This helps identify areas of opportunity and develop plans for overcoming any challenges.

Related: How Employee Performance Is Measured and Why It's Important

3. Measure organization-level performance

Assessing the organization in its entirety can provide additional context for individual and team-level performance evaluations. You can measure the effectiveness of the organization's strategic planning using external and internal assessments. This can help examine the strategies the organization implements to achieve its set goals and objectives. One example of this type of assessment is an employee survey. A company can create an anonymous survey and encourage employees to provide feedback on their work culture, training, and other work-related processes. Doing this can help management identify strategies to support employees and increase productivity.

Related: What Is Business Performance Management? (With Steps)

How to improve an organization's performance

Here are steps you can follow to improve a company's performance:

1. Grow the organization from within

When thinking of ways to improve performance, it's often best to start by considering internal resources. Company-wide improvements can encourage employees' growth and facilitate development. This is typically a continuous cycle and can vary across industries and entities, but there are some areas that teams generally assess. They are:

  • Strategy and mission: You can evaluate how well an organization is meeting its objectives and operating according to its values. Depending on your results, you can plan relevant modifications or change strategies.

  • Organizational structure: This refers to the objectives, responsibilities, and roles of individuals, teams, and departments in the organization. Making adjustments to the organization's structure can facilitate improvement.

  • Employees: Companies can make beneficial changes to their hiring and training processes or implement turnover-focused programs. Adjusting a company's personnel as necessary can help boost its success.

Related: What Are Performance Reports? (With Benefits and Tips)

2. Increase employee engagement

Employees are typically more passionate about their jobs when their leaders actively engage with them. A high engagement level helps motivate employees to put in their full effort. Here are tips you can use for making this process more manageable:

  • Ensure that every employee understands the organization's missions, values, and target customers.

  • Build trust by showing employees that the management team cares about them and is committed to helping them achieve their career goals.

  • Allow employees to use their preferred skills, as this may help them achieve better results.

  • Help each department focus on improving their procedures and targeting their activities to better accomplish the company's goals.

Related: Examples of Areas of Improvement in a Performance Review

3. Adopt the use of technology

Leveraging modern technologies to complete projects and perform daily tasks can contribute to an organization's success. With the right technology, you can automate clerical duties and processes while ensuring a high level of accuracy. You can also enhance customers' experiences and improve productivity across different departments. This supports innovation and introduces new business functions. Adopting effective technology increases the organization's competitive position and encourages growth.

Related: A Complete Guide to Network Performance Monitoring (NPM)

4. Identify and eliminate internal misalignments

It's important to check that the organization's competitive differentiation strategy aligns with its procedures, policies, and structure. Eliminating misalignment can enhance the organization's performance. Answering these questions can help you identify any misalignments:

  • Do employees make modifications and changes to work policies and procedures before completing their tasks?

  • How is the relationship between key business departments such as sales and manufacturing?

  • Do the company's work procedures and policies allow employees to complete their tasks quickly?

Related: What Is a Performance Review Template? (With Examples)

5. Align relevant metrics

You can evaluate the company's key performance metrics to understand how well departments are performing their expected functions. Understanding these metrics can be valuable while improving the organization's performance. They can guide work prioritization and decision making. You can facilitate training sessions to explain how the company chooses its metrics. This can help employees understand how their work influences the company's success. You can designate different performance metrics for different departments according to their tasks and responsibilities.

Related: A Guide to Performance Reporting (With Examples and How-To)

6. Maintain a digital workplace that is easily adaptable and continuously evolving

Maintaining a digital workplace involves focusing on an organization's performance. Then, you can consider individual components that can enhance this performance. To do this, you can implement structural change management that makes the process more productive. Change management is a systematic approach that involves handling the transformation or transitioning of an organization's processes or technologies. Staying focused and changing processes to fit evolving standards and regulations can help enhance a company's performance.

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