In the years I’ve spent researching the HR practices of small business owners, I continue to find that the majority do not have a structured, holistic Performance Management system in place. On the staffing side, as unemployment rates plummet, it becomes an increasing challenge for small businesses to source and retain quality talent. For this reason, some business owners will resist my assertion that increased accountability through performance management is a Best Practice.
“Kit! It is hard enough to get help now,” they say. “If we put pressure on them to perform, it will only become more difficult!” Business owners know rationally that this is a flawed way of thinking, but they will often settle for their employees’ performance being “just good enough” because of the pressure of managing day-to-day operations and the fear of being short-staffed.
Here are four reasons why creating a culture of high performance and accountability can increase both performance and profitability, and actually reduce the burden of staff turnover and low productivity due to poor employee engagement:
1.) Increased Expectations Maximizes Performance
Do you give annual increases without accountability for metrics-based individual performance? If so, why are you giving maximum rewards for minimal effort? Consider this in the context of a traditional grading system: If an employee shows up for work, executes his or her job duties with few errors and is pleasant with co-workers, clients and customers, I call this a “C” (average) performer. These are the minimum expectations for performance. Your business could be meeting financial goals with an office full of “C” players, because making company goals, again, should be the minimum expectation. What you want to create is an environment that recognizes and rewards the “A” and “B” (above average) players. Only by establishing and tracking metrics of individual performance can you push performance upward for the group as a whole.
2.) Identifying the Social Loafers
I am an advocate for incentives based on overall organizational goals (e.g. gross sales). I also love team goals, because depending on each other fosters engagement, which, in turn, increases staff retention. Tracking individual metrics, however, makes each person equally accountable for individual contribution. Once identified, a mediocre performer can be coached to higher performance. A greater sense of equity among the team is created when data proves everyone is pulling his or her weight.
3.) Risk Management
Let’s face it. Being an employer can be a minefield of potential risk from adverse employment actions. You can greatly reduce your exposure by being able to illustrate the equitable practice of clearly defining expectations and having data-driven performance management practices of feedback, coaching, and rewards.
4.) Employee Engagement
Conventional wisdom is that businesses with highly engaged staff have lower turnover, and yet Gallup reported that in 2015, nearly 51% of employees nationally are disengaged at work, and an additional 17.5% are actively disengaged, meaning they are so disengaged that they are affecting the engagement of others. It is a no-brainer that this impacts the bottom line, not only in day-to-day productivity but also in the expense of employee turnover and the emotional impact of low morale. We want the 17.5% out, but in many cases, the 51% can be turned around.
The best Performance Management systems create a culture of continual feedback. You will quickly know who is “all in” and who has “checked out.” You can often pull a marginally disengaged employee back in by engaging them through regular interactions. Regular interactions create relationships, and it makes people feel more obligated to perform well for someone they feel a connection with. As an added bonus, poor performers will often self-eliminate when their feet are held to the fire. This type of turnover is actually beneficial because it rids your company of one source of low morale and low productivity, which ultimately saps profits.
Businesses that are winning are leaner, with comprehensive performance management systems that create cultures of high productivity and high employee engagement. Refusing to change does not maintain the status quo, it puts you further behind your competitor. Be the type of company that the best people are clamoring to work for – the benefits are obvious.