HRDF: How Do You Evaluate Your SME’s Performance?

Every business needs some form of evaluation whether it is meant for employees, business performance, financial or just strategies. The Performance Management System is a wholesome concept that can help SMEs stay on track by evaluating your employees – in the right manner – as they are your biggest asset.

If you are the kind of leader that expects your people to grow along with your business, the system may just work in your favour. The Performance Management System helps employers set some form of key targets for his employees to meet, evaluate their performance along the way and reward them accordingly. This process is known as the Performance Management System Cycle (View Figure 2).

Employers can use the system to record their employees’ past performances as a precept to their review and reward initiatives. A word of caution: avoid evaluating employees based solely on their recent performance, their backgrounds (ethnicity, economic status or gender) or any existing prejudices. Supervisors should also avoid the “central effect” where they mark the middle scale to avoid justifying their evaluations.

This might interest you: HRDF: Playing A Role In Powering Up Malaysia’s SME Sector

Here are five steps every SME can take to evaluate their employees, using the Performance Management System Cycle as a guide.

Step 1: Set a target

Discuss this target with your employee – via good human resource practices – so that employees know what is expected of them. The target should be specific, measurable, achievable, realistic and timely, much like the way we set goals for ourselves and our businesses.

Performance Management System Cycle

Step 2: Monitor performance

This can be done on a weekly or monthly basis, either through personal meetings or department meetings where section heads discuss or provide feedback on employees’ performances. This exercise helps to keep them in the momentum but it should be carried out in a positive and transparent manner, depending on your company culture or you may risk being seen as a scrutiniser.

Step 3: Mid-year review

This is important for businesses and the performances of their employees, based on the set target. Reports shared with the employee should come with constructive strategies on ways employees can improve. Supervisors can introduce a performance improvement plan in case their staff miss out on the set targets.

Step 4: Annual performance review

Similar to the mid-year review, this evaluates the overall performance and contribution by the employee for the year. The sessions conducted between supervisor and employee should be seen as a relations strengthening exercise, between employee and leader, rather than a mere review or evaluation. Positive reinforcement is necessary to instil awareness and keep employees’ morale high. At the same time, employers should also welcome feedback and review them accordingly. This helps your staff become aware that you have their growth and best interest in mind as well.

Step 5: Reward

Once the annual performance review concludes, the higher management can then plan for a fair distribution of reward for their employees. Rewards can be in the form of bonuses, promotions, raise or any other form of celebration that fits your business culture such as awards etc. Rewards always boost performances and help employees feel appreciated at the end of the day.

Recommended reading: 5 Ways SMEs In Malaysia Can Grow