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Small Business owners guide to managing employee performance efficiently

Running a business is like being the captain of a ship setting sail for an exotic destination and a pot of gold.

steer ship

As captain, it’s your job to set the course and navigate, keep it from sinking when the unexpected occurs, and get the most of your crew.

A well trained crew increases your chance of reaching your destination unscathed. They:

  • understand the ship’s course;
  • agree upon current and future tasks and obligations;
  • understand what to do if disaster strikes;
  • know what treasure is waiting at the end of the trip and how it will be split

In business, when your team is trying to reach several middle or long term business goals, it is effective to have a system for sharing your vision and monitoring your progress.

Most companies have some sort of procedure of setting and reviewing tasks which is referred to as performance management. employment management guidelines

If you employ 5-7 people this process can be informal and irregular. But it is far more effective to implement a more formal, yet simple process that allows you manage employee performance on a regular basis.

This small investment in time and paperwork allows you to keep an eye on performance and expectations, facilitate open communication and strengthen the bonds within your team.

PERFORMANCE MANAGEMENT is a regular 10-30 minutes procedure with two main steps and a 1-2 page template. It is usually executed between the direct manager and the employee on an annual (or half-year/quarterly) basis.

Managing Employee Performance 2 Step Process

Step 1 – Set and agree on tasks/plans/objectives and future reward

A good manager or business owner will write down and discuss with the employee their ideas about the main Performance Targets for the periods of time. These targets should be general, measurable and reflect the company strategy. It’s a good idea to adopt the S.M.A.R.T KPI (Key Performance Indicator) framework.

Specific Be specific in what is being required. Leave no room for ambiguity or confusion.

Measurable Define what is to be measured and what types of measurement will be used.

Achievable Ensure the requirement can be realistically achieved in the time frame and within the responsibilities and scope of the role.

Relevant Ensure the KPI is relevant to the person’s role and relates to organisational and strategic goals.

Time based Provide specific expectations regarding timeframe or frequency of achievement. KPIs can be short or long-term goals but need to have a specified timeframe.

There should be no more than 3-5 of these targets so that they are manageable. You may also inform the employee what reward s/he’ll receive (in any) and in what case, especially if you have exact measurable targets.

IMPORTANT NOTE! The employee has to understand the targets clearly and agree to fulfil them, letting you know what resources or additional education s/he might need for that.

Step 2 Review and Reward

You then meet with your employee to review their progress. During this meeting, you will discuss and review the plans you made and how well the employee is fulfilling their targets.  You might discuss strengths and weaknesses, corrections and future requirements to your performance management process, using the Performance Improvement Plan.

After this procedure the employee receives the agreed Reward in proportion, that was settled at Step 1.


There has to be a clear understanding and consensus between parties at each stage and step.

Each step should be signed by both parties to avoid future disagreements.

If everything is documented properly those papers might be even used for the worse scenario – dismissal processes, as the arguments at the Fair Work Commission – Workplace relations tribunal.

What if your employee does not perform?

Dealing with underperforming staff is the stuff of nightmares for many small business owners. Many are not sure of what to do and fear being taken to the Fair Work Commission for unfair dismissal.

Underperformance dismissal is a complicated, time-consuming, several step process when compared to termination for physical violence issues or fraud.

Fair Work Australia states that “Managers need clear procedures, organisational support and the courage and willingness to manage the issue.”

You need to keep all the records and warnings given to the employee in a time-period, signed by both parties.

Implementing a detailed and scheduled Performance Improvement Plan as the part of your Performance Management Process gives you the chance to correct your employees behaviour.

If the employee improves their performance – you both win. In the opposite case – you have a solid basis for issuing the First Warning Note.

In summary, managing employee performance procedures will give you:

  • A clear, fair, commonly understood and formalised information flow in the company (objectives, timing and rewards are documented, with minimum distortion);
  • Regular, face-to-face feedback and follow-ups on the current situation or unusual events/setbacks;
  • increased confidence and trust in the team, followed by rising effectiveness in managing your business.

You can find the templates for Managing Employee Performance here.

Other Resources

employee performance management templatePerformance Management Template and Guidelines

Managing employee performance is a vital factor of the success of any business, which is why large businesses hire HR (Human Resources) people to look after staff.

But even if you run a small business it’s important to nurture your employees so you get the best out of them

This Performance Management Template and Guidelines is framework that you can use to set, monitor and review performance goals for your employees.

Even if you don’t have a background in HR, this practical and educational
document will outline how and why you should conduct performance management. It Includes easy to use templates for
Performance Reviews, Performance Improvement Plans along with all template
documents to support formal disciplinary processes.

Workplace Policy TemplateWorkplace Policy Template

Having a workplace policy in place offers many positive benefits to both your staff and your business. Setting clear guidelines, policies and procedures enables staff to have a clearer idea of their role and can increase efficiency and boost confidence.

A well written workplace policy can be a positive way to define your business and what it stands for.