“The Performance Management System or Performance Appraisal process comes into the picture and becomes one of the most critical activities for the entrepreneur and founders to focus on and improve.”
The entrepreneur is much more than a CEO or a Manager. He or she is the leader whose most significant responsibility is to inspire, motivate, and lead the company to new heights of success and growth. An entrepreneur’s leadership qualities are among the biggest reasons for the startup’s success or failure; growth or depreciation. And this golden rule of entrepreneurship is even more evident when we talk about startups and early-stage companies. More than the management aspect, employees of a startup and a new business need direction, motivation, and belief.
It is here that the Performance Management System or Performance Appraisal process comes into the picture and becomes one of the most critical activities for the entrepreneur and founders to focus on and improve.
As the legendary boxer, Muhammad Ali said, “it’s the pebbles in your shoes that stop you from conquering mountains.” And the #1 priority of the entrepreneur is to make sure that such pebbles don’t exist in their employees’ shoes, who are the organization’s most significant assets.
What is a Performance Management System?
Performance Management System, also known as Performance Appraisal System, is an ongoing process for evaluating employees’ performance and removing any roadblocks that they may be facing due to any reason.
Contrary to what most old-fashioned entrepreneurs believe, performance management is never a one-off annual activity, which needs to be checked out to clear the to-do list – It’s a continuous, evolving process that helps the management to connect with the employees and empower them with more confidence and belief about their talents, skills, and capabilities. And more importantly, it’s a way to build a solid foundation for their career growth and build a consistent growth chart for the company, since both are interlinked.
Why Process of Performance Appraisal is Important? 3 Biggest Reasons
1. Clarity of Vision
The entire premise of the performance appraisal process is based on improving clarity and removing ambiguity. With goal settings, reviews, and feedback, both the employees and the organization can understand one another better and induce clarity concerning expectations and objectives.
More than money, it’s the motivation that drives the workforce of a new startup, which is the same as venturing into uncharted waters. Business performance management helps the entrepreneur find the right trigger for motivating the employees since they now know what stops them.
3. Discovering the Right Talent
The process of performance appraisal also acts as a filter for the management, refined continuously, and as a result, scooping out the ‘bad apples’ from the workforce. The right talent, which is motivated and inspired to break the barriers, can be discovered and nurtured.
Performance Management Process: 5 Proven Techniques Which Work
If seen objectively, the entire performance management process is an introspection into the company’s soul and its stakeholders, including employees, founders, investors, and customers.
By following these 5 techniques of the performance management system, any startup or an established business can start the process of this introspection:
1. Determining the Objectives of the Business
The first and foremost objective is to finalize the company’s objectives and the vision for the next 5 years. This clarity of vision and objectives is the foundation on which enterprise performance management is based and acted upon.
- Create a document, a chart, a map that enlists all the company’s objectives and explains the purpose of its existence.
- Create a timeline to achieve those objectives, set yearly or quarterly deadlines, and share with the entire company and all employees.
This sets the right base for the process of the performance appraisal for the employees.
2. Initiating a Dialogue with Employees
Once the organization’s objectives and vision are determined, the next step is to initiate a dialogue with the employees and seek their thoughts and opinions. This induces more clarity and transparency for both the management and the employees, and they both are on the same page from hereon.
3. Agreeing on Goals & Targets
Now, the most tangible aspect of the performance management system: Goals and Targets. At this point of time, both the management and employees are clear on the exact business objectives, and why they are working together in the first place. This paves the path for creating targets and goals and allows the employees to exhibit their talent and skills.
Goals & targets should always be SMART: Specific, Measurable, Attainable, Realistic, Time-bound, Evaluated and Re-Evaluated.
4. Measuring the Results
Based on the deadlines and the timeline of achieving business objectives, the employees’ performance is evaluated and measured using goals and targets as the scale. The results also help the management to devise a comprehensive incentive program and appraisal policy, and thus, benchmarks can be created for the future.
5. Feedback & Repeat
At the end of the performance management process, the employees are provided with feedback, and the cycle repeats. By this time, the business owner and the management will determine the challenges that their employees are facing, what motivates them and inspires them and how to achieve maximum productivity based on their talent and skills.
The feedback process is also critical, and one-to-one sessions with each employee are recommended for the best outcome. In case any employee cannot deliver as per expectations and the goals, then counseling sessions can be planned to push them towards excellence. The entire performance management process is complicated and exhaustive. Entrepreneurs will need consultancy and coaching from experts, having a 360-degree view of the entire process.
It’s here that MSMEx can assist startups and businesses in starting the process and achieve desired results. MSMEx.in is a micro-advisory platform that provides you with business coaches such as human resources experts and helps get the instant answers you need.
Related Read About –
- What is KPI & KRA? How Setting Right KPI & KRA Can Help Measure Team Performance?
- Business Lessons Founders & Small Business Owners Learned Amid COVID-19 Pandemic
- What Is Employee Stock Option Plan? 4 Types Of ESOPs, Benefits & Its Process In Private Companies
- How To Streamline Business Processes? 4 Ways To Manage The Workflow & Processes Of Your MSME
- 7 Best Business Ideas With Low Investment For Indian Entrepreneurs
- Importance Of Idea Validation For Your Business Startup – Know Its Pillars And How To Validate Your Idea
- What Is The Procedure For Incorporation Of A Company In India? Know The Step-By-Step Process
- Registering A Business In India – Registration Of A Small Scale And A Large Scale Business