Most startups make the same performance review mistakes.
They either skip them entirely ("we're too small") or mimic what Big Tech does ("let's do 360s for our 15-person team").
Here's how I design performance review cycles that fit for different sizes, stages, and maturity levels.
When you have 0-35 employees, quarterly development reviews work well. These can be lightweight. You can say "everyone add a talking point to your 1:1s this week related to performance and career growth. Plan to spend 15-minutes on it" or take a slightly more sophisticated approach with a GoogleForm submission or an existing payroll/HRIS performance module.
Either way, I'd recommend trying to spend a max of 15-60 minutes per person. The goal is to build the skill to deliver feedback continuously while making sure you don't take too long to spot and act on low-performance issues or re-org to increase the impact of high performers.
As you reach 35-200 employees, I'd move to semi-annual performance reviews with optional off-cycle development check-ins. I'd also combine compensation and performance reviews and introduce calibrations at this point. Then, as you pass 200+ employees, transition to annual reviews.
Review complexity should scale with headcount and maturity level:
Start with self + downward (manager to direct report) reviews (180°). Do this even if you have 1,000 people if you've never run reviews before. Then, layer in upward (direct report to manager) reviews after 1-2 cycles where you met all performance review success criteria.
Only add peer reviews — rounding it out to a full 360-degree review process —once you're ready for the complexity. Some organizations may never need to or significantly benefit from doing this. If you do add peer reviews, set a limit. My rule of thumb: each peer reviewer should never write more than 4 peer reviews.
Once you've established 270-degree+ reviews that are happening semi-annually or annually, it helps to run a tight, published schedule with clear week-by-week deadlines. Here's an example:
- Week 1: Self and upward reviews due
- Weeks 2-3: Downward reviews due — 2 weeks here helps for managers with 5+ direct reports and stragglers who were OOO for the whole self and upward review week
- Weeks 4-5: Manager calibrations
- Weeks 6-7: Real-time performance review conversations and compensation decision-making
- Week 8: Compensation and promotion decisions shared
- Week 9: Title and compensation changes go into effect
- Week 10: Performance and compensation review survey
When planning performance calibrations — or conversations where managers discuss and align on performance review ratings, progression steps (e.g., early, at the midpoint, or late in their development in their level), promotion recommendations, and compensation recommendations — create groups of 3 to 5 managers from the same or similar departments (e.g., Engineering and Product, Sales and Marketing) who know the contributions of one another's direct reports.
The relevant context on one another's work is more important than the number of direct reports being calibrated — it can be 5 or 30 people being discussed, just scale the meeting time up or down accordingly (I'd do 25-minutes and 90-minutes to 2-hours for those two example group sizes).
The People Operations team should review all the rating submissions in advance and prepare actual vs expected ratings distributions reports as well as notes on any calibration flags (e.g., this person is being recommended for promotion in less/more time than expected, this person will have gone 2+ years without a compensation increase, etc.).
Speaking of compensation increases, the timing of performance and compensation reviews matters more than you think. It's important to avoid allocating a cluster of promotions and merit-increases during low cash flow periods.
While January and July are classic review times, if March and September are bad cash flow months for your business model, move your performance review schedule.
It's often helpful to visualize where performance reviews fit into your company's overall operating cadence (e.g., budgeting cycle, goal setting process, company retreat) to spot and resolve schedule or financial conflicts far in advance.
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