SCORE

You started your small business because you wanted to be your own boss - not necessarily because you wanted to be a manager. But here you are, growing your team with some really promising new hires. In fact, things are going so smoothly, so quickly that you barely have time to stop and review your own goals, let alone worry about someone else’s. But if you don’t set up your plan for performance management now, you are going to lose those new teammates sooner or later.

While performance management is sometimes more of an art than a science, there is still a formula behind how you can handle performance appraisals and talent management.

Today, SCORE offers you an outline on how to overcome the dread of performance management and make sure you take care of your start-up’s great resources: human resources.

How you pay says a lot about who you are

“A good compensation plan is not only fair, but also supports the culture of the organization,” wrote John Welch, ex-CEO General Electric, in his book Winning.

Paying a fair market value and paying it on time is the bare minimum for retaining employees. But you have to take it further to gain long-term commitment and to attract new talent. In Welch’s vast experience coaching organizations, he has found that only around ten percent of U.S. employees have had “an honest, straight-between-the-eyes-feedback session” in the last year.

While he admits that there is no perfect formula for performance management, Welch offers four ways to ensure these feedback sessions are at least productive and fair:

1. Performance management should be clear and simple. No long, drawn-out forms that have managers putting it off til the last minute.
2. Performance management must be quantitative and qualitative. Your company has to be more than numbers - ask, how is employee behavior supporting our values?
3. He says performance management should be at least once or twice a year. We say at least every three months.
4. A good evaluation system should include a professional development component.

As long as each performance evaluation contains these four pillars of integrity, you have some room to experiment with different styles like one-on-one coaching, peer reviews, and written feedback. But your performance appraisal system itself much be under constant scrutiny. Welch offers you questions to re-evaluate your system often:

1. Does the evaluation system really measure company values or just financial results?
2. Does everyone see your appraisal system as valuable? Or is it just a waste of time?
3. By the end of the evaluation, do people really learn what they can do to improve?

Annual performance appraisals are about nine months too late

“After believing in annual reviews for most of my career, I don't really believe in them anymore. Not timely enough, demoralizing in general (everyone thinks they're above average), and just a hell of a lot of work for everyone,” wrote John Lilly, software investment partner, in his comment on Quora.

In reality, people think they are doing better than they are because they’ve never heard differently, or they think their work is completely unappreciated because they never receive praise. Plus, how could a conversation about an entire year ever be accurate, detailed or productive enough?

It’s insane to think of once a year as being often enough to give - and receive! - employee feedback. In the lean start-up world we live in, we are pivoting every three months or even every three weeks, our objectives are constantly changing, and our job roles are continually evolving. At maximum in this agile world, we need to do formal performance management and goal setting every three months. This guarantees objectives are clearer and more realistic and feedback is more likely to be contextual and understood.

Performance management isn’t just about what happened

“Developing employees’ skills is often overlooked in startup organizations for fear of the costs involved; however, creating a culture that fosters development doesn’t have to break the bank,” CRG emPerform online performance management software wrote on their blogpost, “The Biggest Talent Management Mistakes that Startups Must Avoid”.

If you want someone to grow with your company, you have to focus on how they will grow. Particularly in a start-up, where just about everyone has room to take on new responsibilities and opportunities to learn, you need to make sure you are helping people head in the right direction. In reality, a performance appraisal is going to go one of two ways - talking about their exit from the company (when things just aren’t working out) or talking about where they are headed. Talking about an employee’s future is the only way to make sure you’re a part of it.

Here are some ways you can foster your talent during performance management and beyond:

1. Senior employees can mentor junior employees.
2. Encourage your teammates to further their learning with free MOOCs (massively open online courses) like Coursera or edX.
3. Have lunch with them! Or play games like Moving Motivators to learn what really moves them.
4. Conduct regular on-the-job training.
5. Teach each other! Offer what API platform director Bruno Pedro calls “Friday Sessions,” where colleagues volunteer to hold workshops on something they know a lot about - usually over beer.

Written feedback is more likely to be acted upon

“Written feedback also helps you to keep proper documentation, to think more carefully about delicate issues, and to report on observations, feelings and value in a well-balanced manner,” wrote leadership coach Jurgen Appelo in his book #Workout.

Appelo strongly suggests offering written feedback as there’s a paper trail and it’s more likely to be understood and acted upon - IF it is done right. He offers five tricks to make sure emailed performance management is taken in the right way:

1. Describe Your Context: What is your state of mind as you’re writing the feedback? What were your expectations and assumptions during the examined time period?
2. List Your Observations: Don’t give your opinion on right or wrong. Focus on examples of what you have actually seen in the work done.
3. Express Your Emotions: Written feedback can be quite two-dimensional. Adding descriptive words - annoyed, angry, delighted, confused - helps clarify context.
4. Sort by Value: Since we read from top down, emphasize first where your teammate added value and work your way down to where they subtracted value.
5. End with Suggestions: Constructive criticism is only constructive when you share actionable proposals.

How do you improve performance management without breaking the bank?

Tell us below how you make sure you encourage employee engagement and retention through better performance management.