Rethinking Performance Reviews

Published: at 03:22 PM

Rethinking Performance Reviews

Why do we even care about Performance Reviews?

Performance Review holds a hot topic in every engineering organization, shaping your career trajectory, salary, and acknowledgment. It’s a tedious journey that commandeers weeks of collective focus to navigate through the sea of feedback forms. You’re tasked with gathering and dispensing written feedback from and to your manager, subordinates, peers, and stakeholders. Given the standard org configurations and communication flows, this typically translates into a daunting tally of about 10 reviews per participant.

Weeks consumed, dozens of documents crafted, countless nudges from HR to complete your forms — what’s the endgame here? Certainly, there must be some profound rationale, a silver bullet to all our woes, correct?

It defies logic that anyone would green-light such a bureaucratic behemoth, riddled with pitfalls and complexities, where a misstep in the design of this process could spell disaster for the growth of an entire organization.

The suggested impact of well-designed PR process surely makes it seem that all the investment in it is justified:

  1. Supports skill development and identifies strengths and weaknesses
  2. Boost employee motivation
  3. Establishes clear protocols for bi-directional communication between managers and their teams
  4. Offers a structured pathway for career advancement
  5. Reduces uncertainty about when and how compensations are changed and promotions discussed
  6. Disciplines the organization to give feedback at least during review periods
  7. Provides a basis for making informed decisions about raises/bonuses/promotions
  8. Ensure fairness and transparency in compensation
  9. Establishes a legal framework to comply with audit checks
  10. Standardize PR processes in teams to reduce efforts and drive quality and innovation

If you consider any of the points raised earlier, you’d likely find that addressing them individually through a separate lightweight process is much simpler than engaging with the broad, organization-wide battle of performance review.

Therefore, if you’re a manager reading this, looking to solve a specific problem from this list, remember there are easier ways than attempting to transform the entire organization. I’m not advising against ambitious changes to the bigger picture; rather, I encourage selecting battles that you stand a good chance of winning. Choose a specific problem you wish to address and opt for targeted strategies for its improvement—often. These focused solutions are far more effective than performance reviews, which aim to tackle a broad array of issues simultaneously.

Yet, if your goal is to foster overall organizational growth, embracing comprehensive processes and carefully examining their subtleties might be necessary.

Perspectives on PR Goals

Every organization-wide initiative aims to fulfill specific goals for different stakeholders. Top Management seeks to maximize software engineering ROI (ideally at the lower end of market compensation rates), while HR aims for equitable pay and employee retention. Engineering managers desire straightforward guidelines for efficient management, and engineers themselves seek competitive pay (ideally at the higher end of market rates).

I’ll avoid diving deep into the motivations and typical behaviors of each group to prevent excessive generalization. Nonetheless, there are multiple lenses through which we can dissect the PR process and illuminate its subtleties.

Skill Development

I believe there are significantly more effective methods to foster the growth of managers and their teams.

Performance Reviews (PR) are conducted too infrequently to offer timely feedback — ideally, feedback should be immediate to be most effective. This scarcity also hampers the provision of adequate guidance for most employees, excluding perhaps those at a senior level. Regrettably, there’s a prevailing notion that performance reviews are the main mechanism for improving performance, compelling us to rely on them. However, I advocate for organizations to reconsider the efficacy of PRs in “skill development” and to adopt alternative practices that are more conducive to everyday professional growth: engaging in mentorship programs that benefit mentors and mentees alike, implementing pair programming, devising personalized growth plans, conducting training sessions, and allowing for slack time dedicated to development.

However, in organizations lacking a robust feedback culture, PRs serve as a vital mechanism, compelling the exchange of feedback and acting as a safeguard against the negative feedback loop where the absence of feedback leads to declining performance, which in turn, results in further deterioration.

Additionally, in an environments where managers are heavily pressed to focus on delivering “critical” features, PRs can earn team members a justified opportunity to pause, reflect, and digest feedback, which can be crucial for team development.

Reducing Uncertainty

PR mitigates uncertainty for employees: everyone is aware of when and how they will receive feedback, understand their performance scores, and learn about potential promotions and compensation adjustments. This reduces the anxiety, overthinking and hearsay associated with these important topics.

Compensation Transparency

Establishing public policies that delineate operational procedures not only fosters transparency and trust but also significantly enhances team mental health.

The prevalence of issues like biased promotions or terminations based on skewed feedback, nepotism, tolerance of underperformance or excessive harshness, and unacknowledged cliques, undermines organizational integrity. By clearly defining and communicating explicit policies and protocols, an organization improves trust in its governance.

PR helps to establish a clear input to promotions process, making them more transparent, addressing both the pathway to promotion and reasons for not being promoted. Thereby, again, reducing anxiety and speculation. Such clarity and adherence to transparent rules reinforce the belief in a fair system, where every member understands the “rules of the game” and trusts that decisions are not made arbitrarily.

Being a Part of Organizational Change

PR provides a chance for organizational transformation accessible to everyone. Instead of feedback disappearing into direct messages or one-on-one meetings with a manager, it’s recorded in the organization’s broader bureaucratic system.

This visibility ensures that HR and senior managers observe the feedback provided by employees, offering an opportunity to identify issues such as dysfunctional management or underperforming team members. Conversely, it also allows for the recognition of employees whose contributions surpass basic expectations, spotlighting their positive impact within the organization.

Optimization

A shared PR process leads to optimization, standardization and innovation. Centralizing the tasks of providing feedback, facilitating peer reviews, calibrating, normalizing, and identifying outliers makes for a more efficient process. Creating universal guidelines, rather than multiple disparate ones, enhances efficiency and leads to innovation. Managing such an extensive process without checkpoints is daunting.

While decentralized performance review systems exist, they lack the optimization and streamlining of a unified, global approach. Through standardization, innovation emerges.

Organizational Synchronization

Essentially, an organization operates as a sequence of processes, many of which adhere to quarterly cycles of goal setting and review, as well as resource management. If your organization lacks this framework for setting and reviewing goals, I pity you.

Performance Reviews slot into this sequence strategically, occurring after the assessment of goal achievements (to gauge team performance against predetermined objectives) and before the allocation of resources. It’s during the aftermath of PR that decisions regarding financial allocations for bonuses, raises, or, in less favorable scenarios, the budgeting for new hires to counteract turnover, become clear.

It happens. Situations arise where an employee, taken aback by an HR call about their termination, protests, claiming top performance and arguing against dismissal. In these instances, you’re navigating the labor laws of your country, which often favor the employee.

Typically, companies offer more flexibility than what’s stipulated in contracts—allowing for reasonable lateness, additional days off, and work-from-home options—to foster a supportive work environment beyond the minimum legal requirements. Yet, when critical issues emerge, such flexibility doesn’t help the company. Abrupt terminations are complicated by unions and labor commissions, highlighting the necessity of a well-documented procedure for identifying performance issues.

To mitigate potential disputes, having a thorough PR process in place is important. This ensures that there is documented evidence to support decisions, smoothing over any contentious discussions regarding performance-related actions.

Building Trust

Viewing PR through a trust lens offers a nuanced understanding of their role within an organization. Consider the hierarchical chain: a manager reports to their superior, who in turn reports up the chain, culminating with the CEO, who is accountable to the board of directors. These directors, ultimately, address investor concerns.

While you may feel confident in your performance, the question remains: do investors share this confidence? The higher you go in the organizational hierarchy, the greater the ambiguity becomes. A dip in expected revenue can trigger a cascade of scrutiny, leaving managers vulnerable to blame. Foreseeing such scenarios, Engineering Management has proactively instituted a system designed to affirm the reliability of the engineering department to all levels of management. This system is essentially what we know as PR.

By embedding trust in performance monitoring protocols, it implicitly reassures the entire management chain of every individual contributor’s performance. As a leader responsible for other managers, it’s critical to trust that they are accurately assessing their teams, thereby minimizing potential issues and underperformance.

This trust is foundational, ensuring that confidence in the PR system cascades down, enhancing overall organizational efficiency and morale. When executed effectively, this not only alleviates management anxiety but also fosters a sense of security. Obviously, for this trust to be sustained, the PR system must be both well-designed and transparent.

The bad and the worst of it

It’s not an individual contribution

Software development is a craft, not easily quantifiable like manufacturing labor nor purely artistic, challenging the traditional means of measuring work through its complexity, quality, and market demand, all of which are inherently subjective.

When considering the compensation for such nuanced work, approaches generally fall into two categories:

with Performance Reviews usually leaning towards the latter, implicitly comparing employees.

Unfortunately, in a team context where outcomes are shaped by collective effort and influenced by a myriad of small decisions from the broader corporate structure, both approaches stumble. The value an individual adds to an organization is deeply tied to the system in place.

The endeavor to ensure fair compensation amid these complexities is daunting, owing to the multitude of confounding factors. The relationship between effort and impact is rarely clear-cut, often obscured by organizational failings or a lack of acknowledgment of these issues. Understanding the intricacies of evaluating a complex system makes it evident that appraising individuals is far from straightforward. The apparent evidence of an individual’s “performance” is heavily dependent on systemic impacts, many of which lie outside the individual’s control.

Most organization do not ovecome the situation when data is cherry-picked within a complex system to argue for or against an individual’s performance contributions. Typically, this absence of a holistic approach results in frustration, discontent, or undue leniency, depending on the particular data chosen and excluded.

Acknowledging these challenges, it seems almost impossible to think about measuring IC contribution directly. It also seems impossible to talk about any pay fairness since we can’t link it to the contribution.

It’s not measurable impact

Not all efforts lead to observable outcomes; processes such as hiring, knowledge sharing, and mentoring are essential yet intangible contributions that enhance organizational growth and culture, making them challenging to directly quantify and acknowledge despite their critical impact.

This creates a dilemma where the organization becomes fixated on initiatives with clear RoI while neglecting vital, yet immeasurable (and invaluable), activities. It’s crucial to recognize that many significant aspects that require management cannot be measured. This reality underscores two key points: one, not everything of importance to management can be quantified, and two, it’s imperative to manage those important, unquantifiable elements nonetheless.

Insufficient Organizational Feedback Capabilities

PRs often fail due to specific anti-patterns exhibited by those giving feedback, including lack of qualifications from reviewer, providing feedback that is either one-sided or anomalous, being excessively lenient, or unduly harsh, etc..

Moreover, giving quality feedback is a skill that is regrettably rare, as it demands a comprehensive set of abilities:

The skill of providing meaningful feedback can be likened to an “untrained muscle” that weakens without regular exercise, leading to a detrimental negative feedback loop within organizations. If feedback is seldom given, the ability to deliver constructive and insightful feedback deteriorates, making each subsequent attempt more challenging, time and energy consuming. This cycle is further compounded by the discomfort associated with giving and receiving feedback, especially when it’s critical, causing individuals to avoid it and miss out on opportunities for growth.

Impact on Project Scope Attitude

Consider project scope in organizations that strictly adhere to PR systems. Individuals might hesitate to engage in projects with a Design-Develop-Measure cycle extending beyond the PR period, fearing the inability to demonstrate “impact” in their PR. Similarly, challenges arise when someone is assigned an “unplanned” objective mid-PR cycle. If this new project necessitates halting an ongoing one, what then constitutes the employee’s impact? The original project remains incomplete, thus lacking impact, and the new project is too nascent to be impactful.

Effective PR system design must address these dilemmas, ensuring it does not discourage the pursuit of long-term initiatives that span multiple quarters, nor should it compromise organizational flexibility by preventing the abandonment of projects due to sunk cost bias.

Essential Foundations for Effective PRs

Before implementing a performance review system, organization should excel in three key areas:

  1. Ubiquitous Expectations: Clear, concise, and universally understood definitions of performance are essential, albeit challenging to create. This process is more akin to an art than a mere checklist of measurable items. Establishing guidelines, reference points, and diligently calibrating managers’ perceptions of performance well in advance of performance reviews are vital steps. These measures ensure that everyone has a shared understanding of what constitutes acceptable and exceptional performance as well as underperformance.
  2. Routinely Feedbacks: An organization must foster an environment where quality feedback is generated regularly and seamlessly, without disrupting daily operations. Such an environment benefits the organization even outside the performance review cycle by creating a positive feedback loop. This loop, supported by sufficient organizational backing to implement changes based on feedback, enhances overall performance. Quality feedback during reviews is only possible if there is a culture of giving and receiving constructive feedback throughout the review period.
  3. Prepared Evidences: Rather than scrambling to prepare materials shortly before reviews, individuals should continuously document feedback, accomplishments, and areas for improvement. This involves tracking the performance of peers, stakeholders, managers, and reports, noting successful projects, poor decisions, missed deadlines, and instances of extra effort. Maintaining this ongoing record ensures that performance reviews are based on comprehensive and accurate data, facilitating fair and constructive evaluations.

Ubiquitous Expectation Management

Creating shared expectations within an organization typically revolves around two dominant approaches: calibrations by a committee and the expectation model.

  1. Calibrations by a committee occur when a selection of experts gathers to evaluate an employee’s performance against what they deem to be the standard. These experts, often from different departments and not directly familiar with the employee and they rather review materials, created by the employee and their direct manager. They assess these against promotion criteria, draft a series of follow-up queries for discussion with the manager, and ultimately, decide on the outcome. This approach has its pros and cons. Trust in the committee’s fairness and judgment is crucial; you have to trust that their decisions, even if not in your favor, are just. However, the process is inherently subjective and prone to errors—no expert is entirely without bias. We expect committee members to aim for objectivity. Ideally, they achieve this, but as many know, the process can be lengthy, often leading to what’s termed “death by committee.”
  2. The expectation model, alternatively known as a “skill matrix” or under other names, relies on objective performance indicators. This method faces two significant challenges: the balance between the model’s comprehensiveness and objectivity, and the exponential effort required to develop it. Crafting a basic model is difficult, but designing a detailed, accurate one is even more so. This precision is crucial—you need to align your model with the collective beliefs of your colleagues, which becomes increasingly difficult the more detailed the model is. Moreover, these models struggle to encompass the full scope of real-world complexities. Consider situations like a colleague spearheading a knowledge-sharing initiative, another experiencing a significant personal loss affecting their performance, or someone organizing team-building events. Such contributions, rarely get recognized in these models, inadvertently signaling that these efforts are undervalued, thus discouraging them.

Both methods aim to establish clear performance expectations but come with their own set of limitations and challenges, highlighting the insane complexity of measuring and recognizing employee contributions in a nuanced and fair manner.

The Endgame

Is there a way to create a performance review system that is both fair and comprehensive, acknowledging the diverse ways individuals contribute to their organizations? Such a system would need to transcend traditional metrics, recognizing the qualitative alongside the quantitative, and taking into account the broader context of each person’s contributions.

In pursuit of this ideal, we’re challenged to rethink established norms and to consider a future where performance reviews genuinely reflect our work. It offers a chance to redefine what we consider valuable and impactful in our workplaces, fostering a culture where recognition is meaningful and based on a holistic understanding of performance.

However, the quest for a “perfect” PR system may be misguided. Instead, focusing on establishing clear expectations and fostering regular feedback could prove more beneficial. If your organization’s PR process has limited impact, prioritizing these foundational elements might yield greater results than overhauling the PR system itself. By shifting our focus from perfecting the PR process to strengthening its foundational elements and addressing related issues through complementary strategies, we can make meaningful progress towards a more effective and holistic approach to performance management.

While this approach does not directly address issues like pay fairness or the measurement of contributions and ROI, it suggests that such challenges should be tackled through modifications in resource management and compensation policies, rather than relying solely on PRs. Breaking the norm that PRs should act as an input to the Resource Management could be a direction worth exploring to see how we can manage our resources and compensations, admitting our failure and inability to measure individual contributions.