Performance Management Basics for Small Businesses

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Performance management can be equally stressful for managers and employees. One of the biggest problems with performance management is that we often see it as being solely about the annual review. This can be a big source of anxiety for employees who stress about the idea of having a whole year of work distilled down to a few pages once each year. Managers also struggle with reviews for this reason and often ask themselves, “How can I sum up my employee’s performance into a few pages and a numerical score?”

In reality, performance management is about much more than an annual piece of paper. A good performance management system includes managing employee performance all year long and addressing issues as they occur.

Provide Ongoing Feedback

The most important piece of performance management is ongoing feedback. Address issues as they arise. For example, if you manage an employee who has been late to work three times in the last two weeks, call them into your office to discuss the tardiness issue right away. Explain the issue, and let the employee know what your expectation is for improvement. Document your conversation with the employee, and follow up to make sure the issue has improved.

Ongoing feedback also includes addressing what the employee is doing right. Whether it is an employee who has improved what used to be a problem area or someone who continues to produce excellent work, positive reinforcement goes a long way to encourage good behaviors.

If you maintain an environment of ongoing feedback, your employees should not be surprised when they receive their annual review. The review then becomes a tool to document what you have been telling your employees all year.

Reevaluate the Role of the Annual Review

Some of us continue to use the traditional annual review simply because it is what has been done for years. Before requiring your managers to write reviews, take a moment to see if the annual review serves a useful function in your organization. In theory, the annual review is a good idea. It is a good way to document employee performance and helps justify promotion and discipline decisions. Unfortunately, managers often make mistakes that render performance appraisals almost useless.

As I mentioned, the foundation of performance management is ongoing feedback, which should be supported by good documentation of that feedback. Your review form should reflect this. If you choose to include an annual review as part of performance management, the review should accurately reflect employee performance and match documentation of the employee’s performance throughout the year.

There are as many ways to create a review template as there are businesses, so work to develop something that fits your organization. With good ongoing feedback and documentation in place, some businesses may find that they do not need an annual review. Others may find that the review should mostly be about setting goals and reviewing the completion of the previous year’s goals.

Train Managers on Performance Management

Having a good performance management system in place means nothing if you have not trained managers on it. The biggest issue I see in this area is written documentation (e.g. reviews, warnings, notes) not matching the employee’s performance. It is difficult to justify the decision to terminate someone for a performance issue when every review and document in the employee’s file is glowing.

Conversations about performance issues can be a challenge, so train managers on doing such things. When meeting with an employee about a performance issue, the manager should give specific examples of the problem, explain the policy or process the employee needs to follow and outline their expectations for improvement.

When it comes to reviews, train your managers on how to complete them. Your training should include how to give feedback, the best ways to address problem areas and how to set goals. Remind managers to use legally compliant language that avoids anything that could be construed as discriminatory. Managers need to know that they cannot mention things like disability accommodations and FMLA leave in the review.

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