Staff performance reviews are a great tool to help employers reach their business targets. By setting aside time to discuss your employee's performance one-on-one, you're able to:
- give positive feedback to reinforce good performance
- identify and discuss weaknesses so employees can improve
- set goals that will develop your staff to achieve your business objectives
Performance reviews also give employees the chance to discuss gaps in training and opportunities for further development.
Measure staff performance with KPIs
To measure performance in an objective way, you can set key performance indicators (KPIs) for staff members, roles or departments. KPIs are standards or targets that you can track and use as a benchmark to measure success. They also provide employees with focus and clarity over what's expected of them.
You want your performance management KPIs to:
- align with your business's goals
- measure areas that will influence the success of your business
- indicate areas that need further action
Choosing KPIs for your business
The areas you choose to measure should relate to the core activities of your business.
Depending on your business, they might measure areas such as:
- unit sales
- profit per item
- product quality
- customer service
- time required to complete tasks
- customer referrals
- staff turnover
For example, you might set a KPI for stockroom staff to process 65 units of stock per hour, or for sales staff to sell $5000 worth of product per week.
How to conduct a performance review
To conduct a performance review:
- Give your employee a performance and development agreement and ask the employee to rate themselves.
- Provide a written performance review to the employee. Make sure you can back up any positives and negatives with specific examples
- Conduct a review meeting within 48 hours of the written performance review.
- During the meeting, note any employee comments, as well as action items. Try to save the discussion about pay for another time – you want your employee to think about their performance.
- Finalise the performance and development agreement and file it for future reference.
A successful review will sometimes depend on how well you can communicate with your staff. But if your reviews find that an employee is consistently lacking, you might need to dismiss the employee.
Performance and development agreement plan
Use the following template to outline your employee's expected performance standards and goals, as well as skills they can improve. You can customise the template as you need to suit your business.
Set up an ongoing review process
Performance reviews are most effective when it's a structured process. Set aside time for face-to-face review meetings every 3 to 6 months with a full review at the end of each year.
Use the 'performance management' section of our HR manual template to embed the process in your business.
Track and revise KPIs over time
Keep records of your results so you can track performance over time.
It's also a good idea to revisit your KPIs as you develop your business plan. This way your KPIs will stay aligned with the changing needs of your business.
