There are no doubt some happy faces at the clutch of SMEs who’ve made it onto the Sunday Times 100 Best Companies to Work For. The run-down of successful contenders makes interesting reading. There’s a real variety of businesses, with everything from a children’s entertainment company, to an electrical cable supplier.

One thing these businesses do all seem to have in common, however, are open cultures where the lines of communication between managers and staff are open and people are encouraged to fulfil their potential. Indeed, two of the key measures used by those who compile the Best Companies to Work For rankings are how positive staff feel about their managers and to what extent they are stretched and challenged by their job.

Now speaking as someone who’s worked for several SMEs, it’s certainly true to say that the entrepreneurial, fast-moving approach encourages employees to be enthusiastic participants rather than simply ‘passenger’s in the business. It’s much easier for people to get to grips with where the business is headed and to see what they need to do personally to contribute.

Why wait to engage with employees?

You don’t need to wait for your annual appraisal to be told what your objectives are and what you might need to do differently to achieve them. It’s usually pretty obvious from the day-to-day inter-action with your boss and the feedback from customers how well you’re performing, what you need to do more of and where you might need to pull yourself up a bit.

The problem with this ad hoc approach however is that it’s… well all a bit ad-hoc really. Yes, you almost certainly do have some kind of formal annual appraisal – but the reality is your manager probably hasn’t had time to prepare properly and has just scribbled a few notes about what to discuss on the back of a scrappy bit of paper.

There’s also a tendency for what’s been discussed and agreed not to be documented in any consistent way. So although you may have had a really positive conversation about the need for you to go on a particular course or shadow a colleague to build your expertise in a specific area, it gets lost in the mists of time or pushed aside in favour of more pressing day-to-day operational priorities.

When hard-pressed managers are ‘fitting appraisals in’ on top of their other commitments, it’s also very easy for inconsistency to creep in across the business. One member of staff gets their performance review done and is rewarded with a pay rise (if they’re very lucky) – while someone on the other side of the office is still waiting three months later. At best, that individual might feel a bit miffed. At worst, they’ll feel unfairly treated and resentment against colleagues might set in.

Now I’m not suggesting for a moment that SMEs should stifle their natural tendency to do everything on the hoof and to be highly responsive to what’s happening at the time. The fast pace and ability to act quickly without bureaucracy is one of the joys of working for a small business. But when it comes to performance management, a bit of structure can be positively helpful.

Let performance management software do the hard work

Thanks to the latest technology, that doesn’t mean burying yourself under piles of standard forms and ploughing mechanically through a list of questions that don’t really relate to the individual or the job in hand.

Today’s performance management software makes it easy for managers to plan for appraisals, record what’s been discussed and make sure agreed actions don’t slip through the net. Your people management software can be set up to nudge them when appraisals are due or when it’s time for a quick informal check-in.

Making sure these conversations take place on a regular business gives the business a chance to make sure it’s really stretching its employees and using their talents to the full – and that’s particularly important in a difficult economic climate where SMEs need all their people to be performing to the max.

It’s also a great way to help build engagement and commitment. Most employees really appreciate the opportunity to sit down and discuss how they feel about the job and to make suggestions about what else they could do to contribute to the success of the business.

Of course any performance management software system is only as good as the people who are managing it – but it would be interesting to know how many of the SMEs on the Best Companies to Work For list are using technology to help drive performance?

What do you think? Could performance management software help SMEs improve the way they tackle appraisals? What’s your experience been of automating the appraisal process?

You may be interested in reading our guide to keeping staff engaged.

Erika Lucas author image

Erika Lucas

Writer and Communications Consultant

Erika Lucas is a writer and communications consultant with a special interest in HR, leadership, management and personal development. Her career has spanned journalism and PR, with previous roles in regional press, BBC Radio, PR consultancy, charities and business schools.