Why small businesses should invest time in employee performance

Fostering a feedback culture and encouraging shared knowledge are just two things businesses should consider if they want to improve employee performance, writes Elora Voyles, SME data scientist at Culture Amp.

Investing in employee performance

If you want to improve performance, small businesses can invest in a combination of strategies that offer employee training, development and feedback.

These strategies include offering training programs to enhance knowledge and skills, conducting performance evaluations, fostering a feedback culture, creating career advancement opportunities, and encouraging cross-training and knowledge sharing.

When considering strategies for employee performance, any organisation needs to consider their culture, the availability of time and resources, business objectives, and other relevant factors impacting the business.

Investing in employee performance aims to achieve an organisational state of continuous performance. Taking a ‘continuous improvement’ approach in the performance process reduces stress and clarifies the process by including developmental conversations throughout the year. These conversations can be coaching, feedback, pulse checks and expectation-setting.

4 reasons to invest in performance

1. Engagement

Employees who feel valued through an effective performance management system are more enthusiastic and committed.

Research conducted with employees working at small businesses across the United States revealed that performance initiatives focused on recognition and feedback were identified as the most crucial factors for enhancing employee engagement. The study emphasised the significance of recognising and acknowledging employee contributions and providing regular feedback. These initiatives were found to significantly impact employee engagement levels (Tate, Lartey, & Randall, 2021).

2. Retention

Along with increased engagement, professional growth and fair processes support higher employee retention. Employees who feel growth and achievement within their role are more likely to stay at their current company.

Recent research revealed that career development opportunities are significant for retaining younger employees (Nguyen, 2020). At Culture Amp, the effects of our continuous performance approach, including development goals, developmental plans and skills coaches, were effective in reducing turnover compared to employees who did not have these constant performance tools available.

3. Competitive advantage

Well-trained employees provide better service and create better products. In addition, employees with higher skills and cross-training are more agile and can tackle projects outside their usual job scope when needed.

Highly skilled employees are the differentiator for a competitive advantage. Our research found that employees using continuous development tools demonstrated meaningfully higher performance compared to employees who did not use constant performance tools.

4. Company culture

Investing in employee performance can enable small businesses to foster a positive company culture that values continuous learning, growth and improvement. Company cultures that have benefited from consistent performance have clearer expectations and goals, accountability, feedback and ownership, and a greater focus on learning and development.

The challenge for small businesses

Performance processes may be challenging in ways unique to small businesses. Here are a few unique challenges small businesses face and suggestions for mitigating these challenges.

It can feel too personal

In small businesses, poor performance processes may feel incredibly unfair or too personal to employees because of close working relationships, limited hierarchical structure, lack of anonymity and increased social investment among employees.

To avoid these issues, small businesses should establish clear performance guidelines, prioritise objectivity and professionalism, provide regular feedback, ensure confidentiality, utilise standardised evaluations and separate personal relationships from performance conversations.

Investing in tools and technology to moderate the performance process can help reduce bias and keep the review conversations professional rather than personal.

Resources and processes are limited

Within small businesses, resources for employee performance are more limited by scalability, budget and time. For example, small organisations may not have a people leader who can dedicate significant time and administrative work to support the performance process rollout.

In addition, leaders in small businesses often wear many hats, such that only a little time is available to invest in employee performance.

To address these concerns, small businesses should focus on fostering a high-performance culture and allocating resources that will positively impact their employees.

Limited upward mobility

Small businesses and organisations can also face difficulty justifying performance management processes to employees because of limited opportunities for upward mobility through promotions. Specifically, small businesses tend to have flatter hierarchies which limit room for career advancement.

Employees who perceive limited promotion opportunities can become demotivated and more likely to leave the organisation. To avoid employees becoming demotivated from limited upward mobility, it is important to offer opportunities for lateral movement, upskilling, cross-training, and a focus on skill development.

References:

• Nguyen, C. (2020). The impact of training and development, job satisfaction and job performance on young employee retention. Job Satisfaction and Job Performance on Young Employee Retention (May 1, 2020).
• Tate, T. D., Lartey, F. M., & Randall, P. M. (2021). Do performance goals and development, feedback and recognition, and a climate of trust improve employee engagement in small businesses in the United States. International Business Research, 14(1), 1-23.

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