Tips for Performance Appraisals in Small Companies [On Atlassian]

If you’re in a startup or a relatively small company, getting started on employee performance appraisals generally presents a dilemma. The ways larger companies do it can be a lot of work and not fit the culture. But doing nothing or being too unstructured has other problems.

I thought sharing how we developed our process might help others in the same boat. I also hope some of you might comment back what you’re doing that works.

Performance appraisals are only as good as your ability to give employees feedback continually and consistently. Otherwise a formal written appraisal can be a surprise, and bring unnecessary angst. We realized we were terribly inconsistent in coaching employees, so we hired a consultant trainer to train everyone in leadership on giving constructive feedback. This training included me and the founders, Mike and Scott.

I’m going to focus this, however, on what we have done to improve our written appraisals.

In our first few years, we had tried two different methods: one that was highly unstructured, and one that was too form-checkbox oriented, which took a lot of work. Thanks to our new HR Director Flanagan, we just went through a company-wide process that was simple yet yielded almost universally positive results.

Here’s what guided our process, and they’re my primary tips:

  1. Keep it simple. This didn’t really sink in until I decided to seek out an outside HR expert. I wanted advice from someone in an innovative company we respect, and who thinks about HR creatively and differently. I remembered a lunch I had with the CEO of Netflix, Reed Hastings, years ago, and so without introduction, called Netflix’ Patty McCord, their Chief Talent Officer. Being the type of person who does not shield herself with bureaucracy, she took my call, and spent over a half hour discussing performance appraisal methods. Her primary advice was to keep it extremely simple if you have a small startup culture.
  2. 360 Feedback. This may sound obvious, but I mean feedback from everyone who encircles your job. Managers need to hear what their teams think. Administrative people need to be able to comment on those giving them work. Peer feedback can be extremely powerful particularly when it comes to knowing your strengths.
  3. Review everyone in the company at the same time. This goes for salaries too. It’s hard, but it ensures far greater consistency. You’ll also run the process much better.
  4. Let employees evaluate the company. There’s no better time to collect ideas on how to improve the company. Collating this information can be interesting, and reveal the things you really need to address.
  5. Don’t confuse operating goals with performance appraisals. A lot of performance appraisal methods call for employees and managers agreeing on goals at the conclusion of their review meetings. You need to be careful to not let this overlap with the natural goal setting you do in the business. At Atlassian, we already have clear goals in every team: developers have release schedules; marketing has web metrics, etc. We set goals by team at least quarterly. Goal setting in performance appraisals should not replace this. They should be about personal improvement only. If an individual’s goals should be contributing to their team goals, then don’t labor over this and create more work.

Here’s what we ended up with:

  • Employees mades lists of who should review them, and HR checked the list for completeness.
  • Everyone was asked to write comments on who they reviewed in two categories: Strengths and Areas to Improve.
  • HR compiled all comments verbatim and anonymously into the appraisals
  • Employees were also asked 4 questions:

    1. What are you proud of having done in 2006, and what do you think you could have done better?
    2. What 3 things would you do to improve your team?
    3. What 3 things would you look at improving Atlassian and/or its work environment?
    4. If you were going to set yourself goals for the next six months, what would they be?
  • Employees received a compilation of the comments, and sat down with their manager to discuss the most important areas for focus, and to discuss the employee’s answers to the 4 questions

I can’t tell you how powerful it is to receive a list of direct comments from other employees on your performance. One of our engineers was so struck, he took the review home and put it on his refrigerator.

Hearing the nuance and subtlety of someone’s perspective, without filtering by some manager, makes the information more genuine and useful. I asked for feedback from everyone in our SF office and a number in Sydney and was blown away by 4 pages of comments (10 point font).

It’s obvious what you need to work on when the data points add up on a certain issue. The comments on strengths can be exhilarating frankly. It can be an extremely useful, introspective, and personal moment in the middle of all the intensity of daily work.

The beauty of this process is a manager did not have to sit down and write a review and check boxes which when done thoughtfully can take considerable time for an entire team. I can’t recommend the process more and would love to hear your learnings on the topic and share more specifics on our process.

23 responses to “Tips for Performance Appraisals in Small Companies [On Atlassian]

  1. Nice tips there, thanks alot

  2. Perhaps these research-based observations about performance appraisals will be of interest:

    GIVE CREDIT FOR GOOD FORM. If the only dimension of performance we needed to be concerned with were the number of widgets produced each hour – without reference to how this was achieved (regarding waste of material impact upon fellow workers, being on time, etc.) – then no formal, performance-appraisal system would be needed.

    However, rarely is this the case. Usually, physical conditions, external events, and the behavior of others (e.g. time required for the best team-building efforts to have effect) interact to determine outcomes. Therefore, adequate attention should be given to productive, work-relevant behaviors – not just immediate, physical output – on the part of each individual.

    IDENTIFY WORK-RELEVANT BEHAVIORS VIA THE CRITICAL INCIDENT TECHNIQUE. Court decisions stress the need for appraisal criteria that are based upon explicit, job-analysis data, rather than general characteristics; such as, attitude toward people, resourcefulness, leadership, capacity for growth, and loyalty to the organization.

    The Critical Incident Technique (CIT) produces quite explicit data. Those who are most knowledgeable about a job (supervisors, incumbents, peers, subordinates, clients, etc.) are asked to describe, independently, specific incidents of efffective and ineffective job behavior they have observed over the past 6-12 months. Next, they meet to classify those incidents that they agree are positively or negatively critical into different perforrmance dimensions and assign relative weights to these. These incident data can then be used to inform new job inductees, guide remedial action, and indicate the the types of behavioral documentation that will be required for supporting “star” and “inadequate performer”

    EXCLUDE THE MIDDLE – SOLICIT RATINGS FOR ONLY EXTREME PERFORMERS. In virtually any organization, you will obtain much better agreement as to who are the “stars,” and who are the “inadequate performers,” than you will as to who is “above average,” “average,” and “below average.” Yet, in most organizations, assignment of these middle-three ratings consumes a disproportionate amount of supervisory time and causes the most dissension and resentment among the troops.

    The label “average” has a negative conotation to good employees, for we know that average performance in a superior organization is not the same thing as average performance in a mediocre one. Why not simply tell these middle people that they are valued menbers of the team and give them CIT data on how to be “stars” and avoid being “inadequate performers.”

    USE MULTIPLE SOURCES AND, WHERE FEASIBLE, MULTIPLE RATERS FOR A SOURCE. Studies show that ratings from those closest to the performance dimension being rated – in terms of knowledge about the dimension and opportunity to observe behavior relative to it – are more valid than ratings from other sources. In addition, the pooling of ratings from several knowledgeable raters for the same source, when available, are preferable to one rater for that source, in terms of measurement reliability and inclusiveness. Of course, all “star” and “inadequate performer” ratings should be documented with CIT determined behaviors.

    USE A COORDINATION PANEL TO PROCESS EVALUATIONS WHEN THERE IS MORE THAN ONE ORGANIZATIONAL UNIT. A Coordination Panel (comprising a representative from each organizational unit and chaired by a top-level officer) should be established to check on the adequacy of each unit’s CIT preparation, review inputs from the various units to assure interunit fairness, handle appeals from aggrieved personnel, and otherwise monitor the operation of the system. The panel also determines how to make trade-offs between goal achievement and goal difficulty.

    SOLICIT FEEDBACK FROM RATEES. No supervisor or other rater is all-seeing and all-knowing. In a rating-review session, the supervisor should regard the overall rating of a ratee to be tentative until the ratee (previously given all CIT data about his or her job) has had the opportunity to input any additional critical-incident data not communicated by the supervisor or challenge any communicated data. Then, if necessary, the supervisor may need to confirm the validity of such data before continuing the performance review.

    A more complete presentation will be found in my article: “Improving Performance Appraisal Systems,” NATIONAL PRODUCTIVITY REVIEW. Winter 1987-1988, Vol. 7, No. 1, pages 20-27.

    William M. Fox
    Professor Emeritus, Management and Organizational Behavior
    University of Florida
    6605 SW 37th Way
    Gainesville, FL 32608
    (352) 376-9786

  3. William — Impressive comment. Your first point makes me wonder because I would advocate getting rid of the appraisals totally in favor of measuring outcomes/MBOs. I think companies spend way way too much time evaluating behaviors and doing it badly. However, I like your ideas about identifying the extreme behaviors. Lot of work for a company of 200 people in 3 locations around the Globe but perhaps something we can strive towards.

    Do you work with any companies sub-1000 employees who have done this successfully and would be Best in Class at this in your opinion? Thanks — Jeffrey

  4. Nice overview.. Loved it…Keep Me updating.. Site Bookmarked

    This is eaxactly what I was talking about on my blog. I appreciate the work you put into this and I look forward to reading more.

  5. Tks for sharing your approach ! I’m sure your method could be a very effective way for SMEs.

  6. I’ve been reading up on various approaches to Performance Appraisals to figure out something that would work for our small but growing company and I was delighted when I found this blog as the approach you outlined seems simple, practical, and worthwhile. I was wondering how you handle the salary review side of things. Is it connected to this performance appraisal process or do you approach it separately? I’d love to hear how you manage it.

    P.S. Keep up the good work with JIRA. Good product!

  7. great business tips thank you .

  8. There are many varieties of performance appraisal systems in operation and there is no “one right system”: what is right is what helps you to achieve your objectives (i.e. improve performance, identify training/ development needs, generate more open discussion of performance objectives, etc.). Great tips! Thanks!

  9. I usualy just go to the university and get some students to work for me and I just fill out a work experience document for the student at the end of the month that way they get the experience and I get cheap labor

  10. This is a well written post on how to excel in small business appraisals

  11. Great tips, will definately be keeping a copy of this as I am currently developing a small business and this will no doubt come in handy

  12. Great stuff! thank you 🙂

  13. Great tips. one of the aspects that entrepreneurs find most intimidating is raising start-up capital. Gone are the days of pitching investors with hot new expertise ideas. Today, entrepreneurs are much more likely to drop into their own pockets and hunker down for a combat to start up and stay alive.

  14. Agreed, I have a small team of software developers and sometimes just hearing my feedback isn’t enough, it is better heard from our customers and their peers, if the same theme or comments are present by all of them, it is much better than if I tell them. We are required at my company to do the “checkbox” performance review, and I sometimes have a difficult time coming up with the write words to use so I am beginning a forum on the topics, since it is not something that is negotiable. I do however get 360 feedback from everyone to input into the comment section. I appreciate you sharing the tips on here.

  15. Great read and for once quite practical in its approach. I work for a small start up named Eko. I would definitely like to use this technique, however, can you also suggest how should I go about the Salary hike/no hike side of the process? I would really appreciate if anyone can come up with a thought considering ours is a small company and we are not in a great position to give awesome hikes.

  16. It’s an awesome article for all the online users; they will take benefit from it I am sure.

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  21. Reblogged this on mansisblogs and commented:
    The process is really effective specially for small set ups where a complex and a very formal KRA based performance appraisal is difficult to implement.

    Thanks for the inputs!!

  22. Interesting and very simple to implement. What do you think of self appraisals as an initiation point for the appraisal process?

  23. Is a formal 360-degree performance review process worthwhile in a company where management is good at providing individual feedback to employees?

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