Performance Management is a ‘Business Process’ and not just a people process. And therefore whether a business is small or a multi-billion dollar organization, it’s an essential business process for any size of business.

Diversity in large corporations, necessitates them to formalize these systems for fair, consistent and effective results. Small businesses on the other hand, in the zest to survive, sustain and grow, do not realize the importance & power of these processes to enable and prepare them for the growth.

Smaller companies perceive that they ‘do not’ have the budgets that large corporations enjoy. Their funds are tightly integrated with some of the more ‘perceived’ important functions primarily such as sales and product development. They have very little left to invest in their most important resource: the employees.  Even some startups, who receive large funding from their investors, are typically known for their aggressive growth. The entire focus in the initial stages is on developing a product that has the capability of disrupting the status quo. Once the product is ready, these companies shift most of the focus on selling that product. So the performance management agenda, is then looked upon as a large corporation agenda. This is one of the major reasons why performance management for small business is really important

In fact c that a small business faces as they work towards crossing the bridge to become a larger sized business.

1. Limited Resources – In small businesses, with limited resources, a lot is expected from every member of the organization. At times, this is taken for granted and can lead to loss of focus on core areas. The performance management system helps effective prioritization of the focus areas while also acknowledging this stretch that every individual is doing in his/her own capacity.

2. Focus on delivery of commitments – The energies of people in small businesses are focused on completing the tasks to fulfill commitments. They hardly find time to sit down and reflect on how deliveries are happening. It tends to get into an unplanned, unstructured work processes leading to pressures on the members to deliver commitments. This list can be unending on how the day to day struggles are addressed. Therefore all the more need to have a formal performance management system for small businesses. It is an effective organization building process, to take those moments to take a stock of “how” things are happening and be able to break the vicious cycle of reactive working to meet customer commitments. The performance management system for small businesses is both a tool to address current and forward looking organizational commitments.

3. Limited Capabilities: The formation of small businesses is anchored around the ideas and thoughts of say one, two or a very few people, who come together to convert these ideas to reality. While translating these entrepreneurial ideas into reality, the teams are built basis needs and limited financial strength. So the teams are not necessarily ready to deliver on these capabilities.  They come with limited exposures to be with small businesses (that’s how they are affordable!). This leads to day-to-day struggles to deliver the results with limited exposure and capabilities – the pace, actions, tasks, timelines, prioritization, personal efficiency, effectiveness, and so forth. While they are learners, not sufficient time is spent on incorporating the learnings into themselves to build capabilities. Its learning as they do things without any formal structures. The performance management system for such businesses is an excellent capability building & developmental tool. It provides a platform to capture the learnings and formalize the developmental needs. This formal framework towards capability building surely is a clear differentiator to move from being a good organization to being great.

These aspects along with many more (the list can go on and on!) necessitates small businesses to desperately implement an effective performance management system. It addresses the prime existence for any organization of achievement of the overall organizational ambitions and goals. Not to forget, that an effective performance management system plays an important role towards alignment of the people, their contributions, expectations, harmonization, engagement and most important communication.

Setting up and implementing does not take huge financial budgets; it just needs the commitment of the leadership to drive the business. So the misconception that such performance management processes are only for large corporation is not true. The key anchors need to be driven with passion and focus These are crucial for any size business and more so for small businesses as they reach their tipping point for growth!