Performance Reviews

Businesses need to ultimately operate independently of the (founding) owners if the business is to continue once the owners step back from running things. Formal business planning – and systems to make sure the plans are executed – is the way to build this independence.

Building good HR systems, including using KPIs or Key Performance Indicators to assess and reward performance should form a critical part of any business owners succession planning.

Businesses use a number of different strategies to ensure they meet targets and stick to deadlines, including the use of KPIs.

And while the size and scope of these guidelines may change from one company to the next, the more effective ones are usually underpinned by a strong performance review process.

Performance reviews are a recommended management tool for most businesses however, the way they are run depends on the individual company.

Held at regular intervals, employers can use these assessments as a way of opening clear lines of communication with staff members, as well as gaining an insight into the day-to-day workplace issues that managers might not otherwise hear about.

They are also a good way to gather information on whether deadlines are being met, or if there are any obstacles to completing tasks on time.

Feedback mechanism

One of the defining features of a performance review as a positive HR resource is its ability to use ongoing feedback as a means of clarifying explanations, defining standards and establishing better internal communication protocols.

Businesses can also incorporate discussions about salaries into the performance reviews by linking a conversation about an employee’s strengths and weaknesses with performance and pay.

Any assessments should avoid bias or evaluations that are based on the individual’s personality or relationship with the person conducting the interview.

Rather than the workplace issues that have crept up in the last few weeks, it should also focus on their long-term performance or the work they have done over an entire year.

Avoiding assumptions

Avoiding assumptions based on race, ethnicity, sexual orientation, religion, gender or age is also important as stereotyping may cloud decision-making about important aspects such as future career options.

On a more serious level, it could also lead to discrimination claims being leveled against your business.

Group assessments

Another important tip is to avoid individual assessments based on group performance. While this approach may appear to save time it is also unlikely to properly evaluate individual performances.

Most business will have a mix of highly talented, under-performing and satisfactory staff and being able to distinguish between these groups is important to boosting productivity.

This doesn’t mean that part or all of performance rewards can’t be team and or organisation-based, to encourage and reward teamwork and also align employees with company/organsiational goals.

A growing number of privately owned businesses are exploring, or have implemented, Employee Share Ownership Plans (ESOPs), backed by significant taxation benefits offered by the federal government.

These ESOPs can be a way of fostering organisational commitment amongst employees, or going further and forming part of the business ownership succession plan.

Automated processes

In these days of cloud-based applications, cheap solutions are available to help automate the appraisal process. A dashboard can give immediate feedback on overall progress of your appraisal process, down to individual supervisor and employee level. There are stand-alone solutions, as well as others which form part of a HRIS – human resources information system – which can also automate other aspects of employee on-boarding and record keeping, and some systems even link to payroll and accounting applications.

This article was wrttten by Stephen Champion and was by ER Strategies. ER Strategies offers businesses expert advice on the best way to conduct effective performance reviews to achieve profitable business growth.

Dr Craig West

Founder & Chairman | Succession Plus

Dr Craig West is a strategic accountant who has over 20 years of experience advising business owners.

With a background as an accountant in practice and two master’s degrees, Craig formed a strong view that the majority of business owners (and often their advisers) were unprepared and unaware of the steps required to prepare for exit. He then designed and documented a unique 21-Step Business Succession and Exit Planning process to assist owners and their advisers in navigating this process.

Craig now acts as a strategic business and financial mentor for mid-market business owners. Craig has written four critically acclaimed books educating business owners on employee incentives, succession planning, asset protection, and exit strategies. Additionally, he has completed doctoral research on Employee Share Ownership Plans (ESOPs) for succession.

Craig is a Member of the Forbes Business Council where he leverages his extensive experience to contribute valuable insights on helping business leaders navigate the complexities of growing and exiting their businesses.

In April 2024, the Exit Planning Institute admitted Craig to the International Exit Planning Circle of Excellence.