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David Howe at the offices of Noseworthy Chapman Chartered Accountants on Topsail Road in St. John's.Paul Daly

With a small work force of about 50, Noseworthy Chapman CA, an accounting firm based in St. John's, has been operating for the past three decades without a human resources department.

Until two years ago, the company did not have a formal system for reviewing employees' work performances.

"Nobody had the time to do it properly," recalls managing partner David Howe. "And we're not large enough to have an HR department or a full-time HR specialist."

Nevertheless, the company decided in 2009 it needed to make time for formal performance reviews, a process where one of the firm's partners sits down with an employee for a frank appraisal of the worker's on-the-job performance.

"We should have done it sooner," Mr. Howe says. "But we're challenged with the day-to-day demands of a very busy business, and not having the HR expertise also presented a barrier."

No time. No resources. No performance reviews.

It's a state of affairs familiar to many small businesses – and even to a number of large companies, HR experts say.

As they work to grow their business, small companies often push aside formal employee appraisals. In many cases, they do this because they're operating with a lean staff and don't have anyone trained to do performance reviews.

In other cases, entrepreneurs may feel the reviews are not necessary.

"For a majority of small businesses, a lack of time and resources is probably the key reason for not doing a performance review," says Michael Haid, senior vice-president of talent management at Right Management, a Philadelphia-based HR management consulting firm with offices around the world.

"But there are also those who think that they're already spending enough time working closely with employees and giving them feedback on a daily basis, so why bother with performance reviews?"

However, small businesses that ignore reviews run the risk of losing good employees, Mr. Haid warns.

They're also missing out on opportunities to develop workers who can really contribute to the company's growth.

"Performance reviews are important for three reasons," Mr. Haid says.

"By having a more formalized process where you can be very specific and explicit about goals, you can drive better employee performance, increase employees' accountability for their work, and help them feel part of the business and its goals."

Cherry Cusipag, HR manager for Kitchen Stuff Plus Inc., a Toronto-based housewares and home décor retailer, says that some small business owners may be avoiding performance reviews because they think it's a complicated process.

"There's this perception that performance management systems have to be large and elaborate and led by HR departments that only big companies can afford," she says. "But in fact, you don't need a fancy-schmancy system with numbers and graphs to do performance reviews."

For the enterprise with limited resources, Ms. Cusipag suggests a simple form with a checklist of an employee's responsibilities and performance measures, such as dependability, communication skills and the ability to work as part of a team.

It's also a good idea to prepare a set of questions that can help shed light on how employees feel about their job and the company, she says.

Companies don't even need to build these forms from scratch, she notes.

"Just go online to HR websites and you'll find templates you can download, many of them for free," she advises. "There are also all kinds of pamphlets and other training material that can give you guidance on how to conduct a performance review."

To create its performance review system, Noseworthy Chapman drew on the experience of other small accounting firms through its membership in DFK Canada Inc., an Edmonton-based national association of independent accounting firms.

"The association has an HR committee where members can talk about their HR challenges and share best practices, and our firm has a representative on that committee," Mr. Howe says.

"The performance review system we came up with was homegrown but, in developing it, we looked at what other firms were doing and borrowed some of those best practices."

In many companies, review timing is usually based on an employee's hiring date. Typically, the first review takes place three months after an employee's first day at work, and then repeats every six or 12 months.

At Noseworthy Chapman, however, all reviews are done in November and December – the only time of the year when the company isn't working to full capacity.

"Because we don't have an HR department, our partners are the ones who do the reviews, so we have to do them when the partners aren't too tied up with billable client work," Mr. Howe says.

The intimacy of a small workplace can make for some awkwardness in the aftermath of a negative performance review. That's why it's important to make the discussion constructive and more about coaching employees to do better, Ms. Cusipag advises.

She also cautions small businesses against adopting 360 interviews, which are done with input from fellow workers and even subordinates.

Mr. Haid agrees. "In a 360, you typically elect the people who provide input, so when a review comes back negative, you have a sense of who those folks are, and in a small business setting, where you see everyone every day, it could add a lot of tension," he says.

"Conversely, you can be so close in a small business that you conspire to give each other glowing reviews – that's been known to happen."

At the Canadian offices of Cohn & Wolfe, a global PR firm, 360 reviews are the norm but the company is careful not to share feedback verbatim, says managing partner David Gordon.

Instead, all comments are distilled into a single report, which is discussed with the employee during the review.

The firm, which has about 30 employees in Toronto and another 20 in Montreal and Calgary, pairs up every employee with a "career management champion" – typically someone two levels higher who serves as a mentor and career manager.

These career management champions – or CMCs for short – are tasked with the performance reviews of the people assigned to them.

"CMCs don't directly supervise the people assigned to them but, rather, are there to help build their career," Mr. Gordon says. "From a performance review perspective, having the CMC do the review just reinforces our objective for the review, which is to develop people, not to take them to task."

Various HR experts regularly cite higher employee engagement, productivity and loyalty as some of the benefits of regular performance reviews. Mr. Howe can't say for sure if his company is reaping such benefits because of its decision to implement a performance review system, but he does like the fact that the reviews give his firm's partners a chance to have uninterrupted, one-on-one talks with employees. And the employees get to talk back and give their review of the firm.

"It removes a lot of uncertainty amongst employees about how they are performing at work," Mr. Howe says. "And it really is a good way to get to know people better and build stronger relationships."

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