2. This document is a review of performance
management best practice for the management
team at a small business. The aim is to provide a
complete guide with examples appropriate to
different levels of a company’s growth.
The rationale is that it is a very different
proposition being a micro business of less than
10 employees compared to a more established
business of 50+ staff. These companies are often
grouped together as SMEs but the amount of
time available and management focus required
to do performance management is very different.
This is the second document in a three part
series:
The Basics – for the small business owner;
The Next Level – for the management team at a
business with 20 to 50 employees;
The Ultimate – for the HR management at a
business with 50 employees.
Introduction
3. THE NEXT LEVEL:
Top t ip s f or t he s e nior m anage m e nt t e am
The ease at which tasks and a company
vision can be relayed to staff becomes more
difficult as an organisation grows. Thus when a
company has grown beyond twenty employees,
there is an ever increasing need to redefine the
performance management process. While one-
to-one and appraisal meetings covers the basics
of a micro business, a growing business will need
to introduce cascading company goals and
individual employee objectives to meet those
goals.
The simple truth is that more employees
means that you will have a greater need for a
sound structure to communicate the company’s
mission throughout the organisation. To do this
you may need to refine your processes and
focus all teams on the company’s goals. At the
core of this effort is the need to create a culture
where good performance is acknowledge,
encouraged and incentivised.
4. C as cad ing C om p any Goals
The best way of designing a performance
management system in a company is to start at
the top with the company’s goals. Establish
what you want to achieve over the next 3 to 5
years both financially and also in terms of new
products or markets to be developed in order to
achieve the financial target. From this you will
create a business plan which outlines what steps
need to be taken to achieve your goals, and a
realistic timeline of when the steps need to
happen.
Implementing the plan will require that all
the steps will need to be disseminated down
through the company and divided up into
departments and then individuals’ roles and
responsibilities (i.e. job descriptions). This
ensures your employees’ expected activities are
all aligned with the company goals.
Though this sounds like a major project it
can be quite simple for a smaller company
because much of the process is likely to be
already in place and may just need reviewing to
bring into line with current goals.
However in order for this process to be
effective in the longer term it is important to
review job descriptions regularly to ensure they
stay up to date. As a company evolves, so too
does the requirements you place on your
employees.
5. O b je ct ive Se t t ing
Taking the roles and responsibilities for each
individual – the next step is to break these down
into objectives over a time period such as 6
months or a year. Setting objectives is an
important step to take with each employee and
should be agreed with the person concerned.
An example of good objective setting is in a
structure called the Personal Performance Plan
developed by Si Conroy of Scarlet Monday. This
structure is currently being implemented by
breatheHR. The part relating to objectives is
referred to as “3+1s”. The idea is that each
employee, with the help of their manager,
identifies 3 objectives which are linked to a
strategic goal of the business, and also one
personal development focus for that time. So
the 3 objectives are business related, and the
development goal is for the employee’s personal
progress – it should be something of personal
interest that brings greater maturity to the
business in the longer term. Each of these 3+1s
should run for around 3 to 4 months depending
on business needs. So the 3 objectives are
business related, and the development goal is for
the employee’s personal progress – it should be
something of personal interest that brings
greater maturity to the business in the longer
term. Each of these 3+1s should run for around 3
to 4 months depending on business needs.
6. T he P ay Ris e s
Being able to offer pay rises to employees is
an important part of recognition of the
employee’s development and the company’s
growth. It is considered a hygiene factor – if you
don’t do it people will lose motivation over time,
but don’t rely on it as the sole method of
achieving employee satisfaction as numerous
research projects have shown the positive
benefit of a pay rise is short lived and other
factors have a much greater influence on staff
satisfaction.
But… don’t confuse the pay rise with the
appraisal. If you give pay rises at the same time
as an appraisal the employee will be so
concentrated on the pay rise that they may not
engage effectively in the appraisal. It also means
that if something unexpected comes up in the
appraisal you may want to review the pay
amount. So it is sensible to do appraisals for
employees when needed and separate it from
pay rises which can happen once a year for
everyone at the same time.
This gives a chance to budget for the pay rises as
part of an annual forecast. Keep it as a
completely separate process but obviously the
quality of performance as assessed in the
appraisal feeds into the decision about how much
of a pay rise they will get.
7. Bonus e s and C om m is s ions
There is a lot of media discussion about
bonuses especially relating to bankers but it is
very important to get the right structure in place
for each job role. All bonuses and commission
schemes are likely to skew the way staff behave
so think carefully about the consequences of a
scheme before introducing it. A couple of
important principles are:
1. Set a time limit for review of the system
you introduce up-front. This gives you a
chance to change it if it is causing bad side
effects without upsetting the staff.
2. Treat it like another part of their contract.
Write down the details and share it with
the staff members. Include Terms and
Conditions such as “The Sales Director has
final say over what sales are due for
commission”, or “no commissions are
payable after employment is terminated”.
It is normally sensible to confine bonuses to
those who exceed expectations. In other words,
no bonus should be paid for any employee just
doing their job, but if they go above and beyond
expectations then that should be rewarded for
their extra efforts. So an objectives system such
as the “3+1s” sets the standard of expectation
and if an employee achieves all these to
satisfaction they cross a threshold into a bonus
scheme. Then it is for the managers to decide
the size of the bonus pot and percentage any
member of staff could receive.
8. O t he r I nce nt ive s
It is often forgotten that there are many
ways of incentivising a team and often non-
monetary incentives are more effective than
bonuses and pay rises. Each company is unique
in what will work but it is worth thinking about
some examples.
If you set regular company goals you can
also define a reward for achieving them. For
example “achieve sales of £500k this quarter and
the company will pay for a meal at a local
gourmet restaurant”. Or perhaps for an
individual achieving a goal you could give them
and their partner a dinner for two voucher.
Small achievements can be celebrated
spontaneously with doughnuts, cakes or even
balloons or banners etc.
Company/team events often go down well
and engender a good team atmosphere. A great
idea is to find someone with a particular interest
and give everyone a chance to try it out. For
example breatheHR has taken employees sailing
for a weekend and also put on a day’s kayaking
adventure.
Many people loveto try something new, and
so long as it is done in a light hearted way it can
create a great team spirit.
