Zugata raises $7 million to make annual performance reviews obsolete

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Even before they began to graduate from college, millennials drove changes at work, from management and recruiting practices to the design of office interiors. But companies are still adapting and figuring out what matters most to this large demographic and employee base.

Now, a tech startup called Zugata has raised $7 million in Series A venture funding to replace the crusty old performance review with something more motivating to this group than a twice-a-year, managerial write-up.

Investors in Zugata’s new round included Canaan Partners, General Catalyst and Redpoint Ventures.

Founded in 2014, Palo Alto-based Zugata developed software as a service that automatically figures out who employees work with most, and then helps them gather feedback from each other, directly, without managers or HR departments eavesdropping.

Companies that use Zugata can set a policy so that employees may exchange feedback either anonymously, or with their names attached.

Zugata shows users a set of skills that a colleague should have mastered, based on their functional role. For each skill, a user marks it as strength or not yet a strength.

The employer cannot access messages exchanged, not through their HR department, IT or any other division. If court orders (or some other situation) required messages between employees to be disclosed such requests would be handled by Zugata.

Zugata CEO and cofounder Srinivas Krishnamurti explained that providing employees with a private, but official, means of exchanging feedback decouples professional development and performance goal-setting from salary and promotion decisions.

Zugata cofounders Srinivas Krishnamuri (CEO) and Plilippe Van Nuijs (CTO).

Zugata cofounders Srinivas Krishnamuri (CEO) and Philippe Van Nuijs (CTO).

Krishanmurti said the effect is beneficial for a few reasons. “Feedback that employees get is only visible to them. Managers, others do not see it. So if I have a problem with what you are doing, you get feedback from me, but your boss cannot see it and in effect, I don’t rat on you to HR or your boss,” he explained.

Ultimately, Zugata should help employees understand where their own perceived strengths and weaknesses lie, he said, and how to improve their work and careers.

Many HR Tech players, from startups like Glint, Impraise or Namely to larger players like PeopleSoft or Cornerstone On Demand, have tried to redefine performance reviews. Key features feel like a survey that’s run throughout the year, or systems that allow employees to give kudos to one another.

Zugata considers its approach distinct in the field of HR tech, and what’s called “performance management” in the trade.

To ascertain which employees should give feedback to which other employees, and to deliver “learning modules” that address areas for improvement with some educational content, Zugata uses artificial intelligence and machine learning, and plugs into email and collaboration tools like Gmail, Outlook, Slack, Github and Gira.

Canaan Partners General Partner Hrach Simonian said, “The paradigm shift from annual to continuous feedback is talked about by a lot of companies. But most of the big platforms are really gimmicky. Zugata is providing an objective system that helps you score skills and set goals instead of just collecting badges. And it’s gaining traction in what amounts to a huge market.”

Primarily, the company plans to use the Series A capital for hiring, product development, international expansion, and to help its clients deliver corporate learning to their employees that is perfectly tailored to their needs.