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Why small businesses need performance appraisals

October is typically the time when companies start planning for annual performance appraisals.

But not every company. Particularly in smaller businesses, finding time for written employee evaluations can be a real struggle – or the business owner may prefer to take a more informal approach to performance management.

Why appraisals are well worth the time and effort

Smaller businesses are very often like families, with the owner interacting closely with their employees. This makes some business owners wary of implementing formal performance management procedures, for fear of making the company feel too corporate. But is the odd ‘Nice job, keep up the good work,’ really the best way to get the most out of your people?

Effective HR is about working with and enhancing the company culture. This means, rather than souring the friendly atmosphere you’ve worked hard to cultivate, a well-designed performance appraisal process will only bring out the best in the business and its people.

Without such a process, performance issues can be neglected or overlooked, creating bigger problems for the future. Plus, an informal approach to performance management can leave some employees feeling like they receive different or inconsistent treatment compared to other team members. This can lead to tension, and even legal troubles.

With regular performance appraisals, you can nip any potential performance issues in the bud and focus employee development in a positive, proactive and consistent way.

Getting the most out of your people

The best appraisal process for your business will depend on a number of factors, but the important thing is to create a system that’s consistent across the business.

This is likely to include:

  • Face-to-face meetings with each employee to discuss their performance over the past year, and to agree development and performance goals for the coming year.

  • A written record of development and performance goals, including a timeline or milestones for achieving objectives.

  • Regularly checking in with each employee’s performance throughout the year to assess progress against agreed objectives.

Whether you’re implementing a new appraisal process or looking to get more value from your performance appraisals, ForrestHR can help. We’ll support you throughout the whole performance management cycle, from designing processes from scratch, to managing employee evaluations on an ongoing basis. Discover how flexible, cost-effective HR support can help your people – and your business – grow.


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