FounderFuel: Where to start with Performance Reviews in a startup

When it comes to implementing Performance Reviews (or Appraisals) in a startup team, it can feel like a somewhat daunting task. Many founders hold off with the first few employees – depending instead on the startup energy and momentum to fuel motivation and performance. But those founders that now have bigger teams, wish they’d started earlier and many recognise they lost people along the way because of the lack of this process.

I can understand why we hold off: A full performance review process includes reviews, 360 feedback, calibration meetings… even promotion track rubrics and review boards. It’s no small undertaking – in truth, this is the recipe for a Chief of Staff or People to lead when the team is scaling. We don’t need to start here though – and I would argue that as soon as we have a team member, we should be incorporating a review process for the benefit of them and the business.

As always, we’ve been crowdsourcing ideas and hearing what works from those in our #FounderFamily. What’s clear is that starting early then iterating based on what works for your team is a solid strategy, as every business is different. So this simple guide is here to make starting out easier.

The headlines:

The why

• Goal-focused: Teams are focused on the key deliverables that strategically matter for the business

• Team investment: Team members feel valued in their career and are more motivated as a result

• Team culture: Team behaviours are nurtured to contribute to the culture you need as a business

Better for the team: Without a shadow of a doubt, we hire proactive, intrinsically motivated people into our teams – they are the lifeblood of our startups – but as founders, we have to accept that it isn’t their baby, like it is ours, so we need to feed their personal motivators too. Alongside Purpose and Autonomy (which we can usually deliver in spades) the third crucial factor to intrinsic motivation is Mastery – the urge to get better at something that matters. Having reviews really gives this focus – rather than becoming an afterthought – it formalises feedback and progression plans clearly feeding this mastery driver. Not only that, it demonstrates that you are investing in them as an individual too which boosts loyalty. Personal growth beats big salaries right now – studies show that 82% of people would feel more engaged at work if their manager showed greater interest in their career progression – so it helps win the hiring and retention war too.

Better for the business: For me this all comes down to the What and the How;

• The What: The tasks, projects and deliverables that a person is responsible for delivering. This drives results and gives you a vehicle for managing under-performance if necessary.
• The How: The way in which a person behaves and delivers their deliverables within the team. This drives culture.

Reviews always include the What – incorporating a list of what is expected during a defined period of time is a fundamental part of aligning all team members to deliver against the strategic priorities of the business. It creates prioritised focus, which we inevitably need in an ideas-rich startup environment.

The surprising omission in many reviews is the How – yet time and time again, this is the area that causes the most frustration for founders. Every founder knows how critical culture is to creating that hungry, progressive sense of energy in a startup. Culture ultimately boils down to values, and values only come to life if we identify the behaviours that reflect those values. This then is where reviews can be so powerful. By having a section, as part of a review, that discusses an employees performance against the behaviours you want to see in the team, you can measure and mould the culture that you want. Miss them out and there’s no way to reward (or police) the behaviours you believe are critical to your team.

The who’s who of reviews

Recommendation: Managers review direct reports, everyone gets peer-reviewed including managers being reviewed by their direct reports

The standard approach is to have managers oversee the reviews of their direct reports. This would include the direct reports providing a review of themselves, as well as the manager doing the same, and the review meeting being a focused conversation on results and development potential.

Incorporating peer-reviews (often called 360 reviews) into the process shifts the review process to be more collaborative and less dependent on one person’s opinion or viewpoint. Have team members select two peer reviewers to feed into the review process – ideally who is asked to be a peer reviewer should be agreed between manager and direct report to avoid skewed selection. As part of the peer-review process, managers should have their direct reports review them – with the right questions, this is gold-dust for improving as a manager.

A note on eligibility: New starters are likely already in a review process for the first three months, so the recommendation would be to start including new starters into the review cycle after they’ve been with you for 6 months. Peer reviewers should have been with you for at least 3 months to give a credible view aligned to company culture.

The cadence

Recommendation: Bi-annual reviews for all team members

In a fast-growing scaleup, a lot happens in a year so annual reviews just aren’t going to be relevant. You might want to trial quarterly reviews to align with your OKR sprints, but if so – keep them lightweight as possible, as the review process does take time day-to-day. For many founders, it seems that every 6 months is working well, with March and September matching up to the energy of Spring and ‘back-to-school’ feeling (and avoiding Xmas and summer holidays). Doing everyone at the same time means the process can be centrally coordinated and everyone has the same expectations at the same time.

The structure:

Prior to the review meeting, team members should prepare their self-review and line managers should prepare their manager-review – both based on the structure and questions included in the review meeting. In addition, 2-3 shorter peer reviews should also be gathered. These are all then shared in advance of the review meeting. The following will help structure both this prep and the meeting itself. 

For FounderCircle members you can access the performance review toolkit in the Hub.

Part 1: Reflections on the last 6 months

Starting with a section that encourages a holistic review of performance helps individuals to look at the bigger picture and take responsibly for their progression

• What are you most proud of achieving in the last 6 months?
• Which areas of your job do you feel that you could have performed better?
• Which aspects of your job do you particularly enjoy or find rewarding?
• Which aspects of your job do you least enjoy or find most challenging?
• How do you see your career developing over the next 12 months and what areas do you need to work on to help you progress?

NB: All example questions are written for a direct report’s Self-Review, but each would be replicated for the line manager review too i.e. What are you most proud of this person achieving in the last 6 months?

Part 2: The What – Key deliverables and objectives for the last 6 months

This section would include the deliverables or objectives agreed at the start of the 6 month period, along with an assessment and/or score versus these deliverables, and space for comments.

Part 3: The How – Behaviours that align to the team values

This section would include a list of the agreed behavioural development areas for the 6 month period, along with an assessment and/or score against these and a space to record evidence of the behaviours being demonstrated.

Part 4: Career development

This section looks ahead and supports your team members in developing their career.

• What are your longer-term career aspirations? (2-3+ years)
• What skills would you like to develop in the next 6 months?
• What training and development would support you in this?

Additional coaching-style questions for the review meeting:

• What could I do as your manager to support you more in your role?
• What could the organisation do differently to support you in your role?

Part 5: Objectives for the next 6 months

This section focuses on the 6 months ahead. As preparation for the meeting, both direct-reports and line-managers add their perspective on the What and the How priorities for the next 6 months. During the meeting these would be discussed, along with details of how each objective would be measured to remove any margin for misunderstanding. After the meeting, an agreed consolidated list would be included in the final review document.

The final review document would also include a section for both the direct-report and line-manager to add their overall comments.

Final considerations:

The conversations, insights and objectives discussed in the review meeting should become a living breathing thing, not something that’s filed away to gather dust until the next review meeting. A great way to do this is by incorporating it into a longer one-to-ones monthly, which you can read more about here. If you don’t go down this route, then more frequent quarterly reviews may suit better.

To score or not to score

Recommendation: Start now it’ll help later but keep it simple

It’s fairly standard practice for scoring to be used in performance reviews – both by objective and an overall score. Initially the idea that everyone gets a ‘score’ can cause controversy, with concerns over it being too binary or biased. The whole process and structure though, is designed to avoid one dimensional perspectives and give insight to the score. Furthermore, it really helps create clarity and focus on whether a person is meeting expectations or not overall. It is easy to have a review conversation with someone and their key takeaways be different to yours (either overly negative or overly positive, based on their perspective) and the score helps avoid such misalignment. In a study at Facebook, staff were asked if they should get rid of scores and 87% said no, so it’s worth getting into the habit now.

A simple 4 point scale has proven most popular (5 point scales encourage safe middle-ground scoring) – you might choose something like:

• Exceeds expectations / exceptional performer
• Meets expectations
• Partially meets expectations
• Misses the mark / Needs improvement

As soon as you have scores, you need an aligned approach to what constitutes each of those scores between scorers. Questions to discuss include the percentage of deliverables that have to be hit to gain each score, the weighting of What and How deliverables, and how to deal with extenuating circumstances (within the business and for the individual).

Future development

As the team grows beyond a handful of people, the scores start to have implications beyond the individual. Team members are likely to compare against their peers and develop expectations relating to their performance review and future promotions.

A good place to start (even with a small team) is to introduce calibration meetings between scoring managers, where line-managers have to defend the score of each of their direct-reports. This helps ward against overly harsh or lenient scoring, and doesn’t have to be a drawn out process in the early stages.

As the team grows and expectations change, the process can mature to incorporate incentives, salary changes and promotions. This requires a more detailed rubric approach, that outlines what competencies are required at each level for the What and especially the How, in order to drive consistency across teams and develop the kind of managers you need for growth. This process is a must in scaleup phase and this First Round article is a great read for that process.