Here is a very common scenario at growing companies.
A team has decided it’s time to get serious about performance management, but they’re not sure what comes next. Maybe someone at human resources read somewhere that employee performance management is something they’re supposed to do, maybe an executive did things a certain way at her last job and wants to bring that here, or maybe the company is full of hungry young employees with lots of ambition and not much management experience. Or maybe the CEO just decided that it’s time to get a program in place.
And so the team members dive in and start debating implementation details.
“Should we make the feedback anonymous, or should we even share it all? Reviews should be based off of employee goals…or should we scrap goals all together? Let’s go for annual 360s and have monthly check-ins, as well. I heard real-time feedback is a thing. And what’s the deal with ratings, do we need ratings?”
While the debate goes on, employees are the ones who lose out as time passes without a good review process in place.
The key is getting started. You can iterate from there
There are so many variations and permutations of how a program will be run, and a company can spend endless hours developing, implementing, and refining an effective performance management plan. But the truth is, for the vast majority of companies, simply picking a good enough performance management plan and going with it will be so much more valuable than the time spent decision-making around little details around your specific performance management plan. You can make tweaks once you’ve started, but just get a general plan in place and get started. You can and will iterate from there.
How to get started
Here is a strong performance management system that I believe will work for 80% of companies, along with a list of tweaks you can make based on specific company nuances you might have.
- Do performance reviews twice per year.
- Include the whole company in a review cycle at once rather than trying to keep track of everyone’s start dates.
- Do 360 degree annual reviews including feedback from one's manager, self, direct reports, and peers, for each employee. For peers, ask employees to suggest 3–5 people they have worked with and have their managers approve those peer selections.
- Ask 3–5 straightforward questions in the performance evaluation. Find a balance between guiding the conversation and allowing people to share whatever is on their minds, and keep the total number of questions low to reduce review fatigue. For some examples of good performance review questions, see here.
- Make sure managers sit down with their direct reports and discuss the collected performance data together after it’s all done. This conversation is the most important part of performance reviews. It should also involve creating development plans to improve employee performance.
- Tie one of your performance review cycles per year to compensation. Everyone should know this is coming to ensure that they don’t have to ask about raises throughout the year (if you want to make off-cycle compensation changes that’s of course fine). This review cycle should have some form of ratings or designations so you can have a quantitative basis to compare performance. You can also use the employees' job description to figure out what the employee's job performance standards should be.
- Your other review cycle should be around career development and performance improvement/ development — exclusively for the benefit of employees. It’s an opportunity for them to receive and give feedback with nothing on the line other than to be heard, be recognized, and learn what they can improve upon. Managers should work with employees to figure out how to increase the employee's current performance — likely using an employee development plan that you can make together.
- These should be heavily encouraged, if not required. They are an absolutely fundamental management tool.
- One-on-ones are the employee’s meeting, not the manager’s. If the employee wants to talk with the manager about any issue (or success), big or small, that's their prerogative. It’s their meeting.
- This can also be a good time for managers to bring up employee feedback, and vice versa.
- If the employee doesn’t have anything on their mind, it’s a great time for managers to do things such as communicate information, recognize accomplishment, and to help solve a problem on the employee’s mind.
- If there is pertinent but transactional information, it’s best to put this in writing before the meeting so the time can be spent on higher level interaction.
- If employees would like to have agendas, they should be driven by the employee and supplemented by the manager.
- Give employees a way to share praise/ positive feedback or coaching feedback with one another.
- Praise can be public, but constructive feedback should be private.
- Surface this feedback during performance reviews to help jog reviewers’ memories and reduce recency bias.
- Set 2–4 company goals per quarter. Make these goals public to every employee in the company. Talk about them at an all hands at the beginning of each quarter.
- Ask departments and employees to set their own goals at the beginning of each quarter. For a little more context on goal setting, go here. You can go for SMART goals or OKRs or what-have-you. The key is that people know how to make them and know how to measure them.
- It's a good idea to divide goals into performance goals, which measure individual performance, such as sales numbers, and development goals, which are about an employee developing skills such as time management.
- Discuss goals at the end of each quarter. Talk about what caused goals to be met or not, whether the goals turned out to be worthwhile to pursue, and how you might be able to set better goals next cycle.
- Don’t try to cascade every single goal into a perfectly aligned tree. It’s too much work and the juice isn’t worth the squeeze. Besides, it misses the point — organizational goal setting should be about prioritization and expectation setting, not project planning and task management.
- Don’t tie goals directly to compensation. You can and should discuss goals during performance reviews as part of an overall assessment of an employee’s performance, but there should not a one to one correlation here. (Revenue generating roles are a possible exception.)
This is a basic, effective framework for performance management that you can implement and iterate on. It’s a battle-tested plan that we have seen succeed at a lot of companies, and you can make tweaks to fit your unique situation.
Questions to ask yourself as you refine your process
To improve your performance management process further, start by asking yourself some basic questions about what your goals are for your program.
- Are you trying to evaluate employees so you can give promotions and separation packages appropriately?
- Are you trying to increase employee engagement and happiness?
- Are you trying to make managers give feedback more often?
- Are you looking to give employees more recognition?
- Are you trying to make goal-setting a core practice at your company?
There is no right answer to these questions, and as a result there is no one right way to do performance management. Every business is different, and this process will be unique to each. If you are a smaller company you might be able to make quarterly reviews work. If your company is new to giving direct feedback you can either anonymize peer and upward feedback or not share it with employees at all. If goal setting is too structured for your work culture, you can start with reviews and one-on-ones and see if adding goals later makes sense.
As Jack Welch once said, “This whole game of business revolves around one thing. You build the best team, you win.” Performance management is one of the most important tools you have as a company to build a great team. The sooner you get started, the sooner you can start improving.