Feb 15, 2023
6 min read

Organizational Performance: How to Measure & Improve It

In this article:

Many organizations and business owners are focusing more on organizational performance. According to research, 98% of business owners believe performance management is crucial for sustainable growth in an organization. 

While organizational performance can initiate positive change in an entire organization, it can be challenging to implement. So, how can your business maintain a competitive edge when it comes to your organization's performance? What's the ultimate organizational performance measure?

This article will answer these questions and explain how you can measure and improve your organization's performance. Let's begin by explaining the basics of organizational performance.

What is organizational performance?

Organizational performance is the ability of an organization to effectively use resources and processes to achieve goals, improve the communication pipeline, and optimize results. 

You can analyze organizational performance from different angles. Here are some of them:

  • Economic performance – focuses on your company's processes regarding financial and market outcomes like profit, sales, and ROI 
  • Operational performance – focuses on the resources and measures used to improve business workflows
  • Human capital performance – focuses on organizational culture, employee retention, employee engagement, and development

How to measure organizational performance

Organizational performance can vary across different organizations. So when you want to measure success indicators, you need to consider what matters to your organization. We've highlighted some key performance indicators to guide you as you measure your organization's performance.

Survival and growth

As with every business, challenges and issues occur, but what matters is how your employees and organization can survive and adopt a steady growth flow.  Survival and growth measures of performance can help an organization answer the key question – "how can we continue to improve and provide value?". Gaining this insight can illuminate innovative ways to add value as your organization adapts to an evolving business environment.

Good fit with the environment

This performance measure addresses organizational effectiveness. By assessing the right fit between your organization's environmental demands and internal capabilities, you can gain more insight into your organization's performance.


The final performance level addresses the way your organization relates to systems and processes set in place.

Measuring levels of organizational performance 

There are different levels of measuring organizational performance:

Individual level performance

Individual performance indicates whether employees can handle assigned tasks without assistance and supervision. The more self-reliant employees are, the higher the organization's performance.

Team level performance

Team level organizational performance

Image source: Unsplash

This measuring level focuses on how team members handle designated tasks and the results that they generate. A high task performance level indicates that team members contribute positively to organizational outcomes.

Performance review template

Department level performance

This measuring level focuses on the performance of various departments in your organization. Since departments involve more complex processes, performance at this level adopts a slower pace than individual or team level performance.

Organizational level performance

This level of performance addresses strategic management at the executive level. When you assess how your organization implements strategic planners using internal and external assessment markers, you can measure performance and identify what needs to be improved.

Factors affecting organizational performance 

All organizations are not made equal. Each one could deal with various factors that could impact performance.  These factors can be related to internal and external factors. Read on for more details on each of them. 

Manager and employee relationships

The way managers treat employees can have a major impact on organizational performance.  For instance, a manager's lack of resilience can significantly decline team performance.

Development opportunities

When your employees don't constantly upskill, learn, and grow in their skills, what do you think will be the result?  It could negatively impact your organization's performance. 

For better business outcomes, you need to set the right development opportunities in your organization. This can provide many benefits, such as:

  • Increased employee engagement 
  • Better productivity 
  • Increased employee retention 
  • Improved sense of value

External factors

The global pandemic came as an unexpected shock that negatively impacted the performance of many organizations. 

It serves as an example of external factors that could feel out of your control. Other external factors include:

  • Economic recession 
  • Politics
  • Socio-economic factors 

What is organizational performance management?

Organizational performance management involves recurring activities designed to establish the overall organizational objectives, assess results, and make changes to reach business goals more effectively. 

Organizational performance management can be grouped into three phases:

1. Strategic planning

This phase indicates how you set the right conditions for your organization's growth. You'll want to identify your purpose, vision, and goals. This will help you get a bigger picture of how your organization will work and also ensure it is headed in the right direction. 

2. Appraisal

After you have identified your goals and vision, you'll need to monitor your progress. This is where the appraisal aspect of organizational performance comes in. It focuses on the measures you take to track progress. How is your company measuring success? 

What systems are providing the best results? What factors are an impending success? What's working and not working for your organization? 

3. Transformation

This last stage of organizational performance is about using your findings to make necessary adjustments.  After identifying what's working and not working well, you need to find ways to improve your organization. You can begin by answering this question – how can you make adjustments to remain on the right track? 

How to improve organizational performance

When it comes to improving your organizational performance, you must apply the suitable methods. Here are some examples: 

1. Invest in leadership

Leadership is a core anchor in any organization. If your business doesn't have good leadership, it can negatively affect ROI, employee well-being, and overall performance. Ensure you identify ways you can build strong leadership roles within your organization. 

2. Set goals & measure them

organizational performance: set goals

Image source: Unsplash

As a business manager, setting the right goals is necessary to have a clear picture of where your organization is heading. When setting business goals, you must use the right key performance indicators to measure success. 

3. Focus on employee well-being

Your employees are an integral part of your organization. You need to look at them as not just workers but human beings. This means taking a holistic approach to nurturing employee well-being – emotionally, mentally, financially, and physically. 

4. Recognize and reward hard work

Rewarding your employees can create a positive impact on their performance. When you recognize and reward them for their efforts, you will make them feel appreciated and valued. Even more, it helps boost employee satisfaction, morale, and productivity. 


As your organization's performance journey begins, ensure you maintain a solid competitive advantage by investing in the proper development strategies. 

Start by taking a people-oriented approach and improving your employees' well-being. Apart from that, ensure that you apply the suitable systems to align the performance of different departments and stakeholders across your organization. 

FAQs: Organizational Performance in 2023

What are organizational performance and effectiveness?

Organizational performance and effectiveness are the ability of an organization to apply suitable processes and resources to meet its business needs and optimize results. 

What determines organizational performance?

Organizational performance is determined by:

  • Employee satisfaction 
  • Employee retention 
  • Growth and development opportunities 
  • Manager and employee relationships 

What are examples of organizational performance?

Examples of organizational performance include:

  • Financial performance stock price, return on investment, and return on equity
  • Tactical performance strategy and innovation 
  • Adaptive performance agility and flexibility

What are the 3 Ps of organizational performance?

The 3 Ps of organizational performance include:

  • People – workforce and customers 
  • Process – for organization management 
  • Product – for your target market 
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