[Upcoming Webinar] Supporting your employees financial well-being in 2023

Performance Management Issues to Actually Be Concerned About 2023

Organizations talk about reinventing performance management every year. Post covid-19 the rise of hybrid work models and the increasing inflation globally is making performance management a critical moment to reconsider the purpose and significance of performance management programs. These are the future performance management issues to be monitored based on major industry trends.

It is obvious the emerging working models have made it critical for performance management practices to adapt to become more human and people-centred. In many cases, employees can achieve their set performance objectives, despite the fact they did not fully use their skills and capabilities to support the organizational strategic-project agenda. This means that many organizations are sitting on surplus skills and resources that are not utilized because no one asks the employee to do so. 

It is high time that human resources move toward the concept of performance enabling instead of performance management. This would mean that a business’s performance goals can be cascaded down into projects and assignments associated with employee skills and not their job titles.

This is needed especially as research shows that there is a major shift in employee perception of workplace interactions. For example, research shows that 20% of employees feel catfished by job descriptions, 54% are experiencing burnout, and just 14% believe that their feedback to management drives change. The good news is that it’s not too late to turn that ship around, and we hope to give you a head start with these HR trends for 2023.

Reevaluate Previous Strategies and their Effectiveness

As a business manager, it is easy to feel overwhelmed with everything on your plate. New items always appear on your task list, especially at the year-end with annual tasks like budget and workforce planning, end-of-year reporting, performance review season, and others. It might feel like your only option is to put your head down and power through as best you can to get everything done.

But, as the old year ends and a new year emerges, it is wiser to pause and consider the state of your business, especially regarding your workforce. With no end in sight for the rising inflation and the crisis, is there anything you could have or wish you had done differently in 2022?

It is tempting to focus on the future and not assess the current year’s mistakes and adjust for them. However, skipping this step can prove to be a fatal mistake.

 

Learning from Mistakes

A trap many business owners can fall into is to start working on their plans for next year rather than taking the time and assessing what they did well, or not so well, in the year ending. Sometimes, planning for the future seems easier than looking back (and accepting mistakes).

Put simply, whatever we don’t finish this year comes back to trouble us in the next. That’s especially true with most management issues like cash management and, increasingly, people and human resources.

One issue many business owners are struggling with is payroll. Faced with growing inflation and talent shortage, many businesses are in trouble due to both shrinking margins and high payroll costs. 

 

Focusing on hot Issues

There are nine key areas linked to people and human resources that should be a priority for every small business manager as they wrap up the year:

  1. Employee benefits: Review the business’s benefits package and measure how competitive it is for your market. If you plan to make additions, make sure it is budgeted appropriately. For example, if you are considering adding health benefits, a 25% gross up on base salary costs is a good starting point for budgeting purposes.
  2. Handbook Review: Employee handbooks should be reviewed annually to ensure compliance with new rules and regulations. It’s also critical to ensure that policies remain aligned with company values and culture, as well as the needs of the business and its employees.
  3. Bonuses and Deferred Profit Sharing: Year-end and the related financial analysis also means it’s a good time to look at employee bonuses. Businesses that have retirement planning in place should reassess how much bonus money should be paid in cash and how much deferred profit sharing, as it can be tax efficient for both the business and the shareholders.
  4. Compensation structures: With ongoing disorder in the talent market. Your salary structures should be reviewed for internal equity and market position. If compensation is clearly understood and perceived as equitable, employees will continue to be engaged and contribute actively to organizational goals.
  5. Merit (salary) reviews: Every business should have merit reviews at the end of the year. Businesses need to ensure that their employees feel that their contribution is valued. If your people believe that going ‘above and beyond will be rewarded, they will respond positively to stretch goals; if they don’t, then they won’t.
  6. Promotions: Promotions meet an organizational need and the individual need—and readiness—for career growth. Review promotional opportunities primarily through the lens of business operations. What roles do you need in place to be successful next year? Then look at who you have who is ready to take on additional responsibility.
  7. Performance development conversations: Managed separately from salary or merit reviews, performance development dialogues are an opportunity to connect with employees and exchange feedback on how things are going in their current role. These reviews should be more forward-looking, focusing on what needs to change to facilitate learning, career growth, and increased organizational contribution.
  8. Employee feedback: Conducting employee surveys, focus groups, or even 1:1 conversations are great ways to gather feedback on what’s working and what’s not inside the organization. However, these would only be useful if then you ask the question and the answer is acknowledged, no matter how harsh it sounds. A successful employee survey always has an action plan behind it, where the issues raised are addressed openly with a roadmap for resolution if needed.
  9. Workforce planning: This is part of the budgeting process and includes estimates of the required headcount, assessing new vacancies, and any organizational changes needed to fuel the growth of the business. 

It includes promotions that create a vacancy and new products or services that will require manpower to deliver. Workforce planning begins at the same time as the overall financial budgeting process and continues to be updated throughout the year in response to business needs.

Prepping for 2023

Even as you do the work to assess how the past year went, it’s also critical to ask yourself important questions to better prepare for the coming year. Experts suggest handling questions like:

  • Do I have a budget and workforce plan that guides my hiring decisions? Do we have updated, accurate job descriptions in place?
  • What safeguards do I have in place to protect profit? How do those specifically relate to how I pay my employees?
  • How am I continuing to build and grow a workforce where employees feel safe and valued for their work?

The Bottom Line

Nobody knows what will happen in 2023. But it seems likely that the economic turbulence we have seen this year will continue—it’s time to get your business sorted when it comes to hiring, rewarding, and reorganizing. Setting up good business metrics for decision support on all things related to employment is critical to confidently handling future uncertainty.

Finally, while it’s vital to address any mistakes left over from 2022, it can be equally valuable to stop and celebrate any victories from this past year. 

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