Performance management, traditionally a numbers-intensive evaluation, has generally been stressful, ineffective, and detested by managers and employees alike.
When it comes to tech startups, which often rely on cross-functional teams to build their product and grow a user base, clear communication and feedback is especially important in keeping everyone working in sync toward the same goals.
How can performance management build workplace efficiency without destroying culture? We recently sat down with Jack Altman, co-founder of Lattice, to get his views on the matter. Lattice is a Y-combinator backed performance management software tool that helps teams complete structured peer reviews, get feedback, and set goals.
In this post, we share Jack’s insights and advice on how founders and engineering managers can use performance management to become better leaders, help their teams improve collaboration, and boost overall efficiency.
As a founder, CEO, or engineering manager, it’s important to recognize the difference between evaluation and feedback.
As Jack explained, an evaluation, also known as an appraisal, has the connotation of being quantitative in nature and designed for the benefit of the company. Evaluations are used to grade performance and then make a judgment — usually, whether someone should be given more training, a bonus, a promotion, or fired.
Historically, such appraisals were conducted once per year. This performance review process consumed a lot of time and the results carried a lot of weight. “It was an extremely scary process, with people being fired afterward,” says Jack. “People hated it.”
Jack argued that annual appraisals are not the way to go. “If you do something wrong in February, but you don’t hear about it until July, that doesn’t keep up with the pace of work, and is not a real solution,” Jack told us. This is especially true for technical employees, like developers, who may continue building in the wrong direction if not given clear, timely feedback.
In contrast to evaluations, “developmental feedback is first and foremost for the benefit of the employee,” explained Jack. The idea is to give employees more regular feedback so they can learn and grow in real time, rather than be blindsided with harsh, results-oriented reviews once per year.
Over the last five to ten years, startups and large enterprises have been diversifying their performance review process to emphasize developmental feedback, as well as regular goal setting.
Now the question is, as a founder or leader, how do you structure this feedback to bring the maximum benefit to your team?
Lattice’s most popular tool is its framework for 360 reviews, which means that feedback is given and received between peers and managers in both directions. Jack credits the success of Lattice’s 360 review product to fact that people are not naturally good at feedback, so it helps to have a structure for this.
“The nice thing about 360 reviews is it allows you to get a range of input from people you don’t normally hear from.”
Employees can feel more at ease with the performance review process because feedback is not exclusively coming from the boss, who probably doesn’t work closely with them every day.
At the same time, managers have a lot of context that can balance out one-sided peer feedback. For example, when providing feedback in cross-functional teams, marketing team members and engineers may tend to provide overly critical feedback because they have vastly different core competencies and may not always understand one another.
After reviewing peer feedback, managers can help bridge any information gaps or hang-ups among team members of different professional backgrounds.
People hate to give critical feedback, it makes people very uncomfortable. The hump that people have to get over is that if you actually care about your colleagues, you owe them good feedback.
Jack Altman — Lattice Co-Founder
Because people tend to be non-confrontational and want to avoid giving negative feedback, having a formalized structure can help normalize this. Regardless of how uncomfortable providing critical feedback may be, it’s very important “because everyone has something they can improve,” Jack reminds us.
To formalize negative feedback, managers should include questions in peer reviews that specifically request critical feedback. For example, “What can Jane Doe do better?” or “What should John Doe stop doing?”
Now, just because you encourage critical feedback in your peer review process doesn’t mean your team will know how to give “good” negative feedback. Negative feedback is only helpful insofar as it is actionable.
To make feedback actionable, it needs to be specific, Jack advised. An example of “bad” negative feedback would be something like, “you don’t communicate well.” The recipient can’t really work with this. They probably have no idea what the context is.
Jack provided us with a much more actionable structure for negative feedback:
“You don’t communicate well. An example of this is when I reach out to you in the mornings, it takes a long time to hear back from you. This is a problem because I lose an hour fixing this bug, and visitors are unable to submit completed forms on our registration page.”
This is very specific and the recipient will know exactly where they need to improve.
While companies should provide a formal outlet for critical feedback, as far as Jack is concerned, informal and positive feedback is also crucial.
Informal feedback not only gives people the chance to learn from mistakes in real time, but also receive recognition for a job well done.
“For every critical or negative interaction, there should be four positive ones,” Jack suggests.
Jack cites an often heard but seldom practiced expression,“criticize privately and praise publicly.”
“You should not be publicly shaming people. When you take the time to recognize someone's achievements, copy it on an email to all, or post it to a public Slack channel.”
Jack pointed out that of all the ways to boost employee morale, positive recognition is probably the most cost-effective:
One of the cheapest ways to make employees happy is to just recognize their positive achievements.
“People deserve, crave, and get energized off of public recognition.”
If developmental feedback is intended to be exclusively for employee learning and growth, founders and managers may be wondering how to address compensation appraisals and promotions.
The fact is that numbers still matter — especially when it comes to the number on paychecks. Jack emphasized the importance of making a clear separation between developmental feedback and compensation review. “The worst possible outcome is that people have what’s meant to be a developmental performance review turn into an evaluation.”
An example of performance review policy gone awry comes from Facebook, which previously eliminated evaluation-based employee ratings. After a period of observing this policy, it was found that 87% of employees wanted their ratings back. This is because, without a transparent policy of employee evaluation, compensation and promotion decisions felt subjective and political.
To avoid confusion and resentment, CEOs and managers should communicate clear performance management policies that outline what constitutes developmental feedback and how evaluations will be used for compensation reviews.
To address the delicate issue of compensation review, Jack suggests “data and empowered managers” as an ideal solution. Instead of relying solely on quantitative evaluations, or subjective qualitative reviews, these two things can be used in combination to give managers a more complete picture for salary adjustment recommendations.
Goal setting is also an important part of performance management. It’s key that individual employees are able to align their objectives with overall organizational goals.
For Jack, the trick is to over communicate and be very transparent about company goals.
During our chat, he recommended an exercise for managers to assess big picture goal understanding within the company: “Walk around and ask everybody privately what the top three goals of the company are. How similar are the answers?”
Once everyone is on the same page, focus on the content of individual objectives. There are various structures, like OKRs and SMART goals, to guide managers and teams through the goal setting process, but what’s more important is that goals are useful. “A useful goal is something that aligns people within the company to drive strategic results, and has the ability to be improved each quarter,” Jack told us.
Depending on the specific role and level of the organization, goals may have a specific metric to achieve, may be measured on a scale, or have a binary pass/fail.
An example of a good goal for an engineering manager would be to “improve the quality of product releases.” In the case of OKRs, this objective would have some guiding key results, like “increase unit testing coverage from 40% to 60%,” or “less than 3 major bugs found in production,” etc.
Jack suggests that managers regularly hold one-on-ones with their reports to check-in on goal progress and to revisit objectives quarterly.
During quarterly reviews, teams sometimes find that goals were not met and need to rebound. “The key is an honest diagnostic. I always encourage teams to think first from principles — don’t point the finger, don’t be defensive, just try to figure out what happened.”
After a dose of self-honesty, teams can adjust missed goals or double down with a new strategy.
As a company grows, it becomes more important to build communication and feedback structures that scale with that growth.
This can be done both formally and informally in the following ways:
Formalize peer and management review frameworks that encourage critical feedback — negative feedback is a vital ingredient for employee development.
Form a culture of informal and positive feedback — this helps employees learn in real time, as well as boosts morale.
Transparent policies on compensation review and how any evaluations will be used — promotes organizational trust and clarity on important money matters.
Align individual objectives with company goals and regularly revisit both — helps to measure individual progress and optimize focus for growth.
In closing, Jack reminds all managers and CEOs, “You’re the communicator in chief — you need to communicate not just [company] priorities and your own feedback, but also build a culture where people are giving each other feedback and continuously communicating what’s going well and what’s not.”