Performance management

Why it matters

Unaddressed underperformance is corrosive. Good performers see it, conclude that standards do not matter, and either lower their own or leave. Owners often tolerate it for months because they dread the conversation, then act abruptly in frustration, which is exactly when unfair dismissal risk is highest. A simple, consistent process makes the hard conversations easier, protects the business, and, most importantly, turns ordinary performance into good performance because people know where they stand.

Expectations: the part most owners skip

You cannot manage performance against expectations that exist only in your head. For each role, write down the outcomes it must deliver, the standards those outcomes must meet, and the behaviours that matter in your business: how customers are treated, how the team communicates, how safety is handled. Share these when the person starts and revisit them at each review. If you did this in the role brief and 30-60-90 plan, you already have most of it.

Set a small number of goals per quarter, three is plenty, that connect the person’s work to the business’s goals. Make them specific and measurable where you honestly can, and describe what "good" looks like where you cannot. Goals that the employee helps set are far more likely to be met than goals handed down.

Feedback as a habit, not an event

The most effective tool in performance management is a regular one-on-one: fifteen to thirty minutes, every week or fortnight, same time, never cancelled. The employee brings the agenda; you bring observations. Cover progress against goals, blockers, feedback both ways and anything the person wants to raise. Keep brief notes. Over a year this is twenty-five or more conversations, which is why the quarterly review stops being frightening: nothing in it is new.

Make feedback specific and timely. "Great job" and "you need to lift your game" are both useless. "When you called the customer back within the hour yesterday, she renewed on the spot; keep doing that" and "the last three quotes went out with pricing errors; let us look at how you check them" give the person something to act on. Praise publicly when appropriate; raise concerns privately, always.

Addressing underperformance fairly

When regular feedback has not closed a gap, move to a more structured process. Meet privately, describe the specific shortfall against the written expectations, listen to the employee’s explanation, and agree a performance improvement plan: what must change, by when, what support you will provide, and how you will both know it has worked. Put it in writing, set review dates and keep to them. Many people improve at this stage because the seriousness is now clear.

If performance still does not improve after a genuine opportunity, you may consider ending the employment. Procedural fairness matters enormously here: the employee must have known the expectations, been warned that their job was at risk, been given a reasonable chance to improve with support, and been allowed a support person in meetings. Follow the Small Business Fair Dismissal Code if it applies to you, give the correct notice or payment in lieu, and seek advice before acting. Conduct issues, such as dishonesty or safety breaches, follow a different, disciplinary path and should also be handled with advice.

• Document expectations, feedback given and the employee’s responses as you go.
• Diagnose the cause before choosing the response: skill, will, role design or something outside work.
• Use a written improvement plan with specific measures, support and review dates.
• Offer a support person at formal meetings and give reasonable notice of them.
• Check the Small Business Fair Dismissal Code and your award before any termination.

Recognition and development close the loop

Performance management is not only about problems. Most of your team most of the time are doing a reasonable job, and the fastest way to lift the whole business is to make good work visible. Recognition does not have to cost much: a specific thank-you in front of the team, a note to the person’s family, first pick of shifts, a training course they asked for. Tie pay reviews to the same written expectations so that increases feel earned and explainable.

Ask each person once or twice a year where they want to be in two years and build a small development plan around it. In a small business that might mean learning the quoting system, getting a licence or leading the next new hire’s onboarding. People who are growing rarely leave for a small pay rise elsewhere.

How to set up performance management in a small team

1. Write expectations for every role Outcomes, standards and behaviours, one page each, shared with the person.
2. Set three quarterly goals with each person Connected to the business goals, specific, agreed together.
3. Schedule recurring one-on-ones Weekly or fortnightly, fifteen to thirty minutes, employee-led agenda, brief notes kept.
4. Run a short quarterly review Progress against goals, two-way feedback, next quarter’s goals. No surprises if the one-on-ones have happened.
5. Address gaps early and specifically Diagnose the cause, agree the fix, put it in writing if it persists.
6. Use a formal improvement plan when needed Clear measures, support, review dates, support person offered, everything documented.
7. Recognise and develop Make good work visible and build a simple development plan for each person annually.

Real-world example

A Perth agency stops avoiding the conversation

Swan Studio is a nine-person digital agency in Perth. One designer, Jake, is talented but misses deadlines, and the account managers have quietly started routing work around him. The owner, Priya, has mentioned it in passing twice. Jake thinks things are fine. When a client project slips a fortnight, Priya is tempted to let him go on the spot.

Instead she writes down the expectation (deliverables on the agreed date or a flagged risk 48 hours before) and meets Jake privately. It emerges that he is juggling six briefs with no visibility of priorities. They agree a four-week plan: a shared board of his work, a Monday priority check with the account lead, and a weekly one-on-one. Priya documents it. Within a month Jake has hit every date; two were renegotiated early, which is exactly the behaviour she wanted. She adopts the weekly one-on-one and quarterly goals for the whole team, and the next pay review is the first one where everyone understands why they got what they got.

Common mistakes

• No written expectations If the standard was never written down, every performance conversation becomes an argument about what was meant.
• Saving feedback for the annual review Twelve months of unspoken concerns delivered at once feels like an ambush and changes nothing. Make feedback weekly.
• Confusing a skill gap with an attitude problem Diagnose first. Training fixes one; a frank conversation about role fit fixes the other.
• Acting in anger Dismissing someone the day something goes wrong, without warnings or process, is how unfair dismissal claims start. Slow down and follow the steps.
• Only managing the poor performers Your best people notice when all the attention goes to problems. Recognise and develop them or you will lose them.

KPIs to track

• One-on-ones held as scheduled Percentage of planned conversations that actually happen. Target 90% or better; this is the leading indicator for everything else.
• Goals met Share of quarterly goals achieved across the team. Consistently near 100% means goals are too easy; below 50% means they are unrealistic or unsupported.
• Time to address a performance gap Days between a shortfall being noticed and a specific conversation about it. Aim for under a week.
• Regretted turnover Departures of people you wanted to keep. The ultimate measure of whether good performers feel seen.

Frequently asked questions

How often should I do performance reviews?

A short quarterly review, built on weekly or fortnightly one-on-ones, works well for small businesses. The annual review on its own is too infrequent to change behaviour.

Can I dismiss someone for poor performance during probation?

Often yes, following the notice in the contract and the NES, but the Fair Work Act’s minimum employment period, which depends on business size, is what actually governs unfair dismissal protection. Still give clear feedback and a chance to improve, and document it.

Do I need to give three written warnings?

There is no fixed number in the law. What matters is that the person knew the expectation, was warned their job was at risk, and had a reasonable chance to improve with support. The Small Business Fair Dismissal Code sets out what small employers should do.

What if the underperformer is a long-standing friend or family member?

Use exactly the same written expectations and process. Avoiding the conversation damages the relationship more in the long run, and the rest of the team will judge the business by how you handle it.

Key takeaways

• Written expectations are the foundation; without them performance is a matter of opinion.
• Regular one-on-ones make feedback normal and make reviews uneventful.
• Diagnose the cause of a gap before choosing the response.
• Use a documented improvement plan and procedural fairness before any termination.
• Recognise and develop your good performers; they are watching how you treat everyone.