Critical Facts to Conduct Employee Performance Reviews

Employee performance reviews get a bad rap. They can be time-consuming, nerve-wracking and simply ineffective at truly measuring an employee’s performance and contribution to a company. But that might have more to do with how they’re usually conducted — once a year, crammed in before the holidays and using one-size-fits-all forms to evaluate everyone from warehouse workers to marketing managers.

The truth is that employee performance reviews can play an important role in helping you lead and cultivate a happier, more motivated staff. Here are five reasons why your small business should have a performance review process.

1. To set new goals:

It’s no secret that many small business employees stay busier than their large company counterparts — wearing many hats is often one of the draws of working for a small business. But often those added responsibilities don’t leave time for big-picture planning. Having a formal performance review process in place will allow you to take the time with each employee to focus on growth. How do they want to grow as an employee in the next year? And how can they contribute to the growth of the company?

2. To assess achievement of those goals:

A common complaint about employee performance reviews is the lack of follow-through. It’s one thing to set goals; it’s another thing to achieve them. Regular performance reviews throughout the year can help you and your employees stay on track with achieving whatever performance goals are set. And if your review process finds that you and your employees aren’t working toward those goals, you’re also one step closer to finding out why.

3. To address problems:

It’s a natural tendency to want to avoid confrontation, but if an employee isn’t performing well, it’s in your company’s best interest to address the problems. Having a regular review process in place can provide a structured and confidential way of addressing problems with performance.

4. To acknowledge a job well done:

As a small business owner, it can be easy to forget to praise individual employees for doing a good job. You’re focused on other aspects of running your business and you expect employees to do a good job. But, that praise is important to them, and receiving strong marks on a performance review can motivate them to continue doing great work.

5. To gather employee feedback:

An effective performance review isn’t one-sided. It should be an honest, two-way conversation that provides plenty of opportunities for the employee to reflect on his own performance, as well as that of his boss and the company as a whole.

Show Your Care To Your Employee

It can be really easy to get caught up in the day-to-day tasks of running your small business, but remember to take a step back and recognize the employees helping you make your dream a reality. While “Employee Appreciation Day” is technically the first Friday in March, there’s no wrong time to show support and reward your team. Here are a few tips to get you started.

Pick a Theme
A theme lets everyone know you are ready to have fun. If your team loves music, you can host a “Rock On” day with musical video games set up around the office. Do you run a team of coffee lovers? Perhaps a celebration with personalized coffee mugs and fresh ground beans are in order. Whatever theme you pick, make sure it represents your full team.

Change the Dress Code
If you typically dress up in the office, use this as a chance to let your employees dress down (within reason). Send out an email alerting everyone of the big day and any new rules around your one-day dress code. Keep the guidelines light — this is supposed to be a fun day, right? — and related to the theme like “Casual & Jeans welcome!”

Plan Lunch
You’d be surprised at just how far a free lunch can go in the minds of your staff. Have a favorite local restaurant bring the food to you with a full catered lunch. If your team is small enough, you can all head out for lunch, too. (Who doesn’t like to get out of the office from time to time?) You can also open up the food choices to a vote!

Bring Some Fun
Get people away from their computer monitors and get them involved in some team-building fun. You can try some ice-breakers like “What was your dream job as a child” or “Share one thing few people know about you.” Trivia games are also fun, or you can plan an office-related scavenger hunt. If you have an outdoor space, think three-legged or sack races, water-balloon toss and volleyball.

Give a Gift
Depending on the size of your team and your overall event budget, you might be able to swing a nice token of appreciation, like a leather journal or chocolates. For larger teams, set up a candy station with everyone’s favorite. Then, give out plastic bags for everyone to fill up and take home. Or reward everyone with an early leave for the day.

Say “Thank You”

Take the time to tell your team how much you appreciate their dedication and hard work. You can give a speech during lunch or hand out personalized handwritten “thank you” notes. You can also present personalized awards to each member of the team like the “Born Leader Award” or “Team Spirit Award.” However you do it, make sure it’s genuine and comes from the heart.

Secrets To Hire Great Employees

These are the most important factors you should consider to hire the best new employees:

1. Competent: This is still the first factor to consider. Does the potential employee have the necessary skills, experiences and education to successfully complete the tasks you need performed?

2. Capable: Will this person complete not only the easy tasks but will he or she also find ways to deliver on the functions that require more effort and creativity? For me, being capable means the employee has potential for growth and the ability and willingness to take on more responsibility.

3. Compatible: Can this person get along with colleagues, and more importantly, can he or she get along with existing and potential clients and partners? A critical component to also remember is the person’s willingness and ability to be harmonious with you, his or her boss. If the new employee can’t, there will be problems.

4. Commitment: Is the candidate serious about working for the long term? Or is he or she just passing through, always looking for something better? A history of past jobs and time spent at each provides clear insight on the matter.

5. Character: Does the person have values that align with yours? Are they honest; do they tell the truth and keep promises? Are they above reproach? Are they selfless and a team player?

6. Culture: Every business has a culture or a way that people behave and interact with each other. Culture is based on certain values, expectations, policies and procedures that influence the behavior of a leader and employees. Workers who don’t reflect a company’s culture tend to be disruptive and difficult.

7. Compensation: As the employer, be sure the person hired agrees to a market-based compensation package and is satisfied with what is offered. If not, an employee may feel unappreciated and thereby under perform. Be careful about granting stock in the company; if not handled well, it will create future challenges.

Best Ways To Lose Your Best Employee

You know who your star employee is. They are the one whom you can always count on to stay late to help you meet a deadline or pick up a crucial item you need for your presentation at the last minute.

The truth is, without your best employees, you’d be screwed. So you’d better be doing everything you can to ensure they are happy and feel fulfilled working at your company — or else you might lose them.

The Cost of Your Best People

A CAP study estimates it can cost up to 20 percent of a mid-range employee’s annual salary to replace that employee.

For example, for an employee making $40,000, the cost to replace that employee would be $8,000. That’s just for a mid-range employee. For highly educated executive positions making $100,000 annually, that number jumps to 213% of the salary. That’s $213,000 lost if your best executive quits.

Even more startling, it takes at least a year or longer for a new employee to reach full productivity, according to a study by the 2012 Allied Workforce Mobility Survey.

With these numbers, it seems no company can afford to lose its best talent.

Avoid these simple mistakes so you don’t lose your best talent:

1. No Recognition

Employee recognition has been proven to improve employee morale and reduce turnover.

Yet, only 12% of organizations provide employee recognition training for managers, according to World At Work’s 2013 Trends In Recognition survey.

Organizations offer an average of 3.9 recognition programs, but the objective of these programs seems to be skewed in a direction that isn’t working. The majority of respondents in the survey (77%) said the objective of their recognition program was to recognize years of service. Further down on the priorities list lies “increase morale” and “increase retention or decrease turnover.”

Your best employees don’t want to know how much you appreciate them annually. They want to know on a daily or even weekly basis. Give them a hand-written “thank you” note or a nice eCard. Recognize them publicly in front of the whole team, too. Your employee will feel more valued for his or her contributions and continue to produce great work.

2. No Rewards

Verbal thank yous are effective, but small rewards can go a long way. You might choose to reward the whole team with a trip to a nearby theme park, or a company dinner at a nice restaurant. Whenever possible, also reward employees individually with a small treats like movie tickets, memberships that provide discounts, or a free service like dry cleaning.

3. Dishonesty

Being dishonest with your employees might be one of the fastest ways to get rid of your best employees.

Generally, your best employees are confident, skilled individuals who possess enough self-respect to place themselves in relationships with trust and respect. If those things are not present in their current workplace, they won’t stick around long. They’ll set off to find a team of people who treat them right.

4. Lack of Training

A Deloitte study found 75% of employees believe offering employee development programs incorporating training, education, and mentorship help achieve a sense of important purpose at a company.

If you aren’t providing the training new hires need to adjust and current employees need to grow, it will cause more stress on your best employees who carry the majority of the weight. Take the time to access growth opportunities among your current employees. Pair employees with mentors to help them learn new skills. Keep an eye out for free or low-cost local seminars or webinars your employees can attend to learn valuable skills they can apply to your company.

5. No Visible Career Path

If your employees can’t see the light at the end of the tunnel, they might feel stuck. Research by Catalyst cites “individual’s perception of limited opportunities” as a top reason for an employee leaving a company. Usually ambitious, your best employees might have big career goals they’re hoping their star performance at your company will help them reach.

Ask employees what their goals are and think of what you might do to help them take a step forward. Maybe they want to be an entrepreneur someday and you know a thing or two about running a business. Teach them as much as you can and keep an eye out for opportunities for advancement.

6. Ignoring Feedback

When your star employees notice something’s wrong and say something, listen. Don’t just laugh it off or invalidate their concerns. There’s a reason why they are your best employees. They might have a better idea of what’s going on in your organization than you because they work more closely with the other employees.

When they present a concern, sit down and talk with them about it. Find out why they are concerned and any actions they suggest. Tell your employees you would like to work with them to find a solution, and if you cannot make a requested change, fully explain why.

7. Micromanagement

New research from the University of Pennsylvania found that highly educated employees work more when given autonomy over their schedules.

You might already notice your best employees work well under minimal supervision, so there’s no need to interfere. Of course, when you’ve got a deadline to meet or an important presentation to prepare for, you might be looking over the shoulder of employees more often than usual. Checking in occasionally is OK; it ensures everyone’s on the same page. But if you ever get the urge to crack the whip, take a step back and practice some mindfulness.

There’s no doubt you can’t afford to lose your best employees, especially when fully engaged, skilled employees are hard to come by in today’s workforce. Check with your star employees regularly to ensure they are happy and ask if they have any suggestions for improvement within their roles or the organization. They’ll be happy you’re willing to involve them in the direction of the company and feel more committed.