4 Reasons Why Performance Appraisals are Critical for Small Businesses

Starting a business might be all about spontaneity, freedom to err and learn. But there’s one aspect that no small business can leave to chance – the people aspect. While machines and software are the objective part, people are the subjective component of businesses. They are unpredictable and even inscrutable – qualities that pose immense risk to businesses. The only way to neutralize this risk is to deploy a process-driven approach to employees – one that is empathetic and intuitive. Career growth is what matters most to the employees. The problem is growth can be perceived in different ways by different people. So, how do you harmonize the varied expectations?

Here’s how a structured performance appraisal framework can help:

Identifies top performers

No matter how groundbreaking an idea is, people will remain the core force that drives it, especially in small businesses. The challenge is not just finding top talent at the time of hiring, but also identifying such talent within the company. Often top performers, buried in executing their responsibilities, escape the attention of leaders. An effective performance appraisal is a powerful tool to spot and groom them. That’s exactly what BabyChakra – an Indian startup – had in mind when it launched its formal 360-degree performance appraisal. The core values and skill-based appraisal system of BabyChakra operate on the premise that a team member’s values reflect on work performance, helping the company identify top performers and their developmental needs.

Streamlines communication around performance

Sometimes the ‘family-like, close knit culture’ that small enterprises pride in may create hindrances – especially during conversations around salary, bonus or promotions. Performance decisions taken without a structured process can give rise to unnecessary speculations about favouritism and discrimination. One way to address this is to integrate decision making with a formal performance appraisal framework. What’s more, it is also an effective platform to strike a two-way conversation to build a well-connected and cohesive organization. Uptick, a Chicago based startup, takes this seriously. It has made the ability to work well with others and understanding people’s viewpoint, a key parameter in performance evaluation.

Brings underperformers up to speed

Star performers degenerating into underperformers isn’t a new scenario for startups, but understanding what prompted the loss of interest or the hurdles impeding employee’s performance are not so easy to understand. A formal evaluation process can go a long way in providing the answers. Leaders can get a comprehensive view of whether there’s been a discrepancy in aligning the capacity of an employee with the task assigned. Or it’s possible that employees are not aware of their performance – a glitch that can be easily addressed by adopting a continuous feedback mechanism.

Reinforces futuristic orientation

Unlike in the case of larger organizations where performance evaluation typically focuses on past performance, in startups, it’s all about the future – the projections and the anticipation of growth. These not only act as stimulants to keep employees upbeat but also reinforce futuristic thinking in them. Talks about goal setting, the big picture and the impact each employee can have on the company, become the biggest motivators. These are the interactions where employees internalize how their efforts support the big business plans and milestones.

With a majority of the hires in start-ups being millennials, who are fairly forthcoming about receiving feedback, performance appraisal is no longer a process that small businesses can ignore.  As repetitive tasks get automated, industry leaders are now focusing on the qualitative aspect of performance evaluation. Striking a quality conversation around performance, one that is mindful of the sensibilities of all stakeholders, can be a good starting point for start-ups.   

 

Sources: https://economictimes.indiatimes.com/jobs/startup-founders-tell-you-their-secrets-to-talent-development/articleshow/60834199.cms
https://www.builtinchicago.org/2017/08/22/spotlight-working-at-uptake-0

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