As a small business owner myself, I see great value in using a PEO when it comes to tasks such as payroll, taxes, workers comp, government regulations, etc. However, I initially could not understand how a company that did not interact directly with my employees could possibly help me to evaluate and manage them.  There are many components to keeping my workers motivated, supervised, evaluated, and essentially happy working in my business. What could an organization outside of my industry and company culture possibly contribute to a performance review?

I’d like to share with you what I discovered. One of the first things that a PEO will do is remind you of the fundamental objectives in correctly managing employees; being able to identify weaknesses and help the employee work towards improving them, create goals and ensure they are obtained, and acknowledge individual initiative and achievements. These performance management practices are so important yet as a business owner it is easy to fall short due to the simple fact that there are not enough hours in the day to accomplish the tasks required at work and most likely in your personal life as well.

The second area that the PEO will usually focus on is the execution of strategy. Success is only grasped when a strategy is executed. Execution is the #1 issue for most CEOs and business leaders. Quality of execution separates successful companies from failing ones. Professional Employer Organizations help you to anchor your employees to your business strategy by clearly communicating business objectives and goals, making sure there are no mixed messages across your organization.

How exactly do they do this? They offer personal consultation as well as some impressive choices of software that you can tweak to your specifications depending on the size and objectives of your company. These include compensation management systems, analytics and reporting, employee profiles that let you track goals and performance, learning and development, succession & recruiting, and business execution software. These tools offered by PEO companies drive the success of your organization by helping to more tightly align the efforts of your entire workforce. When the entire workforce is involved & motivated this will drastically impact your bottom line.

Let’s use a compensation management system as an example. You have a real time tool that gives you complete visibility of what’s happening within your company. This provides a summary of goal details and identifies who is responsible for those goals, as well as lets you recognize top performers with better tools and information. With this data, you can be proactive and take immediate steps to course correct, allocate resources, or counsel employees. Under performers can see where they need to improve. This makes it easier for managers to drive a "pay for performance culture."   You gain visibility to your overall compensation budget as well as access to what the going pay rate is for similar jobs around the country (market salary data). There is even a social media component in some of these systems which makes communication between employees, divisions, teams, leaders and management so easy that it really promotes enthusiasm in your workforce. Sometimes you just need a little healthy competition from another department to boost motivation. Goal management is also essential in keeping employees focused on their objectives.

One of the challenges in executing goal management  is that employees don’t really know how to create effective goals,  The goals they set for themselves don’t always support the strategic goals of the company. The systems that PEOs offer give you the tools to communicate and track objectives across the organization. Employees are guided to make their goals specific, measurable, achievable, and on a time specific. Some of these programs offered already have hundreds of pre-loaded smart goals, employers and employees can even browse the "goal library" to help them focus and narrow down objectives.

A manager is given the ability to take any goal and distribute it to her entire team with a link to the goal. You can expand your goal plan to show how it is connected to every other goal in the organization & then everyone can track their progress. When employees understand how they affect the big picture and realize that what they do everyday matters, they generally feel some ownership and motivation increases. Business leaders have access to reports and analytics that can track objectives by category, employee, teams, etc. They can detect problem areas much sooner and take action.

PEOs also offer tips such as changing management practices to target specific areas of weakness. Specific examples of some of these changes include;

Changing How HR/Employment Admin Works

Remember, change doesn’t happen if you ask nicely and in fact people must be motivated to change.  This can mean reviewing current jobs, developing new job descriptions and mixing up incentive programs. The PEO can support some of this change management, in addition to providing training that can be tracked and implemented. 

Change how each department manager communicates

Often, the introduction of workforce planning is one of the first real strategic conversations departmental managers could review  with their PEO partner (this is not always the case – just a general observation). While conversations may have been previously about individual employee performance, it now shifts to a vision of the future and translating that vision into present and future  workforce requirements. It is critical that the PEO representative has a solid understanding of the strategy, can clarify when needed, and can facilitate decision-making.  

Changes in the management process

Before you get started with workforce planning, stop and think about the change on each of the groups involved and what communications need to be in place to facilitate awareness and acceptance. PEOs will counsel management on how and when improvement opportunities should be brought to the employees’ attention. Being aware gives motivation to the employee to strengthen their skills before their time of review.

Establishing goals quarterly and taking things one step at a time can make a difference in communication with your employees.  By starting with simple goals, you and your employees can see immediate progress which builds confidence and increases momentum. Identifying personality traits of your employees should help guide you as to which style of instruction they need. Providing very specific tasks to get something done may limit out of the box thinking and initiative in some workers, whereas others may need those micromanagement directives every step of the way. Therefore, when assigning tasks, give parameters based on the personalities you are dealing with, leaving room for individuality.

Providing acknowledgement for initiative is critical, however challenging if you are not the type of person that does so routinely.  A PEO will keep you on track with calendars and reminders for interaction with all employees.

Writing reviews

Far too many organizations make this an annual "check the box" exercise. Peos offer solutions that help managers write performance reviews quickly and accurately. For a business with under 10 employees, there are tools offering a writing assistant which helps you find the words for any situation, a skill library with over 50 skills to spur the start of the evaluation, and a step by step guide to walk you through the process.  For companies with over 10 employees, there are solutions where teams of people can provide reviews and you can link pay to performance, update goals, log in from anywhere, track progress, and review employee performance instantly. One exceptional feature was that managers could log in, access their employees’ self-reviews, and provide feedback to complete the process.

In summary, PEOs or ASOs or Employee Leasing Companies can identify key employees, give guidance on performing reviews, and put in place compliance performance based programs that can be extremely time consuming for a manager or business owner to undertake themselves. Their services also include improving your productivity and measuring it. Being able to create goals, give acknowledgement, drive initiative, and clarify company strategy can take away confusion and boost employee morale.

Focusing on these areas will ultimately increase the impact that performance management has on your business execution.  In addition, a failure to not use the these 4 best practices will ensure that the business focuses only on the past and not the future, a death sentence for any organization.