Why Job Performance Reviews Are Important for Your Small Business

If you aren’t conducting them, you’re missing out on a valuable opportunity.
Performance reviews provide the perfect time to give both positive and negative feedback to employees. (Photo: baranq/Shutterstock)

As a small business owner, it’s possible the idea of giving your employees performance reviews never even crossed your mind. They smack of “corporate.” And after all, you probably rub elbows with many or most of your employees every day, so they already know how they’re doing and what you think of their performance — don’t they?

In fact, regular performance reviews can benefit you, your employee and your business in ways you may not realize.

“It gives me the opportunity to take a breath and connect with my employees about the employee rather than what needs to be done that day or any other headaches,” said Gene Marks, president of The Marks Group, PC, a 10-person consulting firm. “It’s an opportunity for me to step back and see the big picture.”

Ground rules:

  • Make it clear that all employees will receive reviews (no one is being singled out).
  • Meet in a private space, not where other employees can see or hear you. (Marks recommends holding reviews offsite.)
  • Give the employee a chance to talk; the review should be a two-way conversation.
  • Put the review in writing. There are plenty of free templates available online. If this isn’t the employee’s first review, refer back to the last written review to see what progress has been made.

Here’s what performance reviews are good for.

Building relationships

You’re busy all day running the business and leading the team. You may not ordinarily have time to talk with employees about much besides their to-do list (and who won the game last night). Just as important, they may not feel they can come to you to talk in depth about work issues.

Performance reviews serve as an opportunity to interact one-on-one, which strengthens relationships by opening the lines of communication.

“They are a great opportunity to connect on a personal level and to make sure they [the employees] are in sync with where the company is going,” said Marks. “It’s also a good opportunity for the employee to discuss what they like and don’t like about their job, and for the employer to give a pat on the back to the employee who wants that or needs that.”

Setting goals

Performance reviews chart an employee’s past performance, of course, but they should also be used to set goals for the future.

“The goals can include anything quantitative, like making sure you are meeting the sales target or ensuring you are generating this number of reports every month, or that customer complaints are being kept under this month,” said Marks. “Also, you can make personal goals, like signing up for a training class to increase your skills. The important thing is you should be able to measure them in black and white, whether you achieved them or not.”

Set goals that will help move your business forward. Don’t have anyone who can create a newsletter or video or manage your Facebook page to help market your small business? Assign someone to learn. Need another body capable of using the mobile POS? Make it an employee’s goal — and plan to provide any necessary training.

Giving constructive feedback

Is your sales guy in an inexplicable slump? Have customers complained about one of your staff members? Don’t ignore these issues and hope they’ll solve themselves. Clearly spell out problems, talk openly about what might be causing them and set expectations for improvement. Include those expectations in the written review.

“You need to have a paper trail so that when you leave an evaluation, not only do you leave the employee with what they need to improve upon but also so that when you go back to the next session, whether it’s six months later or a year later, you can see where you land on the goals that you previously set,” said Marks.

Justifying promotions — and disciplinary action

“Performance reviews document someone’s history. If more than one person is up for a particular spot, and if there is any concern over that, you have documentation that validates why you want or don’t want that person for the position,” said Marks. “More importantly, it serves a greater purpose as it explains to the employee why they are getting promoted or why they aren’t.”

Should you ever need to demote or terminate someone, a written performance evaluation can back up your action.

“The biggest thing that an employer faces when they want to get rid of an employee is being accused of discrimination,” said Marks. “An employer can terminate an employee if they are in violation of rules, and the other way is based on performance. So if you’re going to terminate someone based on their performance, you need a record of their performance.”

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