The next death by another little cut:
Don’t Give Employees KPI’s and Annual Reviews
“I Hate Annual Reviews”
I frequently hear this statement from owners and managers. Most put off annual reviews until they absolutely have to be done or don’t do them at all.
Why?
The most frequent answer:
“All they care about is how much more they are getting an hour. They don’t care what the review says. They leave either happy or pissed off.”
There is a difference between a cost-of-living increase and an increase given at review time because of great job performance.
First, Cost of Living Increases
Cost of living increases are generally given on January 1st of each year – and are just that, a raise because it costs more to live. Remember to raise your prices by the increase in the cost-of-living times 1.3 to cover the additional payroll expenses. For example, if the total increase in wages is $10,000, then multiply the sum by 1.3 to arrive at $13,000. This covers your additional payroll taxes, worker’s comp, etc. Make sure you raise your prices accordingly.
Second, Performance Reviews and Raises
If you hate performance reviews too, then it’s time to change how you do them.
First, every employee should have KPI’s: Key performance indicators which define their roles in your company. What are they responsible for? What will they be measured on? What is the baseline acceptable performance? What happens if they exceed their KPI’s? Are there bonuses?
KPI’s are communicated weekly or at least monthly. Then, the annual performance review should not be a surprise to anyone.
First, if you hate doing them, your employees will hate receiving them. Your attitude affects their attitude. Find a way to be positive about the review process.
- Reviews should NEVER be a surprise. If you do them only once a year, then it probably is a surprise.
- Reviews don’t have to include raises. Performance reviews are just that – performance reviews. Raises for great performance or cost of living can be separate.
- Reviews should be based on KPI’s – key performance indicators. What are the minimum performance metrics for their job? What happens if they exceed these metrics? This is where the raises or bonuses come in.
- Employees should know where they are with respect to KPI’s at least quarterly. Then the annual review is not a surprise. Many technicians know what revenues their truck has to generate each day and each week. They get their “report card” weekly. No surprise at review time.
- Salespeople have quotas and required closing rates – their KPI’s.
Employees should always know this as well as the bonuses for exceeding these minimum KPI’s. Bonuses don’t have to be money – they can be time off oriented too.
Communicate the KPI results frequently. When you do this, reviews are never a surprise and they are much more pleasant for everyone.
Next week – another little cut.
Thanks again for reading Financially Fit Business. I appreciate you!
How financially fit is your business?
Click here to take this one minute assessment.
Books/Audios that could help your business and you.
This is the perfect book for those of you who will make and KEEP your New Year’s Resolutions! James gives you some ideas that help you not only set, but also achieve your goals.
Click here to order on Amazon