The importance of performance management in SME’s

advice-advise-advisor-7075.jpgPerformance management; it’s not just about managing your poor performers its an essential tool for business to help them align their employees, resources, and systems to meet their strategic objectives. It works as a dashboard too, providing an early warning of potential problems and allowing managers to know when they must make adjustments to keep a business on track through both formal and informal processes.

Contemporary performance management is so much more than performance reviews. Performance management is all about making sure your employees are happy, engaged and working towards your collective organisational goals. Organisations that get performance management right become formidable competitive machines. Yet in too many organisations, the performance-management system is slow, wobbly, or downright nonexistent . At best, these organisations aren’t operating as efficiently or effectively as they could. At worst, changes in technologies, markets, or competitive environments can leave them unable to respond.

Strong performance management rests on the simple principle that “what gets measured gets done.” In an ideal system, a business creates a cascade of metrics and targets, from its top-level strategic objectives which cascade down to the daily activities of its employees. Managers continually monitor those metrics and regularly engage with their teams to discuss progress in meeting the targets. Good performance is rewarded; underperformance triggers action to address the problem.

Most employees will endeavour to do their very best in their work, however some employees need more encouragement and motivation. Therefore, role competencies and expectations need to be clearly defined. If employees know what is expected of them, and what it is that constitutes excellent performance, then it becomes easier for managers and their reports to be on the same page. This does not happen by accident though, there must be a clear and concerted effort by management to articulate the company’s strategic direction and objectives.

So how does this work in reality. Say you’re an engineering workshop with a strategic objective of “Reducing costs by 5% annually”. When you start to manage this objective at the top level you may assign a KPI as a performance measurement to each manager to keep costs within budgetary constraints. In order for the Operations Manager to achieve this he needs to break this strategic objective down to the employee level so his fitters, boilermakers & TA’s understand exactly what is expected of them in terms of performance. He may set 2 KPI’s of reduce re-works by XX and reduce consumables wastage by XX.

The company also has a value of “Challenge the status quo, in pursuit of sustainability and growth. Think and act like owners” The performance appraisal paperwork will identify the behaviours they wish to see in their employees in order to align with this value. For example some behaviours that could be measured are the employees’ quality of work; do they demonstrate a high quality of work and enthusiasm that suggests they have a sense of pride in their work and the organisation, Embracing innovation; do they seek out cost & time saving measures, accountability; are they accountable for their work, do they own up to mistakes or identify areas for their own improvement.

The Operations Manager would meet with each employee on a semi – regular basis to have a “check in” or a mini performance appraisal. They will check in to see how they are going with achieving their KPI’s and aligning to the organisational values and provide positive reinforcement to keep the employee motivated and to engage any strategies required to get the employee back on track.

The goal of performance management should be to boost productivity and engagement within an organisation. Everything about the performance management procedure should then reflect this goal. Thus, the organisation should be as transparent about its processes as possible. The process should be simple, straightforward, and should add value to each party involved in the performance management process. If your performance management is sub-par; it just becomes an inefficient and expensive exercise in time wasting.

If your current performance management system is not working how you would like it to, contact Simone today via email simone_pickering@iinet.net.au to discuss a performance management process that can build capacity in your business by focusing on aligning skills and behaviours to the organisation culture and strategic direction.