When Jack Welch took over as the head of GE in 1981, he instituted a “rank-and-yank” system where employees were ranked against each other. Originally based on the military’s method for identifying officer candidates in World War II, this rank-and-yank system involved laying off the poorest performers. It was so effective that around 60% of Fortune 500 companies used some type of appraisal system by the early 2000s. Welch’s innovation turned GE around and led the company to success. In turn, GE’s success inspired other companies to adopt performance management systems. While GE was one of the most famous adopters of performance management appraisals, the company eventually realized that the rank-and-yank system had to go. In 2005, Welch quietly stepped back from firing the worst performers because he realized it was endangering GE’s spirit of collaboration and encouraged too much competitiveness between team members.
Although performance management systems have changed, GE and the world’s top companies still use some form of performance management. These systems help to increase employee engagement, improve performance, and provide regular feedback. Today, Welch has a more balanced approach to performance management, but he still believes it is key to ensuring productivity and profitability as a company. He says, “What could possibly be more important than who gets hired, developed, promoted, or moved out the door? Business is a game, and as with all games, the team that puts the best people on the field and gets them playing together wins.”
Top Performance Management Practices for Companies That Have 50 to 149 Employees
If your company has between 50 and 149 employees, right now is an excellent time to focus on your performance management approach. With so many workers, you need a systematic, consistent way to communicate performance expectations and encourage a higher level of productivity.
Set Performance Goals
When designing your performance management system, start by setting performance goals. To do this, review each worker’s job description. The employee’s major performance objectives should be in their job description. If they aren’t, you may need to update your job descriptions so that they are in line with your team’s day-to-day tasks.
You can break down large performance goals into annual, quarterly, or monthly goals. Once you have decided on the right goals for each employee, you should discuss them with the employee.
Communicate Performance Expectations
Communication is incredibly important for performance expectations. Workers should never feel surprised by their annual performance review. They should be informed about their goals and on-the-job performance on an ongoing basis. Other than annual performance reviews, you may want to use weekly check-ins, quarterly reviews, and similar techniques for communicating performance expectations.
You should start communicating your expectations from the very first day you hire a new employee. During onboarding, it’s a good idea to get workers to sign a copy of their job description. Review each part of the description with them, so they are aware of what their role will be at your organization.
Create Rubrics for Gauging Performance Standards
Rubrics are a good way to ensure fairness and consistency in your performance reviews. Typically, the rubric should include the following things.
- Criteria: Criteria represent different competencies that the worker should have.
- Indicators of the Criteria: Within each criterion, you should include a description and indicators that represent the criteria. For example, the indicators for punctuality may be clocking in on time, having few unexcused absences, or volunteering to cover shifts as needed.
- Rating Scales: A rating scale shows how close an employee is to meeting a certain goal. Each criterion is given a different rating, and these are added together to represent the employee’s overall performance.
Provide Annual Performance Reviews
One of the most common performance management techniques is the annual review. At the start of the review, you will likely want to discuss the employee’s past year. Then, you can go through each criterion listed in your rubric and talk about the employee’s performance.
For performance reviews to be effective, you need to be communicating about these goals throughout the year. Give workers feedback about how they are doing on different goals and provide them with training support for reaching those objectives.
Reward Employees for Reaching Performance Goals
To encourage workers to reach their performance goals, create rewards. Typically, companies do this by linking annual performance reviews to raises. However, you can also reward employees through gift cards, thank-you notes, employee-of-the-month certificates, preferred schedules, or any other reward that works for your organization.
Important Reminders to Keep in Mind for Companies That Have 50+ Workers
Once you reach 50 workers, a number of compliance rules kick in. As you navigate this stage in your company’s growth, you should keep a few important reminders in mind.
Workers Can Outsmart HR Practices
When you hit 50+ workers, your workers can become smarter than you are. You need to get HR systems that provide efficient employee self-service options without enabling workarounds, like buddy punching and time card fraud.
As a part of your new HR tools, you can create a compliance library with updated HR policies, onboarding materials, and other important training documents. Digital HR libraries are extremely effective training tools, and they make it easier to document that each compliance-related training took place.
Avoid One-on-One HR Setups
You don’t want to be directly training and managing each employee on your own. Once you reach 50+ workers, your HR practices need to be standardized. HR systems, like digital training sessions and payroll software, can help you become more efficient. If you have an integrated HR system, employees can request time off, update benefits, and change payroll information on their own without having to get help from your HR department.
This is also a good time to create standard operating procedures for your HR department. Employee turnover is bound to happen eventually, and you can’t afford for your top HR workers to leave without clear policies and procedures in place.
Consider Hiring a Lawyer
If you are lucky, your small business made it to this stage with minimal disputes, lawsuits, and audits. However, legal disputes become more common as your company grows in size. At this stage, it may be a good idea to hire a lawyer who can handle your labor, environmental, trade, and commercial disputes.
Don’t Forget Legal Compliance
As your company grows, you should seek out help with your HR compliance. Many HR rules are required once you hit 15 to 20 employees. Then, another set of rules kicks in once you pass the 50-employee mark. The following list includes just a few of the rules you’ll have to comply with once you reach 50 workers.
Family & Medical Leave Act (FMLA)
If you employ at least 50 workers in a 75-mile radius, the FMLA applies to you. This law allows workers to take 12 weeks of unpaid leave without being let go for certain qualified reasons.
Affordable Care Act (ACA) Provisions and Reporting Requirements
Under the ACA, workers with at least 50 full-time or full-time equivalent (FTE) workers must offer insurance to their employees. This insurance must provide the minimum value and be considered affordable. Additionally, the ACA requires specific reporting requirements as well.
Form 5500
Form 5500 is required for reporting about benefits, like pension plans and insurance. The short version is available if you have fewer than 100 workers.
Affirmative Action Plan
If you are a federal contractor or subcontractor, you must create an AAP for your business once you have at least 50 workers. It is also a good idea to create an audit process and a method for documenting your compliance.
EEO-1 Reporting
EEO-1 reporting is required for federal contractors who have at least 50 employees and private sector employers who have at least 100 employees. As a part of your reporting requirements, you will have to submit demographic data about your workforce and the results of an employee survey.
State Laws
Each state has specific laws and regulations for businesses. For instance, every state is bound by the WARN Act to report layoffs of 50+ workers if they have at least 100 employees. However, many states, like New York, Hawaii, and Wisconsin, have mini-WARN Acts that apply to companies that have at least 50 workers.
Prepare Your Business for Long-Term Growth
During this stage in your company’s growth, you should create performance management rubrics and tools to encourage better employee performance. HR is no longer a one-on-one process, so you need to find ways to automate your HR functions and ensure each employee receives the encouragement they need to succeed.
Interested in learning more about performance management and HR best practices that drive business growth? Asure can help. Connect with our small business HR and payroll experts today.