Why We Should Transform Performance Reviews

Problem

"Performance reviews generally tend to be linked to compensation. This leads to unhealthy discussions and removes focus from actual growth and performance."

• Key Quote: "This leads to unhealthy discussions and removes focus from actual growth and performance."
• Key Quote: "Another problem is that performance reviews are often a one-way directed judgment. This leads to lower ownership and disengagement of the team members resulting in a negative impact on the learning process."

Actions taken

One of the steps we made was to introduce a periodic compensation review system where the compensation is reviewed based on clear and easy-to-measure criteria. For example; years of experience, goals achieved and the number of new responsibilities added. These criteria can then be translated into growth points that determine the possible update of the compensation. By doing this, we entirely removed the dependency and relation between performance and compensation. The second step we took was introducing a judgment-free coaching system, a bi-weekly one-on-one session with a retrospective of the last two weeks and review of the long-term growth. The team members themselves own this process and are responsible for setting goals for personal growth, retrospect, and giving updates on their progress toward their goals and making notes. In this process, the leads are helpers and give support and advice where asked and give guidance in retrospective and goal setting, both in personal and professional areas.

Lessons learned

By decoupling performance and compensation, we eliminated misalignment in expectations and destructive discussions. By giving the ownership of the performance to the team members and removing the judging aspect, we created a much more motivating environment where people started taking ownership of their own goals, progress, and results. This leads to no longer needed so much management as people themselves become their managers. Speaking even outside of work, this leads to people thinking for themselves both in the workplace and in their personal lives. A side effect of this process is that it showed us a clear difference between proactive and reactive individuals. Ultimately, judging people based on performance never motivates anyone, and it is counterproductive to any workplace in general.