Performance management can be a daunting task, especially for small businesses aiming to grow.
As your company expands, ensuring that your employees are motivated, aligned with your goals, and performing at their best becomes increasingly crucial. However, the path to building effective performance processes is often filled with obstacles and uncertainties.
We put together this comprehensive guide to give you practical strategies to build your performance management processes from the ground up.
Inside, you’ll find everything we’ve learnt from iterating on our performance management processes at Charlie over the last eight years — from nailing one-to-one meetings to tackling underperformance issues.
What is performance management
Performance management is the process of setting clear expectations, regularly assessing employee performance and providing feedback and support to help your team reach their full potential.
As part of the performance management process, you will also aim to reward team members that go above and beyond (with a promotion or a pay rise), and address underperformance problems by ensuring everyone meets your business’ standards.
Why is performance management important?
Your business’ success depends on your people, and that’s even more true in small businesses.
When you’re starting out and have just a handful of employees, the performance of each one of them singularly has a massive impact on your overall business performance.
As you grow, you want to still be able to maximise that individual performance: develop a high-performance culture in your team, and your business will be able to overcome every challenge coming your way.
If the purpose of performance management is to drive success by maximising individual performance, it also enables you to:
- Set a clear performance standard: Performance management helps establish expectations for employees, ensuring everyone is on the same page. When your team has clear goals, they have a sense of direction and purpose, which fuels their motivation and focus.
- Address underperformance promptly: By monitoring and assessing performance regularly, small businesses can quickly identify and address performance issues. This improves productivity and ensures that everyone is working towards peak performance, contributing to the success of the business.
- Promote your team’s development: Effective performance management enables you to identify strengths and areas for improvement, offer targeted training and help employees reach their full potential.
- Develop a culture of open feedback: Regular check-ins and evaluations normalise feedback exchange at your company, which in turn is the best tool you have to start a journey of continuous development.
Let’s now explore the key components of a performance management process and how they contribute to driving success and productivity.
What is a performance management process?
At Charlie, we see performance management as a collection of processes, all aimed at improving your team’s impact on your key business metrics.
At the core of these processes is the performance review — the moment when your employees’ performance is evaluated. However, in order to effectively conduct performance reviews at your business, you need to nail all the other processes surrounding it, namely:
- Performance objectives
- 360-degree feedback
- Employee self-evaluation
- One-to-one performance meetings
Let’s look at them one by one to see how they tie into a comprehensive performance management process.
Setting performance goals for your team members
When creating objectives for your team to work towards, I’d recommend always starting from your overall goals as a business. What is your overarching goal for this year?
From there, you can start to think about what each team will need to contribute to allow you to achieve that overall goal. If you do this right, it will be then clear what each team member will need to accomplish.
Make goal setting a collaborative exercise — the more you involve your employees in setting their own goals, the more they will feel invested and willing to strive to achieve them.
On the other hand, ensure that the goals you set have strict but realistic deadlines. At Charlie, we use OKRs (Objectives and Key Results): these are ‘smaller’ goals that teams or individuals need to achieve in order to make progress towards their main, long-term organisational goal. Success is also measured using KPIs (Key Performance Indicators).
Head to our blog for some employee goals and objectives examples.
Collecting 360 feedback from the wider team
Traditionally, the performance review process is thought of as a one-way street: a manager assessing their direct report. However, this approach risks leaving out particular competencies or behaviours, those that managers may not be exposed to very often or at all.
360 performance reviews allow managers and employees to collect feedback from their peers, therefore giving a more comprehensive assessment and allowing them to spot hidden strengths or areas for improvement.
Find some inspiration on how to introduce peer feedback at your workplace with our 360 review template.
Running effective one-to-one performance management meetings
Your review meetings are a core element of your performance management process.
In order to ensure they are as meaningful and useful as possible, I’d recommend taking the following steps:
- Ask direct reports to answer specific self-assessment review questions in writing, at least a week before the review meeting
- Have their line managers submit their own feedback to their direct reports a few days before the one-to-one.
- Ensure both parties attend the meeting having read each other's notes. The discussion will then be about drawing any conclusions or learnings from them.
This is exactly the way we run performance reviews at Charlie, and we built our reviews feature around it to help teams automate and streamline this process. If you’d like to try our performance review software, why not take a free trial?
Performance management meetings should be an occasion for acknowledging achievements and removing growth blockers. Check out our blog for more information on how to run a one to one meeting, or get some inspiration to write your own performance review questions.
Performance management follow-up: rewarding high-performers and supporting those who are falling behind
You may have run your performance evaluation — but your performance management process is far from over!
Depending on how the individual team members have performed, you need to come up with an action plan: will anybody be rewarded with a promotion? Is anybody’s performance slipping behind, and if so, what can you do about it?
Rewarding your top performers adequately is essential to make sure their motivation stays high. Without that incentive, they won’t have any reason to continue to contribute to your business’ success. Actually, they won’t have any reason to stay around at all.
So, how do you go about promoting your top performers in a new role? If your business is small, there may not be space for yet another manager. The individual contributor VS manager puzzle is a common one, but often the solution is quite simple.
At Charlie, we have many success stories of team members who have been promoted into specialist roles, while still remaining individual contributors. After all, not everybody wants to be a manager.
On the other hand, if your performance management process highlighted some cases of underperformance, you also absolutely need to do something about it.
Failing to address underperformance in a timely manner can have very negative consequences — it can de-motivate high-performing employees and let the problem escalateup to a point where the only solution is dismissal. You don’t want to get there!
If a team member can’t get back on track, despite your continuous feedback and support, I’d recommend you put them on a Performance Improvement Plan. A detailed and time-bound set of targets will help you set clear expectations with your employee, to offer them one last opportunity to show that they can effectively contribute to your company goals.
The right and wrong way of doing performance management
Building scalable performance management processes for your business can be a steep learning curve. No matter how much you’ve prepared, you are going to make mistakes at some point.
And mistakes are also important, because they show you the way forward, much better than anything else.
What I can do is share what we, at Charlie, have learned from our mistakes, in case it’s useful as you navigate these uncharted waters.
I have two main pieces of advice:
1 - Think of performance management as an employee engagement tool, not a surveillance system.
Performance reviews should aim at fostering an environment of constructive feedback and recognition, not fear and dread. How do you do that? Normalise feedback sharing across your team and ensure top performers are fairly and publicly rewarded.
Do that and you’ll reduce problems of underperforming at work due to stress to a minimum.
2 - Ditch the annual reviews
In traditional performance management approaches, performance assessments are limited to annual appraisals. This doesn’t work, for many reasons.
Make your performance check-ins much more frequent: you could have an informal meeting once a month and then quarterly reviews. This type of continuous performance management allows your team to share feedback in real time, enabling quick course correction and improvement.
From knowledge to results: the role of Learning and Development in performance management
Investing in learning and development opportunities for your people is crucial for driving performance and achieving long-term success.
This doesn’t mean you have to spend huge sums of cash on courses and conferences for your team — as a small business, it’s unlikely you’ll be able to.
Instead, introduce Personal Development Plans (PDPs) into your business to empower every member of your team to define their preferred areas of learning and growth. With clear learning objectives, it will be much easier for your team members to find opportunities to develop new skills and knowledge, without this having to be through traditional training channels.
What is a performance management system?
A performance management system is a digital tool to streamline and automate the evaluation of your team’s performance. It gives you a centralised platform for setting goals, tracking progress, conducting performance appraisals, collating feedback and analysing performance data.
If you’re curious to see what’s on the market, you may be interested in our performance management software.
We built CharlieHR’s performance review software specifically to meet the performance management needs of small companies.
“I’m blown away by how useful Charlie’s Reviews has been. It’s enabled some really high-quality conversations within our team that I know just wouldn't have happened otherwise.” Chris Wallis, CEO and co-founder at Intruder
Thousands of small UK businesses use Charlie to automate their performance review process. It saves time and effort by getting rid of all the paperwork and making everything digital. With Charlie, you can easily set goals, track progress, and run review cycles in one convenient place.
The system also generates reports and analytics — so you can make sense of the data and spot areas for improvement.
By using Charlie to automate your performance reviews, you'll:
- Save time
- Communicate better
- Get valuable insights
- Support your employee development
Want to take it out for a spin? Start a free trial.
Want to find out more about performance management? Have a look at our resources: