Employee Performance Management: Not Just for Big Business

Many small business owners think of formal employee performance management as “overkill” administrative activities that they can put off until their business gets bigger. After all, you spend every day working closely with your employees. Why should you implement a formal process that adds administrative burden and stress?

Actually, a good deal of research shows that effective employee performance management enhances employee morale and performance, and helps drive better business results. As a small business, you likely can’t afford to ignore any program that is proven to help you better run your business. And it isn’t as hard as it may seem.

3 Basic Performance Management Practices

There are three basic performance management practices every company, regardless of its size, should have in place to gain advantages in human capital.

1. Individual Goals Linked to Organizational Goals

Developing a business plan and strategy with goals and milestones is an accepted business practice that most small businesses employ. You can take this strategy a giant leap forward by tying your employees’ efforts to your business strategy. You can do this by helping them plan individual goals that support your larger business goals and by clearly defining what you need them to know and do to achieve them.

For Example: If your overall strategy is to position your business as a leader in customer service, your receptionist might have a goal of answering the telephone on the first ring. Your field service representatives may have a goal of reducing equipment down time by 20%. And your customer service representative may have a goal of responding to complaints within 2 hours.

There are several advantages to taking the time to identify specific individual goals that are directly linked to organizational goals:

  • Employees understand what is expected of them.
  • Employees (and bosses!) understand where to focus their efforts and how to prioritize their work to bring the best return.
  • Employees are motivated when they see how their work supports the overall business strategy.
  • Managers have a basis for providing objective feedback and performance evaluation.

The following are some ideas for setting individual goals linked to organizational goals:

  • Engage the employees in the goal setting process. Because they are closest to their day to day work, employees are often in the best position to know how to improve it. And they will be more invested in working hard to achieve goals when their input is included.
  • Set SMART goals that are Specific, Measurable, Achievable, Relevant to the business and Time-bound (have time parameters, such as “complete X project by May 15).
  • Make sure employees understand both what is expected of them (the goals) and how to achieve them.
  • Write out the goals and make sure both employees and their managers have copies. If priorities change, review the goals and make adjustments as needed.

2. Ongoing, Constructive Feedback on Employee Performance

Performance management is not a once-a-year proposition. Now that both employees and their managers know what is expected, it becomes easier to provide day-to-day feedback on performance that is objective and fair. Employees value recognition for good performance and will strive to do more of what is seen and appreciated. When it’s delivered in a constructive way, and includes coaching on what changes are needed, employees will also tend to respond to negative feedback with improved performance. Here are some tips on delivering ongoing performance feedback:

  • Frequently praise and express appreciation for good performance. This often overlooked practice is a powerful motivator, but it must be sincere and specific.
  • Focus negative criticism on the performance – how the current performance varies from expected performance as defined in the goals — rather than the person. Include coaching on what needs to change to improve the performance.
  • After delivering negative feedback, watch for the opportunity to acknowledge small improvement steps. This encourages the employee to continue efforts to improve.
  • Feel free to praise positive performance in front of others, but always deliver negative feedback in private.

3. Development Opportunities to Support Goals and Performance

As you develop goals and assess performance, you may discover that employees lack knowledge or skills to perform to your expectations or can benefit from increased development. Providing training and development opportunities will not only help employees improve performance, but will demonstrate your confidence and investment in them and their careers. Often small businesses have limited opportunities for advancement, but formal and informal development can raise the competence and performance level of your entire organization as well as encourage employees to give their best. Yes, some may choose to move on to larger organizations where they can stretch their careers, but others may stay to help you take your business to new heights.