Annual Performance Reviews in a Small Business - Are You Crazy!?

Are performance reviews a priority in your business?

I hope it is not a ‘box ticking’ process and you only do these annually?

Do you have a clear structure, a robust process, and opportunities for everyone’s voice to be heard?

Are you reflecting on what’s happened, as well as looking ahead to what’s possible?

Performance reviews are a key to engaged, high-performing employees, but too many small business owners are still stuck in the past with their approach.

I have actually met some business owners who don’t even do annual performance reviews.

Unbelievable!!

If you are stuck in the past, and not prepared to change?

If so, stop reading now and get back to your business with your head in the sand, and get the same results!

Performance management is more than a formalised process of measuring performance.

It’s actually a great opportunity to identify areas for development and increase an individual’s performance and engagement over time.

Great performance management processes are powerful, with research from Gallup showing they can boost productivity by up to 56%.

But poor performance management processes can be demotivating, uninspiring and downright awkward.

Here’s how to future-proof your review process, to make it enjoyable, effective and inclusive.

Performance reviews have had a bad rap in the past.

Typically seen as stressful and a waste of time, everyone involved thinks “what’s the point?”

So start by changing the narrative around performance reviews and show them in a more positive light.

Talk to your team about why performance reviews are valuable for them, and explain that everyone deserves to have these moments to celebrate and reflect on their performance, while also looking ahead to their future goals and career progression.

You should not underestimate the importance of a career pathway and regular conservations regarding progress.

I have seen too many people leave businesses because there was no transparency and communication regarding career opportunities.

They assume there are none, and move on.

With the right structure and approach, performance reviews can become something people look forward to.

I recently read the following article about employee experience, where research shows that businesses who get it right, generate 25% higher profits than those who don’t.

Surely, this means that spending time and money on employee engagement is a solid business strategy.

It’s also proven to boost productivity by up to 20%, especially relevant in the hybrid work environment where productivity can be harder to monitor and maintain.

What I love about performance reviews is they’re an opportunity to work with your team to reflect on their success and explore what the future looks like for them.

It’s a robust and exciting process, a chance to talk about development and career progression.

Set goals and work towards them.

Rather than seeing them as an annual one-off, think of performance reviews as an ongoing conversation throughout the year.

Having a transparent and effective structure in place with monthly meetings, will pay you back in ‘spades’.

There should be no surprises.

By having open and honest conversations throughout the year between managers and team members, nothing coming up in the performance review meeting should be a surprise.

It makes the whole process much more effective and rewarding for everyone involved.

This might mean using weekly or fortnightly one-on-one meetings between managers and team members to address concerns or highlight success as it happens, rather than saving it up for a bullshit annual debrief.

This approach means employees feel more supported around their development and are more engaged in their workplace.

You actually get to know your direct reports a lot better and help in growing your professional relationships.

As the old saying goes, people don’t quit jobs, they quit bosses.

Or, as I have written before, they come for the mission and leave because of the manager.

Here’s a potentially uncomfortable thought: as a small business owner, you are likely the third or second-most important relationship in your employee’s life after their significant other and children.

You are a considerable part of their life.

Because of that, you can’t take that relationship for granted.

It cannot be one-sided.

If it is, you’re likely to end up in a breakup.

That’s why, just like you would with your relationships, you need to spend the time to consider what both sides want out of the relationship.

Performance reviews have a big impact on job satisfaction, and research shows that employees are more than three times engaged when setting their goals and aligning them to business initiatives using the performance review process.

Studies have shown that only 20% of employees strongly agree their performance is managed in a way that actually motivates them to do outstanding work.

That means 80% are being set up to fail….this is staggering!

Probably not surprising given the majority of managers are dissatisfied with the performance management process in their business.

So how can we make performance reviews better and easier?

Here are some ideas:

A good performance review process is one which is clear and standardised.

Everyone should know what is expected of them, understand their role in the process, and have confidence that their performance is being reviewed fairly, rather than it coming down to a manager’s personalised approach to reviews.

Is there anything more demotivating than seeing other people rewarded by the review process, simply because their manager is more generous when it comes to their performance approach?

Good structures create a fair and inclusive approach to performance reviews, providing clear parameters for the process, so that any underlying human biases don’t have an impact on individual reviews.

Giving people autonomy as part of the review process can help with a sense of ownership and engagement.

For example, inviting people to choose which peers and colleagues will provide feedback as part of the process, or to set their own goals.

And give the review process the time it deserves.

I find that reviews are great opportunities to reflect on success and plan for the future.

Performance reviews are an opportunity to build a culture of open and honest feedback, and they shouldn’t happen in isolation.

By rethinking your approach, you’re creating an opportunity to develop, motivate and engage employees, rewarding them for their contributions, and giving them a platform to look forward, not just backwards.

Unfortunately, too many business owners and their managers don’t stop and reflect.

Having a process around performance reviews means you can give your team the structure to do just that, building a more reflective and creative culture within your business, and a more engaged team member experience.

With this approach, you improve attracting and retaining good people, the ‘A-Players’ we talk about.

If you are not serious about this, you are not only failing yourself, but your team members.

From our experience firstly of being direct reports to terrible managers, then being shit managers in our own business - to now being effective managers, we put together the ‘Kick-Ass Manager’ online course, as part of our 90 day ‘Business Transformation Program’.