Setting up a system for performance management is sound business practice. Though performance management is usually associated with big and mid-sized businesses, small businesses have much to gain from evaluating how their employees work. This is especially true since many small businesses typically undergo rapid growth and/ or change. Performance management can help small business managers stay on top of productivity given changes in job descriptions or location, and hiring new employees.

A solid performance management system includes four basic elements:

1. It provides a clear understanding of job expectations. Create a clear and detailed job description for each position in your business. Each job description should describe the employee’s current duties and performance expectations, including: job function, required skills, deadlines and goals, as well as relations with peers and customers.

It is important to update your job descriptions especially if your business is rapidly growing or changing, since this could lead to new job responsibilities and shift in workload.

2. There is a system in place to measure job performance.
Once you have clearly defined each position, you need to find a way to evaluate job performance. For some jobs where there is a quantitative output, this can be relatively easy, such as measuring how many sales were completed, or how many items were constructed. Other positions may require more subjective measurements, such as customer satisfaction.

3. Management offers regular feedback about performance. Once you have evaluated your employees’ job performance, it is vital that you give them advice and feedback on how they are doing. If their performance is average or above-average, then make sure to let them know. If there is room for improvement, then give them suggestions on how to perform better.

Some of the feedback and suggestions for improvement could actually come from the employees themselves. Therefore, do not forget to tap into this resource by asking your employees how things could be made better.

4. There is a reward system for good performance. Make sure to have a system in place that recognizes and rewards good performance. Just try to ensure that your definition of “good” performance is not set too high. Otherwise, you may create a system that only recognizes the contributions of the over-achievers.