| An area that a lot of businesses don't spend a lot | | | | mean the business can afford to pay as |
| of time measuring but is very easy, cost | | | | collectively the business may not be performing |
| effective and critical to do is the key | | | | well enough. The argument goes that incentives |
| performance areas of the business. These key | | | | should include as many workers as possible so if |
| performance areas or metrics can show whether | | | | they are successful so too will the business, but |
| the business has all the parts working together | | | | you can have a top performing employee that is |
| and in a healthy manner or is in need of a tune up | | | | bring in the best sales for the business but his |
| or radical surgery. There are a number of key | | | | demeanor or attitude to co-workers may not be |
| areas to a Performance Plan so let's break them | | | | acceptable. Therefore, how do you financially |
| down. | | | | reward a top performer during a meeting and |
| The first area to look at is the financial | | | | then point out behavior or communication |
| statements of the business. The first and most | | | | problems. Rewarding people for sales is great |
| readily used is the Profit and Loss Statement as it | | | | however, you will lose any goodwill from |
| shows the income and expenses of the business | | | | acknowledging and rewarding great sales and then |
| with hopefully the income greater than the | | | | bringing up negative issues. |
| expenses. Just as important, however, is the | | | | If the performance of each employee is |
| Balance Sheet as this document shows the wealth | | | | measured with an Annual Performance Review an |
| of the business. With an up to date profit and loss | | | | extension of that is to include feedback from the |
| statement and balance sheet, a trained business | | | | co-workers at the same level as the employee. |
| appraiser can then calculate what the owner of | | | | This is called a Peer performance review. It can |
| the business could expect to get if they decided | | | | be controversial as someone may choose to |
| to sell it on the market. | | | | denigrate the performance of a co-worker they |
| In addition to the financial statements, the next | | | | don't like. So there are risks. However, it can |
| performance area to measure and manage can | | | | provide constructive results if managed correctly. |
| be simple business metrics that include the | | | | A best practice for a Performance Review is |
| number of incoming calls to the business (and this | | | | asking an employee that reports to a manager |
| can be broken down into times of day if call | | | | their opinion on the performance of the manager |
| volume is an important metric,) the number of | | | | and how the manager could do things better. This |
| hits to the website, volume of email, volume of | | | | is called a Management Review. Once again this |
| faxes and volume of orders placed on-line (if | | | | approach can have a downside but it can enable a |
| important.) Depending on the business, the total | | | | business to grow and be internally stronger if |
| number of orders placed and/or the number of | | | | open and honest communication is part of the |
| orders placed by each sales person. In simple | | | | business culture. |
| terms, sales can generally be easily measured. It's | | | | The final item to consider is your performance as |
| important that the sales team is clear on sales | | | | the business owner. Not every owner has the |
| targets and agree how they are to be measured. | | | | time or desire to put such a process in place, but |
| Sales people are motivated by getting results. | | | | if you want your business to grow and have a |
| Make sure the results are measured accurately, | | | | healthy business environment I think it's one of |
| consistently and fairly or sales people will become | | | | the best means to enhance the success of the |
| de-motivated; which is obviously the complete | | | | business. Depending on the size of the business, |
| opposite from what you want to do. It's | | | | the Owner Performance Review can be done by |
| important to start by building Key Performance | | | | hiring an outside consultant. An alternative |
| Metrics for your business. Don't be afraid to | | | | suggestion is to do it by anonymous survey but |
| change and add other metrics as they are | | | | this approach reduces the effectiveness as it |
| normally easy to isolate and therefore count. | | | | restricts the answers that can be given and |
| Make sure all metrics are counted monthly and as | | | | doesn't allow an exchange to clarify things. |
| many data points shared with everyone in the | | | | There is a business axiom that says "If you can't |
| business as possible. Celebrate successes and ask | | | | measure it, you can't manage it." The |
| the team for suggestions when the performance | | | | Performance of a business can mean the |
| isn't acceptable. | | | | difference between success and failure. Most |
| The next aspect to a Performance Plan for the | | | | businesses do not fail overnight. They decline |
| business and something not always done is an | | | | gradually, with often the decline picking up steam |
| annual performance review. There are different | | | | towards the end. A good Performance Plan will |
| approaches to this topic; some are personal | | | | provide warnings that if measured and managed |
| preference. For example, some businesses tend | | | | will allow corrective action to be taken in time. |
| to link the annual performance review to also a | | | | Part 11 of this article series, explains the |
| salary review. My preferred strategy is not to link | | | | importance of a Disaster Recovery Plan. Most |
| them. My reason for this is that I don't think they | | | | businesses don't have the time to put this |
| are linked. Compensating someone on | | | | together. That can be a mistake and this article |
| performance is important. However, the good | | | | explains why. |
| performance of one person does not always | | | | |