The 5 Common Mistakes Companies Make About Performance Management

What small businesses often get wrong when it comes to measuring employee outcomes

Written by Glenn Nishimura

Last fall, I was giving a talk to a group of recent university graduates who had secured jobs at some of Canada’s top startups, as part of the Venture for Canada program. Our topic for the evening was the importance of people and culture, and we were discussing how both could have a powerful impact on a company’s growth.

When I arrived at the slide about performance management, I told my audience that it’s probably my favourite topic of all. Why? Because while business owners want their companies to perform, the biggest contributor to that performance is often the most overlooked, underestimated and inconsistent of all—the performance of their employees.

At too many small businesses, performance management is all over the map in terms of how much it’s valued, how well it’s assessed, and how it benefits the organization. While income statements and balance sheets can provide a clear outlook on financial performance, employee performance is often more murky and ambiguous—subjectivity, bias, and poor communication are just a few of the factors that make it hard to measure and act upon. Perhaps that’s why so many small businesses get it wrong, or avoid it altogether.

Here are five of the most common mistakes small businesses make when it comes to managing employee performance.

1. It’s treated as an event, not a process

It’s a common misconception that performance management and performance reviews are one and the same. But an annual review is simply one activity among many in this field. And its one that should ideally be the culmination of a yearlong process of regular feedback and two-way communication about how your employees are feeling and how well they’re doing.

No employee should walk into a review wondering if their performance was at, above, or below expectations for that year. They should already have a clear idea based on the conversations you’ve had with them over the previous 364 days.

2. It isn’t clearly defined

“You can’t manage what you can’t measure” goes the old saying, and performance is no exception. Without articulating what performance actually means for each and every job in your company, how can you determine if people are actually succeeding or failing, or if the existence of the position itself is even justified?

Your gut is not an accurate measure. At the very least, establish an objective baseline by crafting a well written and up-to-date job description (try Googling performance-oriented job descriptions), rather than relying on one that’s inaccurate, outdated, or worse, just a checklist of duties.

3. The wrong things are emphasized

Do you still rate people on their attendance and punctuality, or how clean they keep their desks? If so, you’ve probably downloaded a report card from the first grade by mistake.

The only thing worse than having no metrics is measuring the wrong ones. Focus on measurements that contribute to driving business results instead of the minutiae. Don’t forget to measure a person’s ongoing fit in the company, including whether they live your values every day and help you achieve your vision. More employees are fired because of poor fit than anything else, so it’s crucial that your company not ignore it.

4. Follow-up is poor or non-existent

Too often, when employees are in need of help—to better manage their time or improve their skills, for example—management’s answer is to simply say “Work on it” or “Do better next time.”

Those responses aren’t helpful, and they do little to set the employee up for success. Instead, create a customized plan that includes support and learning opportunities (both internal and external), and has clear timelines and expectations around who is responsible for what. It takes a bit more work, but investing in your employees in this way can have a huge ROI.

5. It’s still considered an after-thought

Employee performance often doesn’t appear on the radar until something or someone goes very wrong, or until December suddenly appears on the calendar and a little light goes off in your head to remind you, “It’s the end of the year, I guess we better do performance reviews.” (Try saying it with a heavy sigh to get the full effect).

Instead of reviewing everyone at one time, try moving to a system based on the anniversary of hire. The renewed review calendar will spread everything out, and help to keep employee performance top of mind throughout the year.

€¢ €¢ €¢ €¢ €¢

Performance management isn’t about closed-door sessions in which your employees sheepishly listen to what they’ve done wrong all year long. In the New Year, make a commitment to yourself to move employee performance up the company agenda, measure what matters, take advantage of opportunities to praise and thank your people, and give them the tools and motivation to exceed your expectations. You’ll quickly discover that the best approach to managing performance is to light a fire within your employees, and not beneath them.

Glenn Nishimura is the Principal and Chief People Strategist at Nishimura Consulting, based in Toronto. He helps entrepreneurs, startups and small business owners across North America and Europe to build strong company cultures and smart people practices. 


Are you making any of these common performance management mistakes? How do you avoid them? Let us know by commenting below.

Originally appeared on PROFITguide.com