Thoughts on Performance Reviews and Organizational Innovation
We do a few things unconventionally at BP3. And people who work here probably have heard me, at one time or another, advocate that you can over-think the innovation in your company when you try to innovate too much with organization and HR procedures.
If you think of a company’s primary means of innovation (as listed below), my take is that you only want to be contrarian on a couple of these, not all of them:
- product innovation
- business model innovation (sales, marketing, etc.)
- process innovation (to enable the above)
- organizational innovation (to enable the above)
Perhaps the biggest risk is with the fourth bullet. You get this wrong, and everything else will fall apart as you demotivated your team. And yet. At BP3 we are a bit contrarian about not so much the organizational structure, but about how we go about reinforcing our culture and performance.
So it is always a nice bit of confirmation bias when I find research or articles that have a similar point of view, like this one by Ken Goldstein: 3 arguments against performance reviews.
- (my personal pet peeve): “performance reviews can put off for up to a year what needs attention now.” Top performance is all about feedback loop and how fast you can learn. If you wait to give someone feedback until their performance review, their improvement cycle will be only annually… Those uncomfortable conversations need to happen sooner, not later.
- “performance reviews are largely clueless on the value of failure“. This is an interesting take on performance reviews. The idea that failure is punished too harshly, rather than risk-taking rewarded, and the learning from those failures re-incorporated into the business going forward.
- “performance reviews require a level of mentoring expertise few managers ever master.” According to the author: “It is one of the hardest things any of us are ever asked to do in a job function. Each time we blow it, we never get a chance to repair the enormous damage we create on top of whatever relatively minor damage has already been done.” More damage to organizations and culture is done through bad performance reviews than most other activities in a business.
At BP3 we try to focus on the feedback and let our team members understand their own failures and learn from them. But I’ll be the first to say this approach isn’t for everyone. It takes a lot of self-confidence to tear your own performance up. And it takes a certain demeanor to not sweat it when you relinquish that responsibility to your teams and let them succeed or fail and learn and get better.
Further confirmation comes from Stanford’s CS183C class notes, an interview with Slice Co-Founder Patrick Collison:
John Lilly: Can you talk about how Stripe is organized? Do you have VPs, managers, etc.?
Patrick Collison: We are conventionally organized. As founders we have a tendency to do things differently. It comes from a good place but there are two problems with innovating on the organizational model:
- The standard means of organization helped create Google/Facebook/Amazon/etc. Even if you could organize a company in a better way, do you need to do that?
- Any alternative you do create, it’s hard to get exposure and experience in that model.
Technology tends to change a lot but people and the organization of people are the same systems today. […]
This is an incredible level of maturity of outlook on organization for someone in Patrick’s shoes. And it perfectly describes how I feel about innovating on organization. When you hear your company talking about matrices and pods and innovative structures, the alarm bells should be going off. Maybe you would expect a startup to roll the dice with something like this, but honestly, you’re already rolling the dice in so many ways with your company, org structure may not be the best thing to take additional bets with.
[incidentally, the whole series of class notes for CS183C is amazing. This is the kind of class that makes Stanford a truly unique and special place in the ecosystem of software and startups]