Article: Tackling performance evaluations: A guide for MSME leaders

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Tackling performance evaluations: A guide for MSME leaders

Performance evaluations play a critical role in enabling top leaders to identify emerging talent and address skill gaps. Read how you can improve the existing techniques and drive better results.
Tackling performance evaluations: A guide for MSME leaders

SMEs have long emerged out of the shadows of large corporations to become a vital component of India’s growth. According to the Confederation of Indian Industry (CII), they contribute significantly to both the manufacturing and service sectors in the country. The report notes that it contributes over 6% of the manufacturing GDP and 25% of the service sector GDP. 

However, their contribution to India's GDP is not the only role SMEs play in the country. Today, they are an important hub for creating jobs, as they employ over 120 million. 

Additionally, they tap into the entrepreneurial spirit of, and open up economic benefits for, rural parts of the country. 

Like in many other sectors, however, the past few years have revealed gaps within the SME ecosystem – among them, gaps in workers' skills.

No matter the size of business, performance evaluation plays a key role in improving internal talent growth. And while they remain a challenge for leaders across the board, SMEs face stricter financial conditions and technological gaps when it comes to their people processes. In a disruptive business ecosystem, such conditions have forced leaders within SMEs to build more impactful ways of conducting performance evaluations. 

Here’s a guide to tackle evaluations in MSMEs and start-ups and obtain the best results: 

Make performance evaluations more frequent

While evaluations are often limited to once-a-year programs, SMEs need to have an appraisal system that is more frequent. With the goal to generate revenue being stricter in the case of SMEs, a more regular performance evaluation can be greatly beneficial. In addition to enabling SMEs to course-correct more often, more frequent evaluations help leaders keep a tab on productivity levels and identify high performers. 

Multiple evaluations throughout the year help keep the employees motivated. In contrast, employees may easily lose interest when they do not know their contribution to the company or where they stand in their performance.   

Streamline data collection

Data-backed decisions form the bedrock of a good performance evaluation. 

Companies must capture what their employees are doing to better reflect their productivity levels. Having structured data – captured through multiple touchpoints – helps leaders create a complete picture of their employees' abilities and interests and reduces the possibility of biases to flow into the process. But it isn't enough to simply capture data holistically. Such data should also be streamlined to properly assist managers and leaders to make decisions. Uncaptured or even siloed data risks losing its meaning over time. SMEs often fail to leverage such employee data, leading to misaligned evaluations and missed opportunities.

Focus on integrated solutions

By leveraging integrated data solutions like ERPs, leaders can flexibly capture and manage performance data as they grow and diversify. As the changing nature of work like hybrid and remote work rises, an integrated platform provides leaders with a complete picture of employee productivity. 

Data from multiple functions and geographies can be consolidated into a coherent decision-making platform for SME leaders. Integrated solutions provide leaders a way to identify, gather, and analyse context-relevant data across their enterprise and make evaluations more impactful. With real-time insights for decision-making, organisations can aim for better business outcomes even in the face of uncertainty.

Use technology to minimise errors

Technology can support leaders to future-proof their practices. Many hope to scale their business. Adopting HR technology enables them to shift from error-prone manual processes to automation. 

Repetitive processes can be standardised and automated for smoother operations across the HR function and can deliver a 360-degree view of an employee's performance. It also helps leaders drive maximum benefit out of their evaluations. 

Like other business organisations, SMEs also operate in a volatile, ever-changing environment. They are vulnerable to fluctuations and disruptions in the ecosystem. To make their business processes future-proof to disruptions, many require innovative ways to address their talent concerns. This means SMEs have had to innovate and figure out newer ways to ensure their performance evaluation processes are primed to identify and accelerate the growth of skilled people. 

Most SMEs consider investment in a digital performance management system an added expense when they have limited resources to monitor. But by leveraging digital technology and adopting a holistic perspective, leaders can be more impactful with their employee performance evaluations, which is a key element of talent innovation. 

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Topics: Performance Management, HR Technology, #PerformanceBeyondProductivity, #SME Spotlight, #SMEcorner, #HRTech

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