Why evaluating employee performance is a top priority

Sure, founding a start-up can give you a heady adrenaline rush, and most newbies plunge head-first into business development, improving their offerings and, of course, piecing together an exciting and effective marketing strategy.

If these are your only priorities, then you run the risk of falling prey to the Achilles' Heel of first-time entrepreneurs. It goes by the boring name of 'employee evaluation'. But, boring or not, any seasoned entrepreneur will tell you just how crucial it is to have a loyal and motivated team. And one way to make sure you have a team that truly shares your vision is by putting in place an effective and well-structured employee evaluation process.

This means you have to provide feedback about the performance of your employees; praise or correct them when necessary; make suggestions in a friendly yet firm manner; and provide guidance for the growth and betterment of your employees.

Remember, in the long-term, any venture is only as good as the team that drives it. Here are some key insights from start-up founders that will help you make your employee evaluation techniques more effective.

1. Hire People With An Entrepreneurial Streak

As the founder of a new business, you have to be very focused about the first five or ten employees of your venture. Amarinder S Dhariwal, Founder and CEO of DoneByNone, an online retailer of affordable international fashion apparel, is a strong believer in looking for an entrepreneurial streak in every employee while hiring. "When interviewing every prospective employee, I ask whether or not they have plans to set up a business of their own some day. Only when one has an entrepreneurial dream can one truly be involved in the growth of a start-up," says Dhariwal.

He also points out that when hiring freshers, look for a passion that drives them to thrive and strive. While hiring experienced candidates, Dhariwal seeks out people who can be potential 'magnets' in attracting other good employees at a later date.

2. Build A Transparent Evaluation Procedure

The evaluation process you have in place must be clearly conveyed to your employees so that they know what is expected of them. Make sure the goals you set are not vague but measurable. For instance, Madhusudan Rajagopalan, Director of India Operations of Aranca, a knowledge process outsourcing firm, places a premium on being 'open and transparent' with employees from the recruitment stage. "At Aranca, we have created a common vocabulary that everyone speaks, understands and exhibits. It is derived from our core purpose and values. We have fostered an environment where the rules and procedures are clear to everyone," Rajagopalan says.

Instead of using subjective terms, discuss goals and expectations. Ideally, as a founder and manager, it is best to provide a written evaluation twice a year. However, if you are working with freshers in your start-up, remember that this is their first job and they need a little hand-holding.

Be forthright with the evaluation. If they make a mistake, correct them immediately instead of waiting six months to put it in their evaluation. Similarly, praise them when they deserve it. Both praising and correcting should be done in real time. "The key to a successful appraisal process is in looking at it as a continuous process throughout the year." Rajagopalan reveals.

3. Set Up A Rewards System

Dhariwal of DoneByNone says a variable pay package where an employee is evaluated and rewarded every quarter for his performance has gone a long way in holding his team together. The fact that here were "clear quantifiable benchmarks" from the very beginning helps his employees judge what is expected of them.

Aranca's Rajagopalan believes there is merit in putting together a plan for non-monetary rewards for performers as well. For instance, four top performers in the organisations were sent to represent the firm at the AIMA competition for young managers. The firm also has the tradition of celebrating their success at a big annual event, where awards are handed out at departmental levels.

4. Motivate, Motivate, Motivate!

As the head of your organisation, it is your responsibility to see that your employees grow. Learn to segregate what you think about a certain employee as a person and as a performer. Barring a few people who are self-motivated, employees are known to perform better when they feel motivated. And it's easy to achieve. Rajagopalan of Aranca remarks, "Timely approval and hearty appreciation are oft-ignored aspects that can contribute significantly to a person's motivation."

Dhariwal of DoneByNone agrees, "Apart from keeping an open-door policy and keeping communication channels open with your employees, one must lead by example. Also, the same rules should apply to the CEO as well as the freshest employee, without exception."