Planning and performance monitoring are essential to the success of any business. These are ongoing and regular activities. Monitoring past performance and planning for the future has a short-term and a long-term component. Specifically, it is held at the end of each year and the following year. Today we’re going to cover the activities that entrepreneurs and their teams should do each fiscal year.
The fiscal year may end on December 31st, and technically performance reviews for years from January 1st to December 31st can only be conducted after December 31st. However, nothing prevents him from reviewing his performance until November 30th and the following year he has a full-year review in early January. As for future plans, we need time to clarify what is expected of people and mobilize the necessary resources, so it should be fully completed by the beginning of the new year. I always suggest that the next year’s plans be fully completed two months before the beginning of the year. While you don’t want to plan too far in advance, you also don’t want to get too close to the start of the new year without planning for the two reasons I mentioned earlier. The point is that there should always be a proper timing balance.
As mentioned earlier, there are two components to the end-of-year activities that entrepreneurs should undertake during times like these. The first is performance monitoring activities that involve “looking back”. Second, there are planning activities related to “looking ahead”. A practical thing to do is to conduct performance monitoring activities first, before planning activities. Because the former gives insight into the strengths, challenges, and opportunities that the latter can benefit from. On top of that, we will start with performance evaluation activities.
How well are you doing in the market? The ultimate test for most companies is how well they are doing in the market. To articulate how well you are doing, you need to ask yourself questions and answer them firmly, intelligently, and honestly.
- Does your product deliver value to your customers as designed and expected?
- Are there any trends or changes in the market? What is causing them or could cause them?
- Is there room for improvement in the value your product provides to your customers?
- If your competitors are ahead of you, what can you do to catch up? If not, what can you do to stay ahead of your competitors?
- What market share do you want to achieve in the short and medium term future? What would you do? What resources and capabilities do you need to do this?
You need a rigorous understanding of your customers, your market, your competition, and how well you’re performing.
How is your business financially? Market performance affects financial conditions.
- How are your sales going?
- Does the gross margin of each product cover the overhead and contribute to the net profit?
- What about your cost structure? How can we improve to make it more efficient and profitable?
- Cash flow is the blood of business. how much cash do you have in the bank Will you be able to meet your matured obligations when they come due?
- Do you have the funds for your planned capital expenditures? If not, can you raise the funds from outside sources?
- What are your business risks?
- How resilient are your supply chains and production activities? How efficient are they?
What level of competence does the employee demonstrate? When it comes to providing other resources as needed, what can or cannot be achieved has a lot to do with the employee’s level of competence and commitment. We need to have the right people and make sure they are doing what is expected of them.
- Do your employees have the knowledge, skills and attitudes necessary for their jobs and your business?
- Do your employees have the initiative, commitment and creativity they need to do their jobs well?
- Are individuals and teams helping each other and heading in the same direction?
- Are your employees reasonably compensated for their performance? What are the areas for improving staff productivity?
How compliant are you with the regulations that govern your business? One issue that many entrepreneurs tend to play ostrich is regulatory compliance. In our environment, the financial cost of compliance may be considered high, but the benefits are immense. At the end of the year, you should check and confirm that you are in compliance with all the regulations that apply to your business. You should be aware of the actions to be taken after the end of the year and plan to meet them. In our country, we need to ensure that the necessary staff contributions are made. File an annual return. Comply with health and safety regulations. Staying on the right side of the law, such as paying taxes, is right and beneficial for the opportunities it opens up to you.
What social services have you provided to your community and country? More than what the market wants to achieve or what the law requires, it is important that you and your business contribute meaningfully to society. What is commonly referred to as “corporate social responsibility” is our way of paying back a portion of the profits we make from our community and the world. What have we achieved in these areas? How can we do better?
What are the rules? What are the operational and procedural rules for conducting performance reviews?
- Always start with the right mindset and attitude.
- You need a performance review team and the rules and objectives should be clear to everyone.
- Performance appraisal is not about sharing responsibility, it is about understanding what has been accomplished, what can be improved, and what should be improved.
- Performance reviews should be factual. Get the numbers right.
- It is about understanding the strengths and weaknesses of individuals and businesses, and the opportunities and threats in the environment.
- It’s about understanding your business better.
- Document what was discussed and agreed upon.
These are some of the basic questions to consider for your year-end performance review. We will cover next year’s business plan next week.