Many small business owners might scoff at the idea of employee objectives and performance reviews. With a small staff, it’s easy to keep tabs on who is doing what and how they’re performing. Who needs to talk about performance? Just get the job done!
When someone mentions the phrase “performance review” the response is often a groan or a rolling of the eyes. In some companies, employees and managers cringe and do everything they can to avoid the annual performance review.
If this sounds like your small business, you’re not alone. And, if you’re looking for a way to more productively handle performance reviews – and performance in general – you’re part of the majority.
“Our research shows that more than 70% of all organizations dislike the process they have, and I have yet to talk with an employee or manager who likes it at all—one client calls it a ‘soul-crushing’ exercise,” writes Josh Bersin, in his Are Performance Appraisals Doomed? article.
Some HR experts argue that traditional ways of managing employee performance—for example, annual reviews with rating scales based on a bell curve—are outdated and not as useful in today’s ever-changing work environment.
“Once-a-year goals are too ‘batched’ for a real-time world, and conversations about year-end ratings are generally less valuable than conversations conducted in the moment about actual performance,” writes Marcus Buckingham in Reinventing Performance Management.
Others contend that these methods are necessary for accountability and are a critical piece when it comes to determining compensation.
The bottom line: when reviews are good, they’re helpful, constructive and inspire great work. But when they’re bad, they can negatively impact culture, employee engagement, and even an organization’s profitability.
There’s not one way to make employee reviews successful, but smaller companies have an advantage: flexibility. Being small and agile provides a competitive edge when it comes to creating performance review processes that contribute to employee and organizational success.
If you want to develop good performers focus on “collaboration, professional development, coaching and empowering people to do great things,” says HR, leadership and talent management analyst, Josh Bersin, in Forbes.
Successful performance review strategies leverage systems that enable frequent, developmental, coaching-based feedback. These solutions focus not only on celebrating results, but also providing constructive feedback—and coaching— that improves performance.
Why performance reviews still exist
Although the traditional approach to performance reviews may elicit groans from employees and managers, there’s no denying that employee evaluations are one of the most fundamental processes in successfully managing a business.
Companies rely on performance reviews to:
- facilitate communication between employees and managers.
- identify employee strengths and weaknesses.
- set goals and objectives.
- make compensation decisions.
- ensure the right people are in the right jobs.
A consistent performance review process across the company creates a sense of fairness and significantly increases job satisfaction. The information delivered in performance reviews helps to establish accountability, productivity, and communication throughout the organization.
Performance reviews also assist aid managers in maintaining a healthy work environment through efficient, consistent processes that boost team performance. When it’s managed effectively, the process improves employees’ job satisfaction by setting clear expectations and identifying plans for career development that positively contribute to their individual performance.
Aside from the organizational benefits, contrary to what people might believe: most employees want a performance review.
“Early on we never did performance reviews,” says David Batchelor President & Co-Founder of DialMyCalls.com.
“To be honest, it was just something that never crossed our minds. As we grew and added more employees, we sent a survey out and found that getting an employee review was something they wanted. Now we do annual one-on-one sit downs with our team members and go over the previous year, mentioning all the positive things and things where there is potential to improve on for each person. We’ve found everyone extremely receptive to them and even looking forward to them each year.”
The need and desire for feedback is a core value—and need—for today’s workforce. Regardless of whether employees work in a large corporate or for a small business, feedback is a way to motivate and encourage their performance.
“Employee performance reviews are incredibly important, especially to engage younger employees and keep them motivated. Being the workforce generation that values Facebook, Instagram, and Twitter, most millennials and even now Gen X & Gen Yers, are seeking constant feedback, both from peers and superiors. This need for feedback can be a great platform for goal setting and making the most of your current talent base,” says Christy Hopkins, Human Resources Consultant at Fit Small Business.
Perhaps the ultimate purpose—and positive outcome—of performance reviews is to assist a small business in retaining the talent they hire. Clear performance objectives, positive, constructive feedback, and a desire to communicate openly and honestly about performance encourages the employees you hire to stay with your organization. If you don’t conduct performance reviews, you risk losing one of your most important investments.
“Some companies don’t even bother assessing the performance, which is a mortal sin when it comes to improving retention rates…nothing is worse than hiring and subsequently ignoring your people. One of the primary goals of the performance review is to enhance the employee experience and lower turnover rates,” says Samuel Madani, Managing Director of Sam the HR Guy.