AltSchool's CEO Max Ventilla has taken his experience from working at Google and other startups to create an employee performance review system. While the annual performance review is often viewed as a source of turmoil, with the right structure, it can turn into a valuable tool for both employee and company feedback.
How to Conduct a Performance Review
- Set the right time interval. While an annual review is traditional, it's not mandatory, so find a frequency—between a year and a week—that fits your company’s culture. “Your performance last week wasn’t so great,” is much easier for your employees to take in than “your performance last year wasn’t so great.”
- Designate a competent project manager. This is the main point person in charge of the nitty-gritty of the entire process, from setting the ratings to gathering feedback of the process.
- Set the performance rating scale. Whether they're a number or a description, use ratings that make sense to your organization. AltSchool’s ratings are unsatisfactory, needs improvement, meets expectations, exceeds expectations or truly exceptional.
- Set a rating curve. The average should be set to something that’s reasonable to your company. For AltSchool, the average rating is set to a low "meets expectations". Ventilla notes that nothing actionable comes from a review process where everyone scores "truly exceptional".
- Execute the self-reviews. This gives everyone the chance to honestly reflect on their performance. You could use questions like: “What areas did I have the largest impact on?”, “What are my key strengths?”, and “What could I improve on?”
- Finalize the peer review lists. To speed up the process and give employees more autonomy, allow your employees to choose whom they want to evaluate. Everyone gets at least two reviewers. The managers should approve everyone’s choices and evaluate whether there are too many or too few reviewers for each employee.
- Execute the peer review. Have your peer reviewers evaluate the performance of the peers they selected. Questions should be similar to the ones in the self-reviews (#5).
- Execute the manager reviews. AltSchool’s manager reviews have a “free write” portion, and ratings (except unsatisfactory) have a subscore from 0 to 4. This granularity captures as much feedback as possible. Ventilla also recommends having your managers first write a rough review first to prevent bias; only then should they review the employee's self and peer reviews.
- Bring reviews to the calibration committee. Create a committee of VPs and other senior roles, which is responsible for:
- Finalizing actionable feedback for each employee. The committee checks every review and finalizes the review comments.
- Calibrating the ratings. The committee reviews all ratings by level (from interns to C-Suite), and then by those who got the same rating at different levels to evaluate whether the ratings seem sensible across the board.
- Performing the “bus test.” For every person, they ask “If this person got hit by a bus, how screwed would the organization be?” This is to limit your organization’s dependence on your top performers.
- Ensuring fair and objective compensation. Every employee at AltSchool is eligible for a discretionary bonus, and that bonus is set by the committee based on the scores received.
- Review the review. To conclude the process, have the project manager ask for feedback on how the process went so that your review is constantly iterating.
Takeaway: Establishing a clear, regular performance review process means that everyone receives actionable feedback, changes are rapidly implemented, and compensation and bonuses are set more objectively. While your team may not require a process as rigorous as AltSchool's, starting with a simple implementation can show impressive results.