When was the last time you conducted formal employee reviews? Not
just casual conversations — the “nice work” compliment to a colleague in
the hallway or the grudging remark that
occurs behind closed doors when a worker isn’t pulling his or her weight.
Unfortunately, in many companies run by
hands-on managers who prefer to work in
the trenches, the all-important employee
evaluation process is brushed aside.
“What happens in some cases is, suddenly, business owners open their eyes and
recognize that an employee who has
worked at the company for years is no
longer the best person for the job,” says
Craig Johnson, president and CEO of
Franklin Bank, Southfield, Mich.
A formalized system, regular reviews and
discussions with your adviser trifecta —
banker, accountant, attorney — will ensure
that the human capital at your company
has the capacity to grow with your organization.
Smart Business asked Johnson what
employers should keep in mind when
developing a formalized review process
and why a review isn’t “just another meeting” on the calendar.
When might a banker or key adviser recognize that an owner has neglected the employee review process?
Many times, an owner’s concentration is
so attuned to daily operations that he or
she neglects the back-office responsibilities necessary to ensure that a business is
prepared for growth. In particular, are the
team members that the owner currently
employs prepared and/or able to move forward with the company and, even more
importantly, has the owner communicated
to employees what ‘forward’ is? What are
the organization’s goals for the future and
has the owner communicated how each
player must contribute to make those happen?
Bankers generally notice that an owner is
on autopilot, so to speak, and failing to
conduct annual reviews to discuss goals
and expectations when the accounting
support begins to show weaknesses.
Maybe an administrator fails to produce timely reports for the bank or, perhaps, a
banker notices inaccuracies in those
reports. The same bookkeeper that managed financials when the business started
up may have done a fine job when the company was small and accounting applications were basic. But as a company grows
in financial complexity, an owner may
need to re-evaluate whether this employee
has the capability of learning necessary
skills. Because bankers and other outside
advisers view the company from a broad
perspective, they often identify these internal deficiencies before the owner — especially if that owner has no formalized
review process in place.
Why is a formal review process critical for
organizations of all sizes?
An employee review process allows owners to look at where the organization is
today and plan for the future. Reviews
force owners to step back from daily operations and evaluate what the business
needs by way of manpower to continue
forward. How have the organization’s personnel needs evolved over time? What
needs currently are not being met? Can an
employee on staff fulfill those responsibilities, or will the owner need to seek skills outside the organization? These are questions that owners must constantly ask so
they are prepared to handle growth.
What should the process involve?
In essence, a formal review process is
one piece of the goal-setting puzzle for
owners. Owners should meet with employees on a regular basis: annually, biannually
or quarterly. Communicate how often
these reviews will occur so employees
know when to expect them. During the
review, discuss shortcomings, positive contributions to the company’s success and
what skills the employee may need. Allow
employees an opportunity to provide feedback and set their own personal goals.
Document these discussions and create a
formal rating system or progress report of
sorts so employees understand where they
have improved or need to sharpen skills.
Getting this information on paper is crucial because people interpret verbal conversations differently. If you put it in writing, ‘These are the five things I want you to
improve next quarter,’ there is no confusion concerning your expectations.
Why should an owner involve advisers when
creating a review process?
Advisers can help perform needs assessments. Where is a business lacking? If the
longtime bookkeeper isn’t equipped to
grow with the company, advisers can help
owners question whether this employee
can be trained or whether a new solution is
necessary. Perhaps the owner needs to hire
an in-house accountant, or maybe it is
more economical for the business to fully
utilize the CPA before bringing in a full-time person. A trusted group of advisers
can ask you the tough questions while you
set goals for your business and address
what improvements in your human capital
will precede growth.
CRAIG JOHNSON is president and CEO of Franklin Bank,
Southfield, Mich. Reach him at [email protected] or (248)
386-9860.