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You don’t legally have to do performance reviews, but they can help you get the best out of your staff and keep your business running smoothly.
They’re also an important part of identifying and managing poor performance, which, if not addressed, could lead to dismissal.
Appraisals are usually done once or twice a year, though you might want to schedule a check-in with new employees earlier, to make sure they're settling in well.
Job reviews don’t have to have a formal structure, but there are a few things you should try to cover.
At an employee’s first performance review, set achievable goals and objectives that are relevant to their job. Give your employee a say in what their goals should be, and discuss what they’ll need to be able to achieve them.
At each appraisal, review and update the goals and objectives.
Have an open discussion about how they’re finding the role. Encourage a two-way conversation with ideas and input from your employee.
You could discuss:
Take good notes of each appraisal you do, and share a written summary with your employee afterwards to make sure you agree on what was discussed.
This is especially important if an employee is not performing — if you end up having to dismiss them or there’s a relationship breakdown, it’s important you have proof that you gave them warnings and took steps to try to help them improve their performance.
Tim has been working for Charlie’s car yard for six years, where he’s paid a guaranteed base salary and commission on each car he sells. Tim, who always meets his sales quotas, decides to ask for a higher salary.
Charlie is caught off guard – the only performance indicators he has in place are sales targets. He asks another dealer for advice, who expresses surprise at how high Tim’s base salary already is. The two owners then call other car yards to check the industry standard.
Charlie apologises to Tim for the lack of performance indicators and explains his base salary is already higher than average. If Tim wants a raise, Charlie can find him extra responsibilities, such as managing junior sales staff or sourcing new product lines. Tim agrees, and together they create benchmarks to justify a future pay rise.
Don’t wait for a full performance review to give your employees feedback or get feedback from them.
Setting up informal chats for once or twice a month with each employee will:
Employee performance(external link) — Employment New Zealand