Performance Reviews

Before running a review cycle, it's important to ask yourself 2 key questions:

• What’s the objective?
• Who should participate?

The goals of performance reviews should be in line with broader performance management objectives to ensure they support the company's overall goals. For early-stage companies, these objectives often involve understanding employee strengths, making well-informed compensation decisions, and providing constructive feedback and support.

Performance reviews can lose their value if they become burdensome, driven solely by HR, and dreaded processes that are done for the sake of it, rather than being a helpful pause to ensure everyone is aligned and working on the right things.

Key Components of a Successful Performance Review

Clarity and Transparency: A successful performance review should offer clear insights into an employee's standing and provide constructive suggestions for improvement. It should enable managers to offer developmental coaching and address potential obstacles, which benefits the company by providing consistent data on individual and team performance.

Fairness and Objectivity: A fair and transparent performance review should be based on clear and objective criteria. It should be seen by employees as a supportive and developmental process that encourages open communication between managers and team members.

Goal-Setting: Goal-setting establishes expectations and serves as a reference point throughout the entire year, anchoring everyone to the company's core objectives. Aligning personal performance with company goals empowers employees to make informed choices and take accountability for their contributions.

Who Should Participate and What to Include in the Review

Every employee, except for non-employees like contractors and temps, should participate in the performance review process. The review content can vary depending on company culture, focusing on self-assessment of meeting performance goals, strengths, areas of development, and contributions to company goals.

Examples of Performance Cycle Content

Example #1

• Self-assessment of meeting performance goals
• Strengths and development areas 

Example #2

• Self-assessment of contributions to company goals
• How someone demonstrated a set of company values
• Opportunities to advance the company values or culture

When and How Often to Run a Peer Review Cycle

Performance reviews are typically held annually, focusing on past performance. Depending on how often your company’s goals shift, you may want to have performance review conversations more often, perhaps twice a year.

Tailoring Timelines

Timeline for peer reviews should be based on process intricacies, company stage, and cultural practices.

For companies just getting started: 

• January: Initiate the program design
• February: Conduct performance reviews
• March/April: Implement compensation adjustments

For companies with established programs: 

• Q1: Start performance check-in and goal setting
• Q2: Emphasize continuous feedback
• Q3: Undertake performance reviews, including peer feedback and development conversations
• Q4: Maintain a cycle of continuous feedback, culminating in compensation/promotion reviews

Steps in a Performance Review

Early Stages

• Setting Goals: At the beginning of the review cycle, individuals align their objectives with company goals. While having company-wide goals is ideal, reaching an 80% finalization can suffice, ensuring employees have a foundation to plan their contributions.
• Informal Feedback: Encouraging a continuous flow of informal feedback throughout the cycle.
• Self-Assessment: Employees reflect on the goals set at the cycle's outset, evaluating the extent to which they've met these objectives.
• Manager Review: Managers gauge performance through their experiences or data sources such as customer service surveys or code reviews.
• Performance Review Meeting: A crucial juncture where managers and employees engage in a dialogue, discussing self-assessments, and managers provide feedback.
• Development Planning: This phase brings the process full circle, intertwining with goal-setting. It involves both reflection on past achievements and an anticipatory look toward personal growth and contribution to the company's goals in the coming year.

Beyond 30-50 Employees

• Introducing Peer Assessments: Once a company grows beyond 30-50 employees, it becomes important to introduce peer assessments. These assessments provide valuable insights into how individuals are viewed by their colleagues, compensating for the reduced visibility of managers and executives into day-to-day performances.

Beyond 150-300 Employees

• Senior Manager Calibration: When a company exceeds 150-300 employees, it's important to gather senior managers (Director level and above) for calibration. This step ensures that there is alignment and consistency in evaluating performance across different teams.

Being Data-Driven in Performance Reviews

In order to improve the data-driven aspect of performance reviews, a variety of strategies can be utilized based on available resources and the stage of the company. Clearly defined goals, measurable criteria, code review data, and customer satisfaction feedback all play a role in creating a thorough and data-rich performance review process.

However, it's important to note that data should not be a substitute for manager judgment. Ideally, performance reviews should encompass the overall experience of working with the individual and their contributions

Giving and Receiving Good Feedback 

Peer feedback, though valuable, should be integrated thoughtfully. You can include peer feedback at any company stage, but if your company is fewer than 30 people you might ask yourself if formal or written peer feedback is useful. More than 50 people, peer feedback is essential for understanding how a person is perceived as a teammate and colleague.

This feedback, whether integrated simultaneously or following the self-assessment step, should focus on contributions to projects, embodiment of company values, and observations of strengths and development areas.

See our conducting a performance review section below to learn more about giving and receiving feedback.  

When it’s time to build your program, start by asking yourself these questions:

• When and how often should I run a performance management cycle?
• What questions should we ask?
• How will managers give feedback if there are no employee OKRs or goals in place?
• What are the best practices for delivering feedback?
• How should I conduct training for managers and employees?
• Should we use a rating scale?
• If we don’t have an HR leader, who should oversee this process?
• What tools/systems should we use?

Overseeing the Process in the Absence of an HR Leader

In smaller companies without an HR leader, communication about the review process should come from a senior executive. This will highlight the process's importance to the company and can be followed up by a professional with program management skills, possibly from the CFO office, COO office, or Chief of Staff.

Choosing Tools and Systems for Streamlined Management

Selecting appropriate tools is crucial for an efficient peer review process. Considerations include the company's size and scalability. Options like 15Five, BambooHR, Namely, and Lattice are suitable for small to mid-size companies, offering features for goal-setting, self-assessment, and peer feedback.

Drawbacks of Manual Processes 

Moving away from manual processes (e.g., email or Google Docs) is recommended, especially as the company reaches 15-30 review-eligible employees. Dedicated tools not only ensure confidentiality but also streamline organization and process management, preventing chaos and document proliferation. 

And if you want any basic features such as self-assessment and collecting peer feedback, those 20 employees have already created 80+ documents.

Maintaining Transparency in the Early Stages

Company cultures vary on transparency philosophies.  With regard to performance reviews, this can translate into whether to share performance review ratings, compensation ranges and peer feedback.  Our recommendation is to build a transparent performance review program for several reasons:

• Building Trust and Equity: Initiating transparency from the outset establishes a long term effort of objectivity and fairness, and helps avoid the cultural-shift challenges of transitioning from an opaque process.
• Mitigating Misinterpretations: Sharing ratings and compensation decisions with the employee mitigates the likelihood of misinterpretations. For example, if If the rating is hidden from the employee, a manager may have given a lower score in the review system but primarily focused on the positive feedback when conducting the review with the employee.  This would result in the employee believing they’re a high performer and then feeling resentful by the lower bonus or merit increase.
• Peer Feedback Dynamics: Transparency with peer feedback is less widespread but practiced by certain companies. When peer feedback is part of the review cycle, it can be either completely transparent to the employee, or more commonly, only the manager can access the verbatim feedback, and they are then responsible for summarizing the key points into the employee's review.
• Navigating Legal Compliance: As of this year, 8 states require pay transparency by law (California, Colorado, New York Connecticut, Maryland, Nevada, Rhode Island, and Washington). By building comp transparency into the HR processes, you can ensure you are staying compliant with the continually expanding state laws.

Common Mistake When Developing Your Program 

One common mistake is rushing into the 'how' without a strong foundation. Start with the 'why'—understand the purpose of performance reviews and desired outcomes. Then, proceed to the 'what' and 'how,' creating a process and system that aligns with company goals and mission.

Performance Reviews and Remote Work 

For companies embracing a fully remote or hybrid model, here are 2 considerations to consider when conducting a performance review cycle: 

• Mitigating Bias Through Objectivity: it’s incredibly important to use objective criteria to remove any kind of bias, whether it’s related to the hybrid environment, recency bias, racial/gender/age, etc.
• Replicating In-Person Interaction Dynamics: Managers should be urged to replicate the dynamics of in-person interactions like turning on the camera, being fully present, and fostering a thoughtful atmosphere.

Growth Stage: Evolving Your Approach As Your Company Grows

to continuously evaluate your performance review criteria as your company evolves. The best way to do is the following: 

• Company Goal-Setting: Updating these goals, whether quarterly, semi-quarterly (especially in the early stages), or annually for more established companies, sets the trajectory for departmental and individual objectives.
• Aligning Company Values and Capabilities: Reflect and update performance review measures to reflect any updates in company values. 

Should We Use a Rating Scale?

While opinions on rating scales may vary, they offer several benefits:

• Clarity: Minimizes misinterpretation of feedback, ensuring a shared understanding of performance.
• Data-Driven Decisions: Facilitates pay-for-performance models, aiding in bonus payouts and merit increases.
• Analytics: Enables meaningful tracking of performance data, linking it to factors like attrition for accurate analysis.

Rating Scale Example 

Companies do not need to force the below distribution, but ratings should generally fall into the below percentages:

Linking Compensation & Performance

Creating a Pay-for-Performance Culture is done by connecting compensation to “merit.” Connecting compensation to performance can be a powerful motivator but requires careful consideration:

• Pros: Motivates employees, tying individual effort to the company's success.
• Cons: May create a competitive environment, potentially affecting company culture.

Merit Increase Scale Example 

Merit-based pay increases will vary based on individual employee performance: 

When to Discuss Compensation Adjustments

Separating performance and compensation discussions is recommended. This allows the focus during performance conversations to remain on feedback and growth. Wait several weeks after the performance review to deliver compensation adjustments, giving managers time to align budget considerations and other factors influencing compensation decisions.

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Unlocking the full potential of performance reviews lies in transforming them into dynamic two-way conversations. Here are some tips to make this exchange successful:

• Acknowledge: Start the conversation by celebrating the individual's accomplishments since the last review. Highlight unique contributions that had a significant impact on the team or the company. You can ask them what they are most proud of from the last cycle.
• Address critical moments: If there were critical misses, approach them as coaching opportunities. Ask reflective questions such as, "Looking back on your projects, what were some critical moments? What, if anything, would you do differently?"
• Shift to the future: Explore aspirations for the future. Inquire about their goals and share your hopes for their professional journey.
• Offer practical help. Identify areas where the employee may need support, whether it's developing stakeholder awareness or acquiring specific skills.

Providing Feedback Without Employee OKRs

In early-stage companies without established OKRs or goals, focus on individual projects and achievements:

• Ground the conversation in what was accomplished on individual projects.
• Set shorter time horizons for goals or concentrate on team/department goals if the company strategy is unclear or shifting.
• For high performers, align goals with what they want to accomplish for the company in the next 3-6 months.

Address Underperformance

Deal with underperformance outside the performance review setting. Intervene early and be a supportive partner in improvement. You can  have explicit and direct conversations about expectations and performance, possibly role-playing with a trusted advisor.

Constructing Effective Performance Improvement Plans (PIPs)

For struggling employees, create clear, measurable improvement plans (PIPs). Here, you need to seek guidance from yoru HR leader for legal considerations. Additionally, clearly document improvement points, expectations, and involve managers as necessary. Transparency is key. 

Training Managers and Employees for Meaningful Conversations and Culture of Feedback

Founders play a pivotal role in shaping the culture of performance management. When training managers, you can set expectations through transparent communication to the company about roles and processes, and leverage HR leaders or coaches experienced in performance management for formal training.

Self-Evaluation Questions

Questions for an employee to evaluate their own performance.

Example 1

• What accomplishments are you most proud of?
• What goals did you meet?
• Which goals fell short?
• What do you think you should do differently next year?
• Provide examples of how you bring our company values to life.
• What can I do as your manager to make your job more enjoyable?

Example 2

• In what ways can you improve your performance?
• What actions are needed to support these improvements?
• What barriers or blockers exist to improving your performance?
• What metrics/milestones can we use to make sure you’re on track?
• What can I do as your manager to support the achievement of your goals?

Peer-Review Questions

Strengths & Areas for Improvement

• What are this person’s strengths?
• What’s something this person could improve on?

Stop, Start, Continue

• What’s one thing this person should stop doing?
• What’s one thing this person should start doing?
• What’s one thing this person should continue doing?

Other Sample Questions

• Does this employee effectively communicate with others?
• How effective of a leader is this person, either through direct people management or influence?
• How would you rate the quality of this person’s work?
• How well does this person set and meet deadlines?
• How likely are you to want to work with this person again?
• How does this person embody our company values?
• If you could give this person one piece of constructive advice to make them more effective in their role, what would it be?

Upward Feedback to Your Manager

• Is your manager action-oriented?
• How well do they drive results?
• Does your manager make your work better?
• Does your manager hold you and your peers accountable for producing quality work on time?
• How well does your manager support your professional and personal growth?
• Does your manager accept feedback?
• Does your manager communicate well?

Manager-Review Questions

Annual Performance Review

• What achievements are you most proud of this year?
• What did not go so well?
• What personal or professional goals should we set for next year?
• What kind of support do you need to achieve your goals?
• How will you measure or track your progress on these goals?

Quarterly Check-In

• What were the highlights of the last quarter?
• What did not go so well?
• What are your goals for the upcoming quarter?
• What would make the next 90 days successful for you at work?
• What kind of support do you need to achieve your goals?
• How will you measure or track your progress on these goals?

General Questions

• What’s an area where you’ve seen this person excel?
• What’s an area you’d like to see improvement?
• To what extent did this person meet their performance goals?
• How well does this person prioritize and manage their workload?
• How well does this person communicate with others?
• Provide an example of one company value this person excels at.

Deloitte’s Review Template

Their review template is used at the end of every project or quarterly. Managers ask four questions that are rated on a five-point scale, from “strongly agree” to “strongly disagree;” the second two have yes or no options:

• Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus. (1-5)
• Given what I know of this person’s performance, I would always want them on my team. (1-5)
• This person is at risk for low performance. (Yes or No)
• This person is ready for promotion today. (Yes or No)

Additional Resources

• A Blueprint for Getting Started
• Performance Review Questions
• 13 Employee Performance Review Tips That Actually Improve Performance
• Review Template Questions