Performance management techniques for small businesses

3 performance management techniques to boost your small business

HR Consultant Kate Marchant of Running HR Ltd advises on the best performance management techniques for small businesses, including how to develop an effective Performance Management Framework.

Firstly, what exactly is Performance Management?

There is no standard definition of Performance Management; however, it is about creating a culture and environment which encourages the continuous improvement of business processes. It also consists of activities that recognise the contribution of individual skills and behaviour and how these can be best utilised to meet objectives and support a company’s ethos, vision, and values.

Why is Performance Management important for small businesses?

Having effective Performance Management techniques can increase employee engagement and commitment levels, which in turn can really boost business performance with all employees having clarity on their role, the performance required of them, the contribution they make, and the ways in which they can develop. Motivated employees will go the extra mile and ultimately boost company performance.

Performance Management Techniques

managing-poor-performance

Performance Management techniques usually include activities to establish objectives, improve performance, and hold individuals to account for their performance. Effective Performance Management relies on formal and informal processes and one of the key enablers is the ability to give constructive and meaningful feedback in both settings. It pulls together many of the principles that underpin good people management, such as learning and development, performance measurement, and organisational development.

Having a Performance Management Framework

Many small businesses do not have a Performance Management Framework (PMF) in place as perhaps they view it as only necessary for the big corporates and that it is a complex, time consuming process – it really isn’t! All businesses, regardless of size, can benefit from having a Performance Management strategy and framework in place and it needn’t be complex. In fact, it’s probably best to start simple and build from there!

What does a PMF look like?

As a starting point, a typical PMF will have the following components:

  1. Performance Planning – where goals and objectives are established.
  2. Performance Coaching – providing regular feedback on performance throughout the year and enabling employees to improve their own performance when required.
  3. Performance Evaluation – annual documented performance feedback usually known as the Annual Appraisal.

Each of the above components is essential to the successful accomplishment of goals and objectives and below each component is considered in a bit more detail:

1. Performance planning

Performance planning

Ensure goals are clear, well defined, and mutually agreed. Many people use the SMART acronym when it comes to setting goals; however, the SMART(ER) model may be more relevant and includes the following aspects:

  • Specific – specific results to be achieved
  • Measurable – how will they be measured: time, cost, quality, value add
  • Attainable – stretching but attainable goals
  • Relevant – keep them aligned to strategy
  • Timebound – key milestones, review dates, sign off dates and completion
  • Evaluate – keep checking that the goals are still relevant
  • Readjust – adjust the goals if necessary

2. Performance coaching

Performance coaching

In order for the SMARTER goals to be effective, time must be set aside for regular feedback sessions – this allows for ongoing dialogue around expectations and progress. In the event that issues become apparent, it is essential to address at the earliest opportunity and allow time for improvement and review. If left unchecked, issues can snowball and become difficult to deal with. Feedback needs to be genuine, evidence based, and constructive - all employees deserve feedback on their performance and guidance around how they might improve.

Related article: How to manage poor performance

There is a skill to providing feedback and any PMF should include some structure around how feedback is to be given. Again, it needn’t be complex but those leading feedback sessions need to have an understanding and appreciation of what works best and there needs to be consistency in its delivery within any business.

A typical model for providing feedback will have several aspects:

  • Trust – establish an open and trusting relationship with the employee. This baseline of trust will set the tone for future conversations and will help both parties interact and deliver feedback
  • Positives and negatives – balance the conversation with examples of what went well and areas that could be improved upon. Get insight from the employee on their perspective of how things went
  • Make observations – this can take the ‘heat’ away and be less personal e.g. ‘this is what I observed about the impact of X on Y’
  • Specific – always use examples and steer away from generalisations such as ‘your performance has deteriorated in the last few months’
  • In person – ideally feedback should be given on a face-to-face basis, or at least verbally, and not via email, which can end up in long protracted exchanges.
  • Timely – feedback should always be provided at the earliest opportunity and not left to a time when perhaps memories have faded

3. Performance evaluation

Performance evaluation

While it’s true that effective Performance Management is an ongoing and fluid process, the annual appraisal offers a more formal forum where employees can discuss their past performance and future development needs and opportunities with their manager.

Over recent years, the annual appraisal has been subject to some scrutiny, with many employers opting for more frequent and informal conversations around performance. However, the annual review offers employees the assurance that they will be able to have at least one documented conversation that focuses on their performance and future aspirations.

A typical performance appraisal will involve:

  • Preparation – this is absolutely key and needs to be carried out by both parties*
  • A meeting – between the employee and line manager to discuss the employee’s performance. This usually consists of a reflect and review on the past year, what went well, anything that didn’t go to plan, any improvements to be made, a review of objectives, setting new ones, discussion around the employee’s aspirations, and any development required to achieve the aspirations
  • Senior level feedback – a section to include feedback from the line manager’s manager. This is not essential but provides an opportunity for performance and contribution to be recognised by a more senior level

*An appraisal form is normally completed as part of this process with the relevant input from both parties. Preparation can involve both parties completing their relevant sections as a basis for the discussion and then agreeing a final version after the discussion.

Appraisals sometimes get a bad press as managers often see them as a form filling, tick boxing exercise, while employees can lose faith in the process when feedback is meaningless, accomplishments not recognised, and any learning and development identified falls into a black hole.

An effective appraisal process is all about the conversations and not about the form filling! The form merely facilitates the discussion and should be seen as a working document that can be reviewed regularly to take stock of objectives, establish whether they are still relevant, and to track the progress and effectiveness of any development identified.

Tracking and documenting performance

Discussions around performance are dynamic and fluid; it is therefore important to ensure they are well documented and up to date. There are many systems out there to facilitate this process – HR system providers like myhrtoolkit feature performance management tools that enable businesses to book in performance meeting sequences, upload appraisal documents and add ad-hoc meetings.

Systems such as these really help managers and their employees keep track of where they are at – with all documents kept in one place so are easy to retrieve.

Picture of Kate Marchant

Written by Kate Marchant

Kate Marchant is an experienced HR professional and CIPD Associate Member who offers straight talking HR solutions for SMEs with friendly and jargon free advice through her consultancy Running HR Ltd.

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