Annual performance reviews give managers and employees an opportunity to look at the employee's performance over the course of a year. Short- and long-range goals from the prior year are evaluated. Raises and promotions generally are discussed.

As with other job functions, many small-business owners conduct reviews of their sales staff annually. However, in my experience, reviewing a salesperson's performance on an annual basis doesn't work. Problems with accounts are identified too late or not at all. Deals that should have been sealed wind up going to the competition. Low productivity often goes unnoticed.

The result can be that non-performers remain with the company, and on the payroll, for too long. They come in below quota month after month and cost the company time and money.

To avoid this, consider meeting with your salespeople on a monthly basis and conducting formal reviews quarterly. Just because the review process will be different for sales, that doesn't mean it will be unfair for other types of employees. In fact, changing the frequency of salesperson reviews can benefit your entire organization. For starters, you'll notice that after those monthly meetings, there's a burst of high energy that can result in high volume sales activity. Your salespeople will be motivated to fill their pipeline and reach or exceed quota benchmarks.

Here's what you need to know in order to implement these changes.

Starting the Discussion
Here's a hypothetical situation to serve as an example of the benefits of monthly meetings and quarterly reviews:

While prepping for your April monthly meeting, you notice that the number of cold calls one particular salesperson has made are below minimum productivity standards. You mention this to her and discuss solutions.

Whether you suspect the salesperson is making excuses or the complaints have merit, one goal has been accomplished -- she's been alerted. Her current cold calling volume is unacceptable and she needs to improve those numbers now, not after several more months.

Analyzing the Situation
By May, that salesperson's numbers either will or won't be at or above the minimum productivity standard. Again, discuss the situation. Congratulate her on any improvements and offer encouragement if she missed the mark. Revisit the solutions you suggested in April. Set some smaller goals if necessary.

At the end of June, three months have elapsed since that first conversation. At this point, you've offered assistance and coaching on the matter. However, the rep in question has missed quota again.

If the rest of the sales staff hits their cold calling numbers while facing the same obstacles and performing the same duties as the rep in question, something is wrong. It's most likely time to terminate her employment.

While this might seem harsh, it's better for business to cut your losses after three months than to keep an underperforming rep on staff for an entire year.

Boosting Sales and Company Morale
When a salesperson fails to make quota month after month and you don't do anything about it, the message you send to the whole organization is "We don't hold people accountable here."

Salespeople who achieve quota regularly might resent the underperforming salesperson and, worse yet, could lose respect for you. Employees and managers in other departments might begin to wonder how much slacking they can get away with. If this happens, then no one will give you their best effort. The lack of accountability can permeate your entire organization.

Implementing a system of monthly meetings and quarterly reviews can help you determine which salespeople are worth keeping on your team for the long haul. Your sales staff will not take their jobs for granted. Other employees will observe that non-performance isn't tolerated. The entire company will respect you for doing the right thing. 

The Accidental Sales ManagerThis article is an excerpt from the book The Accidental Sales Manager available from Entrepreneur Press