There's something wrong with the way most companies do performance reviews. Here's why, and here's how I do them.

I've come to understand that the way I do performance reviews is very different from how things work at other companies. Stories from employees universally paint the following picture. Performance reviews happen once or twice a year. Every time, they feel nervous because they're going to be judged. What then happens is a flood of criticism, half of which the employee does not understand or remember because it happened too long ago. The employee must fill in a bunch of forms, for formal HR record keeping. After the session, they are left with feelings of inadequacy and frustrations.

A tool for firing

Why are so many performance reviews like this? I hypothesize that many companies use performance reviews as a tool to be able to fire under-performing employees.

Employment laws in the Netherlands are very strict, and to be able to fire anyone with a long-term employment contract, employers need to go through a very heavy government-sanctioned formal procedure. Employers must describe the grounds for firing an employee and a government official will review the case. Firing is only possible after approval. The case must be supported by good arguments and by sufficient evidence. Evidence such as performance review reports.

Underneath all this, I get the impression that many companies see employees as tools. I get it, it's just business. Nevertheless that's not how I would like to approach things.

Feedback sessions

Performance reviews at Phusion started not as performance reviews, but as feedback sessions. We weren't so concerned with performance, but more with employees' happiness and motivation. Our implicit belief was that good performance comes from intrinsic motivation.

That was of course a very simplistic, perhaps naïve way of seeing things. Reality is more nuanced, and how much of the above belief is true probably differs from person to person.

As the employee makeup in Phusion changed, more and more people called our feedback sessions "performance reviews" because that's what they think they are. Still, our underlying philosophy never changed.

Genuine care

The way I approach performance reviews is that I genuinely care about them as a person. I want them to succeed and to reach their potential.

When people talk to a superior, they tense up and they watch their words. And so I do my best to make such sessions feel not as performance reviews, but as conversations. I spend at least as much time listening as talking. I want them to feel at ease and I want them to understand that their well-being is my priority.

I encourage them to talk about anything that's on their mind, including feelings and minor things. I encourage them to ask questions, e.g. about where the company is heading, or about why certain decisions were made.

I am not here to judge, I am here to help you.

Don't get me wrong, if they are underperforming then I will tell them. But that should be done in a nice way: they must understand that I'm judging their work, not their person – and people aren't only their work. I want them to understand that I tell them about bad performance not because I want to fire them, but because I care for them. I give them advice on how they can improve: I want them to understand that making mistakes is not an issue, and that the focus should be on improvement.

Furthermore, criticism should be put in perspective – I value nuance. And so I also tell them what they've done well. It is said that the ideal positive-to-negative comment ratio is about 6 to 1.

Two-way street

I consider such sessions to be a two-way street. After all, nobody is perfect. How can I, as a superior, improve? What is it that I have done well and not so well?

When I hear criticism from employees (or anyone really), I have the tendency to micro-panic. Hearing criticism never feels good. But if I feel this way, just imagine how the employee feels because I'm in a higher power position.

And so a superior should not shy away from showing vulnerability. Not only is this an opportunity for oneself to improve, showing vulnerability also makes employees feel more at ease, and thus makes them more honest.

Of course, as a superior one must strive to actually take criticism well. You're likely to feel defensive, I get it. But hold back for now and think about whether they have a point. In doing so, you are leading by example. The last thing we need is employees that employ cover-my-ass tactics.

Be surprised

We hold performance reviews about 6 times a year. It is important that such sessions occur way more often than once a year, because otherwise they will feel daunting.

I also employ continuous "micro-performance reviews": from time to time I just message people to check how they're doing, and they can talk about whatever they want.

Often times, I think I have a good understanding of whether everybody is motivated, and a good grasp of what everybody is thinking. I am so wrong. There has not been one session where I wasn't surprised by something.

So become surprised, so that you can make things better.