A member poses a timely question.

This member writes “Unfortunately, due to lack of profit, we are unable to administer steady salary increases. Therefore, the following problem arises: If you are unable to increase salary do you still provide employees with performance reviews? If so, how do you justify not supplying a salary increase?”

My first thought in response to this question is that performance management and performance reviews are especially critical at this time. If a company is unprofitable -- notwithstanding economic conditions out of its control -- the following performance management related questions come to mind:

-are performance goals linked to business strategy and established for each employee at the beginning of the performance management process?

-how is business strategy communicated throughout the organization -- for example -- are core competencies identified, are goals transparent?

-are timelines set for goal completion?

-will managers and employees be able to determine when a goal has been met (or what it will look like)?

-can the skills necessary for top performance in key roles be identified?

-do employees understand how their day to day efforts contribute to the financial success of the company?

-are the right behaviors rewarded?

-do certain skill gaps exist that are preventing employees from achieving success?

-are these skill gaps being addressed?

-are requirements for new hires well researched and linked to business success?

-are employees receiving regular performance feedback to allow them to improve productivity and correct any shortfalls?

-is progress against goals monitored and re-evaluated on a regular basis?

A well-functioning performance management system will make sure these things are happening, thus improving employee productivity and supporting company profitability.

On the topic of salary increases - when employees understand that the company is unprofitable and what is required of them to increase profitability, they have more control over the situation. In addition, if employees are aware of the current economic position of the company then they will be more realistic when it comes to salary expectations.

When all employees are clear about what is expected of them, understand how their goals align with the business strategy, receive support to meet those business goals and are well informed about overall financial performance, business competitiveness increases.