All too often, the way employee performance is managed in small and medium-sized businesses leaves a lot to be desired. Either, it’s not done at all or it’s done poorly and leaves both parties unsatisfied.
Mention the topic to many people and their eyes either glaze over or roll upwards, acknowledges BDC Consultant Irene Lis, who specializes in human resources management.
“Performance management does improve productivity and profits,” Lis says. “But, unfortunately, many organizations don’t understand the process and it’s often just a paper-shuffling exercise with little value.”
Instead, performance management needs to be a continuous and regular face-to-face dialogue that strengthens employee-manager relationships and drives the company forward. The benefits to the business and to employees are significant.
“It shouldn’t be something painful you do once a year, like going to the dentist,” Lis says.
She says the key to successful performance management comes down to two words: no surprises. Employees need to know it’s a win-win situation, not “gotcha!”
Used correctly, performance management is a powerful tool for engaging employees by linking their performance to organizational objectives so that ultimately everyone is focused on the success of the business.
In addition, a well executed performance management process will identify an organization's up and coming talent, clarify training needs, shape succession plans and help make objective compensation and internal staffing decisions, Lis says.
When setting employee objectives, Lis and other HR experts advise organizations to use SMART guidelines:
- S: Specific Define what is to be done, where, with whom and how.
- M: Measurable What outcomes are expected such as quantity, quality, cost, time, etc?
- A: Achievable Objectives should be realistic according to the skills and resources available to employees.
- R: Relevant Objectives need to be relevant to the individual’s specific job, department and the business's objectives.
- T: Time bound There should be clear time frames, milestones and deadlines.
“SMART means spelling out what, how and when something will be done and how you measure it,” Lis says. “Specifically, this could mean goals such as driving revenue, controlling costs, improving quality or giving better customer service.”
At first glance, SMART may seem like common sense for a business, but Lis has frequently encountered initial resistance to the process from employers who misunderstand performance management or have experienced botched attempts.
“But employers who have experienced the power and benefits of a proper performance management process are converts for life and can’t imagine business without this valuable process,” she says.
She advises companies to “walk before you run” if they’re introducing performance management for the first time.
“Start by looking at individual job descriptions and base SMART objectives on them in employee assessments. Set up regular sessions with individual employees and involve them in setting the objectives. For example: customer service complaints will be answered within 24 hours.”
Getting comfortable with the process at its most basic level makes it easier to graduate to the most powerful level where performance management drives the accomplishment of the business's objectives, she says.
Many companies use 5 grades in their evaluations: 1. Unsatisfactory performance; 2. Improvement needed; 3. Meets expectations; 4. Exceeds expectations; 5. Exceptional performance.
“People are generally hired to be a three,” Lis says. “You come in, you do your job, life’s good. Above three provides positive reinforcement to an employee who’s performed extra well, while below three is an alert that they need improvement.”
In all cases, Lis stresses that employees also need to take ownership of the performance management process.
“If something good is happening or if it’s going off the rails, people should tell their manager immediately, rather than waiting for next month’s meeting, or worse, waiting until the end of the year,” she says. “Regular communication between employees and managers is critical.”
Content in this section is provided in partnership with the Business Development Bank of Canada. BDC provides entrepreneurs with financing, venture capital and consulting services. To find out more go to BDC.ca.