1. Introduction

The success of a business depends on a performance measurement system to improve management decisions and operations (Kertu, Haldma, & Moeller, 2011). Frequently used tools, such as balanced scorecards, performance management software, and key performance indicators (KPIs), are all valuable tools for creating a suitable measurement system (Prabhu & Hegde, 2012). Company leaders measure performance for two primary reasons: a) they want to know their current position and what improvements they need to make, or b) they want to influence employee behavior (Katic, Majstorovic, & Colak, 2011). Company leaders are often unable to fulfill an effective approach to performance measurement because of the minimal knowledge on the topic. Traditional performance measurements have limits especially concerning the degree of improvement achieved in a company’s actual business performance (Kasie & Belay, 2013). Additionally, the main concern for the development of performance review measures in service-oriented companies is the provision of a measurement system that improves the vital areas within the company, including customer service and customer retention. This study involved five managers and five employees in a boutique hotel in downtown Atlanta. The qualitative investigation involved an action research design. Research data was collected regarding the current performance measurement system and the KPI’s currently utilized. Using the EFQM excellence model criteria, data were analyzed and deficiencies were identified. Based on the analysis, changes were made to the existing employee performance measurement system. A new round of research data was collected to determine how changes to the performance measurement system affected the overall employee performance review process. Results indicated a customer service and employee satisfaction performance indicator was needed; which provided a more accurate measurement of performance within the organization. From a management and social change perspective, a performance measurement system with adequate indicators is a more precise measurement and may influence employees’ perspectives, customer service, and the success of service-oriented companies.

2. Performance Measurement

Performance measurement has developed greatly over the last few decades (Ibrahim & Zainuddin, 2012). Additionally, performance measurement improves when management prioritizes the alignment of management tools and assessment methods (Srimai, Radford, & Wright, 2011). Another area of research into performance evaluation has focused on the design of an effective performance measurement system (Choong, 2013). Also, research in this area has addressed the challenges that managers face when evaluating and improving performance management (Bititci, Garengo, Dörfler, & Nudurupati, 2012; Hunter & Nielsen, 2013). However, a lack of research exists on performance evaluation within specific industries, including service-oriented companies (Liu, Fan, & Huang, 2008). Employees are significant factors in service-oriented companies because they perform the service; however, researchers have not studied how employees realistically view service performance (Wallace & De Chernatony, 2009). Performance reviews often motivate employees to perform better; however, a constant review of the number of challenges that arise when managers evaluate employee achievement is necessary (Ahmed, Sultana, Paul, & Azeem, 2013).

Company leaders need to develop and implement diverse performance measurement systems, as well as evaluate the limits of traditional assessments (Kasie & Belay, 2013). Managers have raised concerns about evaluating employee achievement for years, and performance measurement planning is not sufficiently covered in the literature (Mehrabad, Anvari, & Saberi, 2012). Managers must use proper performance measurement tools that will work for their specific companies, employees, and current business climates (Kertu et al., 2011).

The identification of the cause and effects of a company’s excellent or poor performance by utilizing appropriate performance measurement models is important to organizations (Finley & Buntzman, 1994). Additionally, service measurement is difficult because service features are vague and are often hard to quantify (Jääskeläinen et al., 2012). A manager’s desire for performance improvement of employees is often the main use for a performance measurement system. However, even a properly designed performance measurement system has little effect if its metrics lack authority and fails to stimulate change (Harbour, 2011). Managers must consider the customer service features of services and the impact of company workers when creating metrics and performance indicators (Tyagi & Gupta, 2013).

A lack of motivation for management to create performance measurement systems results from the complicated methods for developing measurement tools such as performance signals (Bongsug, 2009). Managers also often misunderstand the identification process of key performance indicators because managers view KPI’s as a quantifiable measurement tool (Nagyova & Pacaiova, 2009). Whether performance indicators are employed to view a procedure or improve how a company performs, their assessments should connect to a concise strategic goal (Franceschini, Galetto, & Turina, 2013). Success in the management of performance measurement exists, and performance indicators allow company leaders to determine if they are achieving their desired goals (Tsai & Cheng, 2012).

Typically, managers create KPIs based on what has happened in the past (Janes & Faganel, 2013). Four concepts intertwine with developing key performance indicators: (a) customer, (b) financials, (c) internal methods including a company’s operation procedures, and (d) learning and growth potential (Tsai & Cheng, 2012). A precise estimate of performance indicators can be employed to forecast the effects of future strategic decisions (Morard, Stancu, & Jeannette, 2013). Additionally, the choice of ineffective performance indicator metrics may lower the success and effectiveness of the overall performance measurement system (Gabcanová, 2012).

Employee performance assessment is critical for the identification of both strong and weak service areas (Zamani & Esfahani, 2014).

2.1. European Foundation for Quality Management (EFQM) Excellence Model

The European Foundation for Quality Management (EFQM) Excellence Model is a useful method to meet the need to identify both strong and weak service areas (Zamani & Esfahani, 2014). The EFQM Excellence Model is a generic method for measuring quality management, excellence, and employee job satisfaction (Tutuncu & Kucukusta, 2007). Company leaders’ use of the EFQM Excellence Model enables companies to be effective and efficient, as well as competitive (Dutt, Biswas, Arora, & Kar, 2012). The EFQM Excellence Model is a self-assessment tool that allows company leaders to measure present performance and strengthen weak areas for improved performance in the future (Shahin & Pourbahman, 2011). The EFQM Excellence Model may also result in the development of an effective management system that provides a starting point to review data to ensure the prioritization of ongoing performance measurement (Tóth & Jónás, 2012). The degree to which employees are satisfied with their work responsibilities may directly affect customers’ service satisfaction and influence the performance measurement system (Tutuncu & Kucukusta, 2007). The use of expert resources like the EFQM Excellence Model allows a company to identify effective and ineffective areas and present them in ways in which the overall organization can benefit (Zamani & Esfahani, 2014). The value of performance evaluation depends upon an organization's acceptance of appropriate measurement models like the EFQM, as well as how employees are involved in measurement process (Shahraji et al., 2012).

3. Methods

The problem addressed in this study is a lack of knowledge regarding how imposing a change in a performance measurement system may improve employee performance reviews in a service-oriented company in Atlanta, GA. Effective performance measurement cannot be achieved, if a company’s performance goals are unclear (Harbour, 2011; Srimai et al. 2011). The inability to capture reliable measures because of inadequacies of employees’ contributions to their firms’ objectives challenges performance measurement (Kauhanen & Napari, 2012). Some performance measurement systems facilitate limited improvement, lack sophistication, and result in managers using inadequate measures to increase performance (Bromberg, 2009). Misguided measurement selection often leads to failed implementation and undesirable performance results. These outcomes are preventable if reliable measures are implemented (Al-Nimer, Sleihat, Al Abbadi, & Almahamid, 2012).

3.1. Research Questions

The following research questions guided the study:

RQ1: How has an employee review measurement system been used to measure performance in the service-oriented company examined?

RQ2: What are the KPIs measured in the current employee performance measurement system?

R3: Using the EFQM Excellence Model criteria, what are the new key performance indicators and changes that will be implemented in the future performance measurement system?

R4: How have changes to the performance measurement system affected the overall employee performance review process?

3.2. Study Design

A comparison of research methods led to the selection of a qualitative research approach to explore the employee performance review process. Given that the purpose of this study was to examine a performance measurement system, address deficiencies, and implement change in a service-oriented company, an action research design was selected. Action research refers to undertaking research and then acting to make changes to policy development, management practices, and performance (İşman, Altinay Aksal, & Altinay, 2009). This action research study combines performance review theories and service companies’ practices to respond to inefficiencies within a mutually acceptable agenda between employees and management (Avison et al., 1999).

3.3. Sampling

The total population for this study included all employees within service-oriented industries, specifically hotels. The study population included the 188 three-star service hotels located in Atlanta, GA. The sample was one three-star hotel chosen as the location to conduct the study. Within the selected hotel, one hotel manager and four department managers (Front Desk, Maintenance, Housekeeping, and Accounting) were interviewed. In addition, five employees were observed while they performed their duties, and same five employees were interviewed.

3.4. Data Collection

This study included three sources, including the demographic questionnaire, semi-structured interviews, and observation. Ten semi-structured interviews were conducted with five service employees and five managers within the chosen hotel. Five rounds of observations of service performance were also conducted before the change was imposed and two rounds of observation occurred after the change. Eight open-ended qualitative questions were used in the one-on-one semi-structured interviews on the employees’ perspectives regarding the service-oriented company’s performance measurement system. A form of triangulation was used, with more than one method of gathering data, and then a qualitative content analysis was conducted. Triangulation is a method used by qualitative researchers to show validity in studies by analyzing a research question from multiple perspectives as well as testing for credibility (Golafshani, 2003; Guion, Diehl, & McDonald, 2013). The EFQM Excellence Model questionnaire consisted of the nine-criteria assessment checklist used to measure the excellence level and locate discrepancies.

3.5. Data Analysis

A qualitative content analysis was used for the non-numeric data that came from the observations and the one-on-one semi-structured interviews. Qualitative content analysis is a technique of interpreting collected data involving coding and classifying (Miles & Huberman, 1994). After collection, the data were compiled, transcribed, and put them into themes per the interview questions. The collected data was imported into the MAXQDA qualitative content analysis program for an examination. MAXQDA allowed for the analysis of the employee performance reviews and measurement systems in the company to determine if an addition of performance indicators were necessary. Additionally, this study used the EFQM checklist that evaluated the excellence level of the service-oriented company’s measurement system.

4. Results

The demographic questionnaire consisted of the following categories: job titles, age, gender, race, and time employed at this hotel and in the hotel service industry. The first question asked in the demographic questionnaire was about job titles. Three participants worked at the front desk, two participants worked in sales, two worked in housekeeping, one worked in maintenance engineering, and two worked in overall management (Table 1). The second questions asked in the demographic questionnaire involved the age groups of the participants. The age groups were 18-24, 25-44, 45-64, and 65 and older. Seven participants were between the ages of 25 and 44 and three were between the ages of 45 and 64.

Table 1. Job titles of participants (N = 10)

The next question in the demographic questionnaire concerned the participant’s gender. Four participants were male, and six were female. The following question was on ethnicity and race. Five participants were African American, three were Caucasian, one was Latin, and one was Hispanic. The next question concerned the length of employment at the hotel. Two participants worked at the hotel for 6 to 11 months, three participants worked at the hotel for 1 to 3 years, two participants worked at the hotel for 4 to 6 years, and three participants worked at the hotel for 7 years or more. The final question in the demographic questionnaire concerned how long participants had worked in the hotel service industry in total. One participant had worked in the hotel industry for 4 to 6 years, and the other nine had worked in the hotel industry for 7 years or more.

Table 2. Time employed at hotel (N = 10)

Research Question 1

The first research question asked how the employee review measurement system has been used to measure performance in the service-oriented company in Atlanta, GA. The management and employee participant interviews for this research question resulted in two themes: 1) tracking device and 2) motivational device. All the management and employee participants indicated the employee review measurement system is used to measure performance in a written form to track the progress of employees, Also, all five management and employee participants indicated the use of the employee review measurement systems motivated, inspired, and educated.

Research Question 2

The next research question asked about the indicators in the current employee performance measurement system. Management participants and employee participants said job knowledge, work quality, attendance/punctuality, response time, listening skills, and dependability were the performance indicators measured in the current system. Management and employee participants said customer service and sales were also indicators. Nevertheless, the performance measurement form reviewed by this researcher did not have customer service, sales, nor response time, as indicators. However, job knowledge, work quality, attendance/punctuality, initiative, communication/listening and dependability are the performance indicators this study identified as themes. In addition, this study identified customer service as a subtheme.

Research Question 3

This question asked, “Using the EFQM Excellence Model criteria, what are the new performance indicators and changes that will be imposed in the future performance measurement system?” The EFQM Excellence Model checklist includes nine criteria: leadership, policy; strategy, people, partnerships; resources, processes, customer, functioning of people, position in society, and company results. The EFQM Excellence Model checklist analysis resulted in four themes. The four themes are excellence levels, customer service indicator, employee satisfaction indicator, and performance management techniques.

1. Excellence levels. Findings indicated the leaders of this service-oriented company produce a culture of continuous improvement, support improvement actions, and evaluate and motivate the staff. The service-oriented company does not have any strategy-based creation and implementation of performance because this study found, beyond the minimal reviews, that there were no strategically related methods on performance reviews.

2. Customer service indicator. Three management participants and three employee participants said customer service was a measured indicator. However, based on an examination of the review form, it was discovered that customer service was not a measured performance indicator. All companies that deal with customers, especially service-oriented companies, need to carry out a measuring unit for customer service.

3. Employee satisfaction indicator. Four management participants and two employee participants said their company did not measure employee satisfaction. Therefore, based on the EFQM Excellence Model criteria and interviews, a strategized method of measuring employee satisfaction in the performance measurement system was also important.

4. Performance management techniques. People are also one of the nine EFQM Excellence Model excellence areas this service-oriented company lacked. Findings indicate most participants supported carrying out performance management techniques; because there was a suggestion this company has minimal performance management processes in place, specifically team building and training. Therefore, based on the EFQM Excellence Model criteria and interviews, training and team building are two performance management techniques carried out into the service-oriented company’s performance management system.

Because of the EFQM analysis, three changes carried out into the performance measurement system are a customer service indicator, an employee satisfaction indicator, and performance management techniques.

Research Question 4

This question asked how the changes to the performance measurement system have affected the overall employee performance review process. In the previous performance measurement system, management measured work quality, attendance/punctuality, initiative, communication/ listening, and dependability. Because of these changes, time, efficiency, and accuracy were the effects of the review process, and customer service, employee satisfaction, and performance management techniques were the additions to the existing measurement system. The additions of the customer service and employee satisfaction indicators result in a more in-depth review method that has management now tracking two important parts of this service-oriented company. The degree to which employees are satisfied with their work responsibilities may directly affect the service satisfaction of customers and eventually influence performance and its measurement. Finally, the changes resulted in a more efficient and accurate performance measurement system and review method based on the final observations and an extra discussion with the General Manager.

5. Discussion

The most important findings for this study occurred within the analysis for Research Questions 3 and 4. Based on the participant’s interviews and observations, 18 of 26 of the measured performance areas were in use. However, 8 of the 26 excellence performance areas were not in use. Therefore, an inclusion of the missing areas into the company’s review method was required. Because of the EFQM Excellence Model checklist and analysis, the changes involved imposing a customer service and employee satisfaction indicator and performance management techniques as well.

Customer Service.

Customer service and appreciation was an EFQM Excellence Model criteria area this service-oriented company lacked. Managers and employees said customer service was an important unit in their company. They also said customer service was an indicator in the company’s performance measurement system. However, based on the review of the measurement form, this was not true. Thus, based on the research findings and the EFQM Excellence Model checklist criteria, customer service was added as an extra performance indicator carried out by this study into the performance measurement review for this company. Additionally, imposing the customer service indicator directly affected the customers and employees because there was an assessment of the employee’s level of service and the customers’ receipt of service. Also, this indicator’s implementation affects management because the required performance and review method were in alignment with the company’s primary goal: customer satisfaction.

Employee Satisfaction.

Employee satisfaction was an extra EFQM Excellence Model criteria area this service-oriented company lacked. Both management and employee participants said their company did not measure employee satisfaction. In addition, management and employee participants said employees were important factors in service-oriented companies. An employee’s perspective is a valuable unit for performance decisions because they are the service providers. Employee engagement is important for excellence in performance and success within a company (Anitha, 2014). Additionally, an employee who is thriving, healthy, observant, and emergent creates sustainable achievement (Spreitzer & Porath, 2012). Therefore, based on the research findings and the EFQM Excellence Model checklist criteria, employee satisfaction is now an extra performance indicator added to the performance measurement form and review method in the service-oriented company. Additionally, this indicator affects employees and managers because performance levels connect with happiness levels. The latter can usually determine if changes are necessary for the success of a company.

Performance Management.

All participants supported imposing performance management techniques because this company had a minimal performance management method in place—specifically team building and training. Performance management is a part of the people category in the EFQM Excellence Model checklist. Therefore, the management and employee participants’ recommendation of these two performance management techniques connects with the research findings and EFQM Excellence Model criteria. Additionally, imposing team building and extra training can spark continuous growth and affect employees’ performance levels, customers’ levels of service, and management’s abilities to motivate, inspire, and educate, all while improving overall performance.

Final Decision.

After the analysis was complete, a second round of observations was conducted, including an analysis of the data against the first round of observations. Findings were compared with data collected during the interviews. The original findings involved an omission of two important indicators. It is important for managers to create a performance indicator system that aligns with the strategy-based goals of the companies and ensure the chosen indicators manage the business efficiently. Additionally, both management and employee participants said customers and employees were the two most important units within their company. Therefore, it was decided to add a customer service and employee satisfaction indicator. This decision was also based on the final observations and this study’s discussion with the general manager. The results are that the service-oriented company in Atlanta, GA now has an improved performance measurement system. The new review is a positive feature of the company because it measures two major units within service industries. Understanding the connection between acceptable indicators and performance reviews’ success adds to the current body of knowledge on effective performance measurement within service-oriented industries. Additionally, the changes resulted in an efficient and accurate review method.

Implications

Theoretical Implications.

First, a performance measurement system with enough indicators is an accurate measurement and might influence employees’ perspectives, customer service, and the success of a service-oriented company. Secondly, it was found that performance measurement motivates employees, despite recognizing that many performance reviews can make employees feel undervalued. Third, proper performance measurement planning and suitable performance indicators are necessary to be an efficient method. Excellence is not a method or system, but a change in philosophy, culture, or strategy on continuous improvement. Fourth, management within service-oriented companies may provide performance measurement systems that align with future goals. The challenges of a performance measurement system arise due to distress, policies, and subversion. However, with successful implementation, the challenge becomes looking for ways to measure and preserve the system’s relevance. Fifth, given the literature, interviews, and analysis of the service-oriented company’s method, using dated systems may leave a company and its employees stagnant, with little room for performance improvement. With the right indicators, leaders of service-oriented companies will need to reevaluate the methods to measure employee performance.

Practical implications.

First, if a company does not have proper performance measurement methods in place, negative results could transpire. However, when proper measurement tools are used, growth potential is limitless. Second, listing a company’s future goals when designing and imposing a sustainable performance measurement system is important because this method can easily adapt to change. Third, employing a positive work environment by assessing performance regularly motivates employees. Fourth, for long-term success, the following things are needed: the employee’s perspective, customer service, cross training, performance management strategies, and innovation. Lastly, establishing rapport between employees and managers is a need for change, growth, and performance excellence within a company.

In sum, the leaders of the service-oriented company had a respectable performance measurement employed. However, it was discovered that some shortages existed within this service-oriented company’s review method. Based on the EFQM Excellence Model analysis and checklist, there was an implementation of two new performance indicators. However, it should be noted that three extra areas of performance measurement required attention. Genuine partnerships with any other companies, including other hotels did not exist. Additionally, the service company lacked satisfactory training, as well as technology and knowledge management. Therefore, first, strategic partnerships create a non-existing network that could be a positive learning tool for service-oriented companies. Second, imposing satisfactory training could boost the overall morale of employees in service-oriented companies as well as improve performance and its review method. Additionally, executing innovative technology and knowledge management techniques could aid with the performance review method, becoming an asset to the company.

6. Conclusions

The purpose of this qualitative action research study was to explore how a change in a performance measurement system would improve employee performance reviews in a service-oriented company in Atlanta, GA. This service-oriented company’s performance measurement system needed change, which resulted in adding both a customer service and employee satisfaction indicator, which are internal and external elements. The measurement of the two important units of a service-oriented company ensures the performance measurement system is excellent, efficient, and accurate, which are vital for effective human resource management. Performance measurement is necessary for business management and finding a company’s competitive advantage. To contribute to the understanding of the topic with performance measurement, company leaders must develop and carry out performance indicators aligned with company goals. The results of this study based on the European Foundation of Quality Excellence Model were important for improving the company’s performance measurement method, as well as providing the human resource manager and the executive team with real life data to continue to improve labor generated processes and effective measurements. This study may also be valuable to other companies whose leaders measure and have concerns about performance and effective human resource strategies. Gaining a company’s excellence level is important when satisfactory changes are required. The necessary tools to select performance indicators and create a performance measurement system that aligns with the business method and goals were the results of this study. Additionally, this study can benefit business professionals, human resource managers, educators, scholars, and students whose focus is on business and the improvement of employee performance.