Performance Management in a Small Business – Is it Really Necessary?

By Nicole Carter | February 10, 2021 | Strategic Planning Resources

I get this question from time to time from my small to mid-sized business clients – do I really need a formal performance management process?  Some clients feel that in smaller, more agile team settings, feedback flows more regularly and openly via day-to-day conversation. They also make the argument that because they are flat organizations, with not a lot of chairs to fill, tracking talent and performance isn’t as critical.  Let’s face it, giving and receiving feedback isn’t always easy to do but it can be beneficial in so many ways. 

One thing is for sure, if you want to ensure organizational success, you will need talented staff to help get you there. Finding a way to provide constructive, structured feedback. While measuring progress is essential to the development of your employees and your business.  Without it you might notice that employee engagement will slowly begin to decline. As the lack of feedback leads to uncertainty.  There can also be a feeling of ambiguity when it comes to job duties and this can lead to a loss of productivity. Employees thrive on knowing exactly what is expected of them. As an employer, providing clear direction helps you ascertain if an employee is doing exactly what you need them to do. If they are performing well, that’s great, but if not, you can make real-time changes to get things back on track. 

Sharing Strategic Vision

You also might notice that business results become stagnant. This can be due in part to the lack of focus on establishing clear goals and setting expectations. As a business leader it is probably crystal clear what you need to do in order to achieve success. But, that is not always the case for your employees. Sharing the strategic vision of the business, and your goals, with your employees will help them determine where their time and energy is best spent to yield the greatest result.   

The best way to track and develop talent is via a structured performance management process.  That doesn’t mean it has to be time consuming and complicated to be affective. The bottom line is most definitely YES performance management matters! 

Need help developing a performance management process to suit your unique business or breathing life back into the one that you’ve got?  Reach out and learn how HR Factor can help. Until then, here are a few tips to guide you in the right direction. 

1. Keep It Simple

Whatever method you choose, a basic Word document or web-based tool, keep your process simple and achievable.  No doubt that you and your employees are already busy, so having a process that is easy to complete increases the likelihood of participation.  Determine how and what elements of performance are most important to measure for your organization and integrate those into your process.   

2. Communicate

Employees and Managers need to know exactly how your performance management process works and why the organization feels it is important to complete.  What’s in it for them is important to share.  Consider integrating a performance management process timeline into your annual calendar of business activities and share the timeline with employees.  You can even introduce the concept of your PM process during new employee onboarding, in addition to embedding it directly into your Employee Handbook.   

3. Build In SMART Goals

Build in SMART Goals. This is a simple and effective way to easily track employees progress and success.  When the goals are drafted clearly, with solid metrics, employees will know exactly what is expected of them and by when.  Ensure that their goals align with those of the overall organization – together you will all be working toward the same end goal, thus fostering collaboration and engagement. 

4. Provide Feedback Throughout The Year

Even if you decide to only do “formal” performance management meetings once a year, that doesn’t mean that you can’t continue to provide ongoing feedback throughout the year.  In fact, I think you should aim to keep the lines of communication open by giving credit where credit is due and by offering constructive criticism when warranted.  If you do this will make your end of year meeting a breeze and leave no room for surprises.  It also increases the chances of positive performance and goal achievement, since opportunity for small tweaks has happened along the way.   

5. Understand The Individual Needs Of Your Employees

You have probably noticed that your employees have different personalities and working styles.  Be sure to align your communication and feedback to complement their individual working style.  Some employees require frequent touchpoints and support, while others like to work more autonomously.  Spend time where you need to and you should notice the positive effects of this in overall performance. 

6. Create A Complementary Development Plan

The best time to create a meaningful development plan is in conjunction with your review process.  The plan should clearly align with areas highlighted for improvement, while supporting personal and professional growth.  Make sure to get direct input from your employees, understand what is important to them on their career path, and discuss how you might get them there.  This is a great time to chart career growth and talk about next steps – short term and long term.  This conversation will give you some insight into the mindset of your employees and help you understand how their future development can positively impact your organization. 

7. Seek Input From The Employee

This doesn’t have to be a one-way process!  Seeking input from employees along the way will definitely make the process more effective.  Having open and more frequent conversations around performance and expectations will also remove some of the barriers to success before they become serious problems.  Lastly, if your process isn’t working, start to consider how you can change it.  Perhaps your business has evolved and your current system isn’t meeting your needs.  No need to wait to modify your processes, be proactive.  Even small modifications can make a major impact. 

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