The Do’s and Don’ts of Employee Management for Small Businesses

18 February 2025

The Do’s and Don’ts of Employee Management for Small Businesses

New business creation is a fundamental for any healthy market economy. But how many small business entrepreneurs realize the importance of good employee management? Employees are the life-blood for any business. Therefore, the happier the employees are, the greater the likelihood of business success. 

Unfortunately, failure to look after employee well-being can result in poor retention, something many small businesses are guilty of. To avoid such instances, your best bet is to create a thriving yet functional work environment. Below, we will guide you through the basic do’s and don’ts of employee management, making sure your small business runs smoothly and generates sustainable revenue. 

Why Does Employee Management for Small Businesses Matter More Than You Think?

18% of startups fail because of team-related problems and poor management. Therefore, it’s safe to say that employee management can make or break a small business’s stability. Not only does it contribute heavily to a company’s productivity and efficiency, but also its overall success. Four key benefits of good management are well-planned workflow, improved employee productivity, better data security, and lower company expenses.

A well-planned and efficient workflow helps streamline tasks and reduces poor productivity by creating transparency. On the other hand, improved employee productivity has more to do with the employees’ morale and better understanding of their job responsibilities. Additionally, with lower employee turnover comes more security for sensitive business data. 

Lastly, businesses that create a good reputation because of their management will find it easier to recruit young and promising candidates, who can further help sustain a small business. All in all, if businesses wish to observe a significant boost in their employees’ performance, proper management and policies should be put in place.

Do: Evaluate Performance and Give Feedback

Employee performance evaluation helps managers better assess their employees in a structured manner. With the help of these reports, managers can identify the strengths and weaknesses of their teams and provide feedback accordingly. They can further use this evaluation to acknowledge the efforts and work of high-performers. 

For employees who are not meeting their objectives, performance evaluation can help managers recognize and understand their issues, and provide them with proper assistance. If managers take these performance reports seriously, they can also help their employees’ career development by investing in appropriate training or staff development. 

All in all, performance evaluations give managers a proper chance to set and communicate performance goals with their team and discuss daily expectations. Based on these reports, managers can also give constructive criticism and ensure that the employees are aware of their performance. Employees can then use the feedback to overcome their weak areas and make adjustments to improve performance. However, the key to good employee management is that the manager must appreciate good performance or any improvements.

How does an Employee Tracker help Keep Performance Reports Simple?

However, for this to work, one needs to make sure that the performance reports are unbiased and clear of any prejudices. Therefore, it is paramount that a manager doesn’t solely rely on their views and gut feelings to generate these reports. Instead, a formalized system should be put in place to track the exact performance metrics of all employees. 

Managers can analyze their productivity using different tools, like employee monitoring apps. These apps can offer instant performance reports and enable managers to give honest feedback to their team. Lastly, with these reports, they can spend more time recognizing the weak points of particular employees and investing in their development for optimal output. 

Not only that, when employees receive their deserved recognition, compensation, promotion, or reward they will feel motivated to improve performance. Regardless of the type of feedback received, open communication between the manager and the employees established through these evaluations, can help with more effective employee management.

Don’t: Be Overly Critical

If managers are overly critical of their employees in small businesses, they can feel undervalued. There can also be a decrease in job satisfaction, which can subsequently make the job turnover rates increase significantly. 

Moreover, employees who are constantly discouraged and degraded for their work can become demotivated, which can also negatively impact the overall team morale. It’s also proven that employees who work in overly critical workplaces have lower self-esteem, reduced creativity, and little to no trust in the management. Factoring in all of these things, employees are more likely to switch jobs and not give their best since they feel unappreciated. 

Do: Maintain Proper Communication

“Communication is key” is not just a phrase but a universal truth. In workplaces, particularly, communication plays a critical role. Therefore, small businesses need managers who can talk to their employees, properly discuss goals, and provide detailed instructions. 

By doing so, managers can create a positive work environment, establish trust, reduce misunderstandings and miscommunication, and produce better results. Employees, on the other hand, can feel heard and informed, which leads to better engagement and performance, and increases creativity.

The best way managers can encourage open communication is by holding regular meetings with their employees. During these meetings, they must encourage employees to ask questions and provide their feedback about the company and its policies. Once the feedback is given, though, it must be properly addressed. Lastly, an open-door policy can also encourage employees to bring any issues to the manager directly, helping to deal with any problems in good time.

Don’t: Give Unclear Instructions

Unclear instructions can prove disastrous for small businesses since they not only lead to poor employment management but also negatively impact a company’s business. Overall, vague instructions can lead to confusion, employee frustration, unnecessary errors, sub-par work quality, and reduced productivity.

As a result, all instructions provided by managers must be clear, specific, and in simple language. Rather than using niche-specific words or jargon, simplifying the instructions can make it easy for the employee to understand. Moreover, managers should encourage employees to ask questions in case of any confusion, and if possible, provide written documentation with comprehensive instructions and operational or project details.

Do: Reward Highly Productive Individuals

Rewarding productive individuals and high performers is important for small businesses to retain employees. An employee recognition culture can increase individuals’ commitment, make them feel appreciated, encourage better performance, and benefit a company immensely. Therefore, genuine verbal appreciation and small rewards recognizing an employee’s work can go a long way. 

Managers can reward employees by offering monetary benefits through bonuses, salary increments, personalized rewards, etc. High performers can also be rewarded with company-wide recognition, professional growth opportunities, sponsored professional training programs, peer-to-peer recognition, more decision-making power, etc. 

Regardless of the type of reward, though, managers should make sure that they are based on the person’s needs and interests. With these rewards, managers can rightfully motivate employees to keep up their high-level performance. Moreover, with higher recognition, constant feedback, and job satisfaction, employees are more likely to stay in the company.

Don’t: Ignore Efforts and Achievements

Ignoring employees’ efforts and achievements can negatively impact employee engagement. Hence, it’s plausible that employees who feel undervalued and unappreciated will leave their company sooner. So much so that 46% of respondents claim to have left a job because they did not feel appreciated. Since employees no longer give their best, look for employment opportunities elsewhere, and do not take risks or offer new ideas, the company’s environment can become very toxic. 

Moreover, ignoring efforts discourages employees, decreases team morale, and lessens their productivity, therefore, small businesses are unable to retain high performers. This consequently results in poor company performance, a negative reputation, higher turnover rates, and additional expenses for new hiring. 

Do: Encourage Mentorship & Team Bonding

Managers must work towards creating an inclusive and positive work environment to sustain their small business and better manage the employees. To achieve a positive work environment, though, team bonding is essential. Managers can organize creative and fun team-building activities like scavenger hunts, human knot challenges, two truths and a lie, etc. 

Plus, they can also use activities that allow all the employees to collaborate, like problem-solving and goal-oriented activities. However, to keep it interesting, managers should come up with new activities every time.

Beyond casual team-building activities, structured mentorship programs also create stronger workplace relationships. According to research, organizations with formal mentorship programs have a 20% higher retention rate, as employees feel more supported in their roles. Investing in mentorship initiatives can help create a culture of learning and long-term commitment. Plus, when businesses assign mentors to new employees, they can integrate faster, build confidence, and feel more connected to the company.

Don’t: Discourage Communication Between Employees

Poor employee communication equates to poor management. Discouraging employees from talking among themselves can result in disruptive collaboration, ineffective problem-solving, and counterproductive knowledge sharing. As a result, not only does the company suffer, but the employees also have to deal with a negative work environment and work politics. 

Moreover, employees become more prone to unresolved issues, misunderstandings, and arguments. They can also feel a significant decrease in their morale, motivation, and engagement. Overall, this can prove to be risky for small businesses because 65% of employees would rather tolerate lower pay than a bad work environment.

Final Thoughts: Managing Employees in a Way That Works for Your Business

From this discussion, it’s apparent that the only way for small businesses to flourish is by improving employee management. To do so, managers should provide employees with constant feedback through performance evaluation, maintain open communication via discussions and meetings, reward deserving individuals with monetary benefits or public recognition, and encourage team bonding using team-building activities.

Investing in human resources with PERFORM

The article is part of our series on How to Motivate Employees to PERFORM. Knowing how to motivate employees is one of the most important aspects of a manager’s job.

But as important is the need to manage the factors that contribute to that motivation, and to create the conditions for people to perform and realise their potential.

Our tool to help you achieve these management skills is the Apex PERFORM model. It stands for:

P – Potential
E – Expertise
R – Results
F – Focus
O – Opportunities
R – Resources
M – Motivation

>> Return to the Managing Performance Knowledge Hub