Goal setting as a tool for addressing poor performance in small businesses

Jan 29, 2024 | Business Principles

In a smaller business context, where each employee’s contribution is vital, addressing performance issues is not just important – it’s essential for the health and success of the business. Most small business owners and managers in small organisations will have had to deal with performance problems before, but goal setting can be a highly effective tool in this process.

Understanding poor performance

Before diving into setting goals for your underperformer, it’s crucial to understand the root causes of poor performance. It could be due to a lack of skills, waning motivation, a poor understanding of the job requirements, or personal issues. Identifying the cause is the first step in addressing the issue effectively.

The role of goal setting

Goal setting plays a pivotal role in performance management. Well-defined goals provide clarity, direction, and motivation for employees. When addressing poor performance, goals can act as a roadmap for improvement. It may be that vague, irrelevant or unachievable goals were in fact the cause of their poor performance, but even if that isn’t the case, with well-defined goals, the employee will very clearly understand exactly what is expected of them.

Goals can tell them what to achieve, and also what good performance actually ‘looks like’. Interim targets progressing towards an end result can be incorporated into goal setting as part of poor performance, enabling the employee to feel achieving good performance is possible, and to feel success and achievement along the way.

Incorporating feedback and support

Goals should not be set in isolation. Regular feedback and support are essential when managing a poor performer. This can include training, regular check-ins, and resources to help the employee improve. Feedback should be constructive, focusing on how to improve rather than just what is going wrong.

Motivation and recognition

It’s important to keep the employee motivated. This can be achieved through recognition of progress, no matter how small. Celebrating milestones on the way to achieving larger goals can boost morale and motivation.

‘Pouncing’ on any improvement you see and recognising it can do wonders in motivating someone in circumstances where many employees will feel disheartened by simply having had poor performance highlighted to them, however constructively. Setting very short term goals can also help with this, very small very achievable improvements that can be ‘ticked off’ with new goals set at the same time can work well.


Be prepared to adjust goals as needed. If an employee is struggling despite genuine efforts, reevaluate the goals to ensure they are still realistic and attainable.

Goal setting, when done correctly, can be a powerful tool in addressing poor performance in a small business setting. It provides structure and clarity, motivates employees, and aligns their performance with the overall objectives of the business.

If you’d like some advice on using goal setting as a tool in your business, do get in touch.