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Why Small Businesses Need Employee Performance Reviews

Why Small Businesses Need Employee Performance Reviews

By: Melanie Berkowitz, Esq.

If you’re like most small business entrepreneurs, you are a mega-multi-tasker: part salesperson, part manager, part accountant and even part parent.  

Without a formal human resources department, many small businesses rely on their owner to make decisions about hiring, firing and all employment matters in between. And as any HR professional will tell you, dealing with personnel problems can take more than part of your time -- it can be all-consuming. That makes it all the more important to take a pro-active approach in managing employee development with effective performance reviews.

Avoiding the Issue Can Become the Issue
It’s easy as a small business owner to let performance problems slide (“Robert is having marital problems” or “Julia just had a baby”.) In other cases, a boss may assume that the casual conversation she had in the break room with an underperforming worker about “picking up the pace” was enough to address the issue. After all, one of the advantages of working for a smaller company is the company culture - - the close-knit environment and personal interaction between boss and employees.   

Some small business owners may wish to avoid the employment formalities of bigger corporations -- such as written reviews or probationary periods -- out of concern that such procedures would ruin the “family-like” atmosphere of the workplace.

But the desire to keep things friendly and personal can go too far. If a boss makes employment decisions based on personal feelings, he or she risks violating the law by treating employees inconsistently (see below.)  Remember, it is possible to maintain the collegial work environment of a small business while following important legal issues. Doing so will be good for any company -- big or small. It will also help focus employee development over time.

Be Sure to Document Employment Problems
By not documenting an employee’s performance problems and the steps taken to inform the employee about them, it’s almost as if they never happened. Avoiding the conversation not only jeopardizes employee development but can quickly create tension in a small workplace as other workers pick up the slack from the underperformer. 

How should a business owner address an employee’s performance problems?

  • Have a face-to-face meeting with the employee to discuss the issue.
  • Include a second person at the meeting if possible -- such as the employee who handles HR matters.
  • Document -- in writing -- what was discussed at the meeting, including the type of expected improvements, a timeline for review of the employee’s performance and consequences if the employee does not meet performance goals.  
  • If you’re considering employee termination, carefully assess whether the employee needs additional training or support to help perform the job.  Then, have the employee sign the document. A signature should not indicate that the employee agrees with the assessment, only that he or she has been informed of the issue. Allow the employee to submit a rebuttal which also becomes part of his or her file.
  • Be sure to revisit the employee’s performance as scheduled and hold the employee to the consequences if he or she has not met performance goals.

Be Consistent with Employee Evaluations
Take care to treat all employees the same with regard to leave, pay, discipline and other employment issues, regardless of what you may know about their personal lives. For example, if you discipline a male salesperson for failing to make his quota, you must similarly discipline a female salesperson even though you know she is a single parent whose performance issues are likely a result of childcare problems.   
As much as you might want to make exceptions for employees because of their personal situations, doing so can create the appearance of unlawful special treatment. The laws regarding employment  require that employers treat employees equally with respect to race, color, religion, sex (including pregnancy), national origin, age (40 or older), disability or genetic information.

Although it is true that some employees are entitled to workplace accommodations to help them perform their jobs, the rules governing how and when an accommodation is due are detailed and specific. Before making a workplace exception with respect to discipline, benefits or other work policies, it is a good idea to talk to an employment lawyer, or contact one of the EEOC’s small business liaisons with specific questions.  

Legal Disclaimer: None of the information provided herein constitutes legal advice on behalf of Monster.

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