9 performance management techniques to unlock your team’s potential

If you want to achieve your business goals, you need a high-performing team. But it’s not simply a case of hiring smart, skilled employees. 

As an employer, you need to optimise your team’s performance in a way that aligns with your company objectives, maximises efficiency, and keeps costs down. 

This is known as performance management — and it’s an essential part of how to run a business. 

Read on to explore what performance management is, why it’s so important, and how to successfully implement performance management techniques — regardless of your company type, size, or budget.

What is performance management?

Performance management is the ongoing process of evaluating and optimising your employees’ performance. 

It aligns your employees’ day-to-day work and overall performance with your business objectives — and helps you leverage your employees’ skills to their full potential. 

Performance management includes: 

• Setting clear goals for employees to work towards, both individually and as a team;

• Defining what success looks like;

• Tracking and measuring progress;

• Providing ongoing support, training, and feedback to help your employees do their best work. 

Effective performance management relies on specific methods and practices known as performance management techniques, which we’ll explore later on in this guide.

Why is performance management important?

When you were first considering how to start a business and going through the process of how to write a business plan, you’ll have outlined certain goals and objectives you wanted to achieve. 

And, when you began looking into how to hire employees, you presumably did so because you wanted extra hands on deck to help you achieve those goals. 

That’s what performance management is all about: guiding and optimising your employees’ performance so you can meet your targets and drive your business to success. 

Whether you’re working towards short-term goals such as developing a marketing strategy for your small business, or focusing on long-term business growth strategies — performance management has a crucial role to play. 

With effective performance management, you can:

Maximise workplace efficiency and productivity

Performance management helps to identify and address skills gaps, highlight areas for improvement, and generally ensure that employees are equipped to succeed. 

This boosts efficiency, enhances productivity, reduces errors, and streamlines your day-to-day operations management. 

Boost employee satisfaction and retention

With clearly-defined goals, regular feedback, opportunities for learning and development, and recognition when they do well, your employees feel both valuable and valued. 

This not only improves performance; it keeps your employees motivated, engaged, and more inclined to stay with your company and contribute to its success. 

As such, performance management is an essential strategy if you’re looking at how to motivate employees and boost employee retention.

Ensure a positive experience for your clients and customers

Employee performance impacts customer satisfaction — especially if you’re focusing on small business ideas that require direct interaction with clients, such as in the retail, beauty, or hospitality space.

With effective training and performance management techniques, you can continuously improve your customer service and overall customer experience — helping to foster customer loyalty and boost customer retention.

Not only that. By providing a consistently exceptional service, you’ll build a strong brand reputation, enabling you to attract new clients and meet your customer acquisition targets. 

Operate more cost-effectively 

With improved productivity and efficiency, happy customers, and increased employee retention, you’re both saving money and driving revenue. 

So, when you invest in performance management, you’re not only improving your short-term cash flow — you’re laying the foundation for a more sustainable, cost-effective business in the long term. 

Ultimately, performance management is key to nurturing a skilled, engaged, and focused team who can help you achieve your goals.

Whether you’re looking at how to improve the customer experience, how to create a positive workplace culture, how to cut costs and maximise your small business budget, or how to scale a business sustainably; the right performance management techniques will get your whole team aligned and on track for success.

9 performance management techniques for your small business

1. Set SMART goals

Effective performance management starts with setting clear goals. This provides focus and direction, and ensures that everyone knows what’s expected of them.

First, identify your key business goals. Then break these down into smaller goals and tasks for each employee, following the SMART framework (setting goals that are specific, measurable, achievable, relevant, and time-bound).

If your overarching objective is to increase sales, for example, you might set employee goals that focus on leveraging email marketing for your small business. 

Here’s how you could turn this into a SMART goal:

“Develop and launch an email marketing campaign to target current and past customers. Send out at least three promotional emails per month, featuring our most popular products and a special discount or offer, with the goal of getting at least 20 sales via email by the end of the quarter.”

As you can see, this gives your employees a very specific outcome to work towards, allowing them to focus their efforts and track their own progress. 

2. Create personal development plans 

A personal development plan (PDP) sets out a roadmap for employees to improve their skills and advance in their careers — all while contributing to the success of your business.

A good PDP outlines:

• The employee’s current skills and strengths, as well as areas for improvement;

• The employee’s professional goals and aspirations, ideally related to the company’s objectives;

• Specific actions employees can take to address skills gaps and achieve their goals (e.g. attending a certain training course or learning new tools);

• Specific actions you can take to support your employees (e.g. providing access to training and resources). 

Create personal development plans collaboratively with each employee, and review them regularly (say, every three to six months). This gives your employees a sense of purpose — and ensures that your team’s skills evolve in line with the needs of your business.

3. Provide adequate training

A crucial part of performance management is making sure that your employees are equipped to succeed. This means providing adequate and focused training. 

Employee training can take many different forms — from on-the-job learning, shadowing, and cross-training, to more formal workshops and courses. 

No matter what type of training you provide, make sure that it aligns with your business needs and goals. If you want to improve the customer experience, for example, you might train your employees in what is good customer service and how to deal with difficult clients. 

If your goal is to expand your online presence, you might provide training that focuses on how to use social media for a small business. 

And, for maximum impact, all training should be coupled with clear goals and feedback, as well as opportunities for employees to practise and implement what they’ve learned.

4. Hold regular check-ins

When it comes to performance management, communication is key. Don’t wait for formal reviews or specific points in the year to discuss performance; make it an ongoing conversation that you visit regularly. 

You might schedule short weekly check-ins to catch up with your employees one-to-one, or get into the habit of striking up an informal conversation to discuss how things are going. 

It doesn’t matter what approach you take — as long as you create regular opportunities to discuss the progress of specific goals or projects, address any challenges and issues, and provide support and feedback.

Not only do regular check-ins keep your employees on track; they also help to foster collaboration, trust, and healthy communication in the workplace. 

5. Encourage employee self-assessment

In addition to providing your feedback as an employer or manager, encourage employees to evaluate their own performance. 

You might provide a simple self-assessment form as part of your official performance review process, asking employees to reflect on their recent challenges and successes. 

Or you might take a more organic approach, asking your employees “How do you think you did?” or “How do you think that went?” in relation to specific goals or projects. 

With regular self-reflection, employees will take ownership of their professional development — and be more proactive about learning and improving. 

6. Gather peer feedback

As an employer, you can’t possibly keep sight of everything that’s going on within your team. 

While you’re focusing on the logistical and strategic aspects of running your business — getting ahead of year end accounts, adjusting your pricing strategies, or going all-out with small business networking — there are certain things you’ll miss. 

This is where peer feedback comes in as a highly valuable performance management technique. 

With peer feedback (or 360-feedback), you ask employees to evaluate their colleagues’ performance — usually anonymously. This provides a well-rounded picture of how each employee is doing, and gives you valuable insight into team dynamics.

7. Implement formal performance reviews

Besides ongoing, informal check-ins, it’s important to create a more formal and structured space to discuss employee performance. These should be scheduled at regular intervals, and well in advance — say, every six months — so employees have a clear timeline to work with. 

Use these reviews to reflect on the past six months, ideally celebrating achievements and highlighting areas for improvement in equal measure, and to set new goals and objectives for the next six months. 

This is also a great opportunity to manage your own performance as an employer. As part of the formal review process, ask employees to provide feedback on what’s going well within the company (from their perspective) and what could be improved. 

8. Recognise and reward progress and success 

Performance management shouldn’t focus solely on how to measure performance. It’s just as important to think about how you’ll recognise and reward your employees’ achievements. 

Recognition and reward can take many different forms; it ultimately depends on your budget, personal preferences, and overall company culture. 

For some, public recognition (such as a shout-out during a team meeting) is especially meaningful, while others might prefer a more private thank-you.

I you can, try to offer rewards that go beyond verbal praise — especially for major wins like finishing a long-term project or completing a course or qualification. If your budget allows, you might reward your employees with a team lunch, a small bonus, or a gift card. 

However you express it, recognition is crucial for boosting morale and motivating employees to both improve and maintain their performance over time.

9. Create a positive work environment

If you want your employees to reach their full potential, think about how to create a positive working environment — an environment in which they can truly thrive. 

A positive workplace is one that prioritises respect, communication, transparency, and trust. It fosters psychological safety, allowing each and every employee to show up as themselves and feel welcome and included, and supports collaboration, well-being, and a healthy work-life balance.

At the same time, consider the physical setup of your workplace. Make sure your employees have all the tools and equipment they need to do their job. And, if you’re running a brick-and-mortar business, create a space that’s safe, comfortable, and welcoming. 

By improving the work environment, you can reduce stress and boost engagement — ultimately improving employee performance.

What to do if an employee is underperforming 

Even just one underperforming employee can have a major impact on your business. So, if you’ve got an employee who’s not pulling their weight or meeting their goals, it’s important to act quickly.

Here are some steps you can take to address poor performance:

• Open the lines of communication. Have a private conversation with the employee in question to find out, from their perspective, what’s impacting their performance. Ask open-ended questions to hear how they would evaluate their own performance so far, and seek to identify the root cause.

• Provide honest and constructive feedback. It’s impossible for an employee to improve their performance if they don’t know exactly where they’re going wrong. Share specific feedback, focusing on situations and behaviours with concrete examples — and explain the impact this has on the business and the wider team. 

• Set clear goals and expectations. Having identified the root cause and shared your feedback, it’s important to look ahead. Work together with the employee to set goals (keeping the SMART framework in mind) and reiterate what’s expected of them in their role. At the same time, discuss how you can support them and ask what they need from you in order to improve. 

From there, be sure to check in regularly to discuss the employee’s progress, share further feedback if necessary, and acknowledge their efforts and improvements.

Key takeaways and next steps

If you’re hiring even just one employee to help you run your business, you need to have performance management on your radar.

With the right performance management techniques, you can:

• Align your employees’ work with your overall business goals;

• Maximise productivity and day-to-day efficiency;

• Ensure a positive experience for your clients and customers;

• Boost employee satisfaction and retention;

• Operate more cost-efficiently. 

Whether you’re exploring brick-and-mortar business opportunities or expanding one of your online business ideas — effective performance management will guide you towards long-term stability and success. 

Next steps

Are you ready to leverage performance management techniques and unlock your team’s full potential? Here’s how to get started:

1. Define your goals. Outline one or two key business objectives you want to achieve within a specific time frame — say, the next quarter or the next six months. These will serve as your north star, shaping your performance management and goal-setting efforts. 

2. Choose your performance management techniques. Refer back to the nine performance management techniques we shared throughout this guide and pick those that make the most sense for your business. Think about how much time and money you can realistically invest in performance management, as well as the tools you have available. Start simple with just one or two — for example, setting SMART goals and implementing regular check-ins — and then scale up as and when necessary.

3. Communicate with your team. Once you’ve established your key objectives and decided which performance management techniques you’ll implement, discuss this with your employees. Let them know what performance management means for them, how it will impact their work, and what they can expect going forward.