A performance management system that really works - An article for small business owners

Every year, there is at least one (that is an understatement!!!) employee asking a justification of why his/her increment is “less” than fellow team members this year. Or, there is some employee feeling that they have done a lot of work throughout the year and did not get a good increment to appreciate the hard work.

Choose to address it or ignore it, every single year that goes back has a huge impact on the employee motivation and perceived job satisfaction of the team. It also has a tremendous impact on the overall mood of the employees which not only affects the team mood, but it also affects the way work is done in the organization. Unfortunately, for behavioral effects to show tangible impact, it takes a lot of time often by which it is too late to mend the damage. The entire exercise of *Performance Appraisal* becomes more of a judgmental journey and a struggle of proving whether the person has really worked or not. Obviously, the employees feel that they have worked a “lot” but when asked about what exactly is the output of the tasks done, there is not much which can be put on paper?

It's easier for large corporations with the availability of skilled resources and the ability to hire consultants to solve complex issues, but small business owners often find themselves either ignorant or at a loss of solutions to deal with these performance issues in their teams.

So, does this mean that employees in small businesses don't perform well? If that was the case, would the organization be functioning?

Let’s take a look at what employees have to say. Often heard terms in performance appraisal are –“Sir, I have done everything I was told to do”, “I have done everything that is given in my job description”, “I have done a lot of cost saving”, “I did everything on my own, my manager never told me what is to be done”.

These are just a few statements and variations of these statements are quite common in appraisal meetings. Then what or who really is the culprit here? Looking at it as a third party often shows us the lacuna created by the lack of scientifically measurable parameters for work done by each function. It's not as complicated as the name sounds though.

Before we deal with how to solve this issue, it is important to understand the “WHY” of solving this issue. Let’s consider a few points –

1. If a task is not measurable, it is absolutely impossible to determine the quality of performance in the task. E.g – I did a good job – what does a “good” job mean?

2. How much is the task achieved? E.g – “I worked very hard” or “I did so much for my organization” – Exactly how much is the result achieved – how do we measure it?

3. If we do not measure the work being done in the organization, how do we measure whether our organizational objectives and ultimately our business goals are being achieved.

Overall, a lot of us know this theory but find ourselves lost when actually trying to implement a coordinated effort in performance management. So, let us try to understand how we can go about it in a step-based approach.

Step 1: Understand the key people involved in the design of the process.

Step 2: Check if the organization has a clearly written down vision, mission, and objectives (which are to be achieved over the next 3 to 5 years divided into per year targets)

Step 3: Check if these objectives and the vision & mission is clearly communicated to and understood by each and every member of the organization. (This includes all people working in the organization irrespective of the function that they are working in – housekeeping, security also to be included)

This step in itself requires a lot of consistent efforts to be put in as every person is to be educated in business and vernacular language, through planned training programs and induction programs.

The training programs taken for percolation of vision and mission have to not only cover “WHAT” is the vision and mission but also the “WHY” and “HOW”.

It has to be done in a manner where a lot of examples related to how even a housekeeping staff is continuously contributing to the fulfillment of the vision of the organization.

Step 4: Have the strategic objectives for the year been formulated in a SMART way? If the organization has a QMS system; are the quality objectives formulated in the SMART way? Are the objectives measurable and have we defined how to measure these objectives?

Step 5: Once measurable strategic objectives are defined; these have to be further divided into departmental objectives for each department which exists in the organization structure.

Step 6: All the departmental objectives have to be divided into individual KPIs (Key Performance Indicators) of teams based on their role in their department. These KPIs are then put into the KPI scorecard for the sake of reviewing every month.

Step 7: The organization-level objectives, departmental objectives, and the KPIs are then to be linked in a single dashboard thus giving us a dashboard view of organizational performance. This dashboard helps the owners and department heads to keep a consistent review of the achievement of KPIs and prevents surprises in mid-year or end of the year reviews.

Seems a huge task, doesn’t it? It definitely is a huge task but it is not an unachievable task. This is where the HR head or team has to play a very strong role in not only understanding the functions of the business but also in breaking down the strategic objectives based on the role of each department. An important point here to understand is that the HR of the organization has to be aware of the business implications of each function which enables them to further. My next article deals with the process to integrate KPIs in the performance management system of small businesses and align these KPIs to the business plan.