Hacking the Performance Evaluation

Performance reviews tax organizations, managers and employees to such an extent that some companies have abolished them outright. Reviews are emotionally complex conversations. Positive and negative feedback are intertwined with conversations about career progression, raises and equity grants. These meetings are emotional powder kegs; and it’s no wonder they stress us.

In Work Rules, Google’s Chief People Officer Laszlo Bock, argues for a different type of performance review: a split review. At Google, “annual reviews happen in November, and pay discussions happen a month later.”

There’s a theory underpinning this decision. We motivate ourselves by internal and external factors. The satisfaction of improving a skill is internal. A cash bonus is external. Self-improvement elicits better performance than compensation, but both motivators work. The problem, though, is when they are conflated.

Research shows that external motivators can easily trump internal ones. In a review, it’s easy to focus on the compensation elements to the detriment of the personal growth feedback. So, most reviews end up being about compensation, rather than self-development.

To quote Pasad Setty, another Googler in the People Ops team:

“Traditional performance management systems make a big mistake. They combine two things that should be completely separate: performance evaluation and people development. Evaluation is necessary to distribute finite resources, like salary increases or bonus dollars. Development is just as necessary so people grow and improve.”

I haven’t experienced a split performance review, but I hope to. The idea makes sense to me, and I suspect that having two conversations, one about internal motivators and one about external motivators, would have helped me focus more on personal development.

Plus, splitting the conversations into a personal development conversation and a compensation conversation deflates a lot of the emotional tension and stress of the current way most companies do reviews.

Would you prefer a split review?

Published 2015-04-13 in Management 


I'm a partner at Redpoint. I invest in Series A and B SaaS companies. I write daily, data-driven blog posts about key questions facing startups. I co-authored the book, Winning with Data. Join more than 18,000 others receiving these blog posts by email.

Read this next: