Netflix’s culture deck has been a source of inspiration for many businesses since it was first published five years ago. In it, Netflix argues that companies must find a balance between flexibility and responsibility. Afford employees the freedom to thrive and they will reward the company with outstanding performance; emphasize purpose, honesty and good judgment to attract top-tier talent. But, like a professional sports team, if an employee is not performing, you owe it to your company to find someone better suited for the role.
Measuring actual performance, particularly in white-collar work, can be challenging. It requires goal setting, quality evaluation, feedback and a lot of qualitative judgment. It’s fair to say that most founders and managers find these tasks difficult. Personality and cohesion matter as much as benchmarked success. For instance, Netflix notes that they don’t tolerate “brilliant jerks” because “cost to effective teamwork is too high.” But how is it possible to quantify someone’s “fit” while also stressing high performance?
A majority of companies use qualitative performance reviews — or feedback that reflects comments and observations of an employee’s performance in a non-numerical manner. Eventbrite is a good example of this. Their head of HR, Emily Couey, states, “Leaders and Britelings (Eventbrite employees) discuss performance quarterly based on results and behaviors — what people did, and how they did it.” She adds, “We find performance reviews help our employees feel connected to the mission of the organization and part of the team as a whole.” And that may be paying off — Eventbrite’s overall Glassdoor score is an astounding 4.7/5.
But qualitative reviews are incredibly time-consuming, can be imprecise and often are not overly helpful in identifying opportunities for development. They also are necessarily subjective, which can lead to erroneous feedback.
Quantitative reviews can help address these issues. Numbers cut a sharp line between who performs and who fails to meet standards. They also eliminate the pressure to measure performance based on face time. But what and how much is being measured is still fallible to human error — and it can instill a culture of competition rather than cooperation, as Vanity Fair reported of Microsoft in 2012. The magazine also noted that the “rank and yank” system incentivized managers to “horse trade” team members in review sessions. Microsoft abandoned ranking employees in 2013.
Direct, objective feedback increases employee productivity.
A holistic, or combined qualitative/quantitative approach, values both the employee’s “fit” while also pushing benchmarks for performance. That’s how Facebook does it (and they have a Glassdoor review rating of 4.5/5). According to Molly Graham, who helped build Facebook’s performance-management system, employees are evaluated semi-annually. They elicit feedback from peers, and write a personal assessment and a manager assessment. Their manager then provides the employee with a rating of their performance. Facebook does have a curve, but it is not always a predictor of who is fired.
While certainly effective, evaluating and calculating Facebook’s employees’ contributions to the company and team is not time-efficient. That’s where software can help.
Two companies stand out with their use of software for evaluations. The first is Zappos, which uses an in-house, 360-degree software to help evaluate their employees. Kelly Wolske, a senior trainer at Zappos, says, “Culture is something that we operationalize [in our performance reviews]. It’s just as important to exhibit our culture as doing your job.”
The second standout company, SAS, uses performance-evaluation software called Workday. Jenn Mann, SAS Vice President of Human Resources, told me in an interview, “Our approach has moved away from the traditional one-time a year performance review… that supports ongoing conversations for high performance, as well as discussions about development and career growth.” She adds, “This approach is effective because it encourages innovation and creativity while promoting accountability and high levels of performance.”
Studies have shown that direct, objective feedback increases employee productivity, and software is a great way to save time while doing so. It balances qualitative and quantitative measures, allowing companies to save time, evaluate a person holistically and maintain clear benchmarks. I expect it to play a key role in the rise of performance-based cultures across more and more businesses.