This article is by Dave Girouard, CEO of personal finance startup Upstart, and former President of Google Enterprise Apps. He’s well known for building Google’s enterprise division into a $1B+ global business.
On a recent Monday morning, I was preparing for my weekly staff meeting. Item #1 on the agenda was a discussion about an upcoming review cycle, where everybody at Upstart would receive a performance score based on feedback from their peers and manager. Though I had yet to begin the process of reviewing my leadership team, I had an intuitive sense of how things would fall. Without being consciously aware of it, I had developed a model for how I measure and evaluate the performance of my lieutenants.
Ten minutes before the meeting began, I decided to articulate my thoughts to my team. After all, everybody deserves to know how they’ll be judged and rated, right? After scribbling furiously in a notebook, I came up with a short list of criteria that captured the process that was already happening in the recesses of my brain. A modestly refined version of those scribblings appears below.
Some context is important. All great companies are committed to rigorous performance reviews, and Upstart is in that camp. We debate a lot about frequency of the process, as well as the scope and magnitude of each review, but there’s unanimity in our belief that regular and rigorous feedback in a quantified manner is necessary to maintain a commitment to excellence.
Given our lineage, we adopted a system much like Google’s “perf” system. To begin, each employee completes a self-evaluation — a concise description of things he or she did well, and also acknowledgement of areas where improvement is needed.
Next, the employee nominates a set of 3-5 peers (or internal “customers”) to provide direct non-anonymous feedback. Managers can approve or modify the list of reviewers to ensure a proper diversity of viewpoints. When peer reviews are done, managers will assimilate peer feedback and their own observations and experiences into a written review, including a rating between 1 and 5.
Roughly speaking, these scores can be summarized as:
1. You’re not doing your job and aren’t likely to in the future.
2. You have significant areas where you need to improve.
3. You do your job well.
4 . Your work is amazing — keep it up.
5. OMG how do you do that?
At Google, ratings were expressed to a single decimal place, but at Upstart we’ve settled on increments of .25. So far so good — sounds pretty straight forward.
This process can work well for 99% of your employees, yet there are a couple reasons why it falls short for your senior-most executives, and why a more thoughtful framework is necessary.
First, whether you like it or not, performance ratings have the effect of ranking your employees. In fact, many companies with formal review processes force a “calibration” of scores, which amounts to a process whereby employees of similar levels and scores but from different departments are compared to ensure the ratings (and implied rankings) are appropriate and consistent. Yet it’s inherently challenging to compare employees with entirely different job functions. And of course, a well-structured C-level team will be comprised of individuals with entirely separate and non-overlapping areas of responsibility. So how to rank them?
Second, the nature of the CEO’s job is wholly unique, and what she needs from her direct reports reflects that. I can tell you from experience — it’s a lonely job. CEOs are faced with a blizzard of challenges and issues on an hourly basis. We’re constantly torn with decisions about how our time should be spent, which areas need closer attention, and whether a request of our time is worthwhile. And counter to what many believe, this doesn’t change when your company is doing well — every moment of glory is fleeting, quickly swept away by the next looming crisis and the need to reach the next level of success.
As a result, I found it useful to articulate a framework for evaluating my direct reports that works across all functions, and provides each exec with a basis for understanding how they should expect to be rated in the future.
Without further ado, and in an order indicating nothing more than how they spilled from my head that Monday morning, here’s how the leadership team at Upstart is evaluated:
1. I have a high degree of confidence that [your function] will consistently execute well. It’s not that I don’t want to be involved in the details of your work (I do!) but I’m confident your team’s execution will be stellar regardless. This doesn’t mean mistakes won’t happen, but the quality of output from your team and their response to setbacks is consistently amazing.
When you’re running around like a crazy person, nothing is more comforting than putting something important in the hands of someone for whom you have 100% confidence it will be handled well.
2. You have the skills, commitment, and leadership necessary to lead your team for the company we aim to be in two years. When we reach that place — that promised land — we’ll have a [your function] team that is beyond the best in the industry, and we’ll be ready to push to the next level.
Not to get ahead of ourselves, but the best execs are the ones who learn and develop so fast that I get giddy thinking about how talented they’ll be in couple of years. Linear extrapolation suggests that this exec isn’t going to run out of gas anytime soon.
3. You’re chronically discontent with where the company and your department is today. I don’t spend a lot of time challenging you to do more or to do better — you’re the challenger. I more often find myself at the receiving end of aggressive plans from you to do more, to take your department — and in fact the whole company — to the next level.
If we don’t get better every day, we’re on a path to obsolescence. Your star execs will never say things like “best in class” or “industry norm.” The only benchmark that matters — the only one to beat — is what we look like today.
4. You exercise great judgement and wisdom when it comes to what’s critical to our business. You and your team are focused on the right things. You’re cool headed and able to absorb the ups and downs of startup leadership.
Great execs can intuitively separate the signal from the noise. And there’s plenty of noise in startups and big companies alike. When I hear this exec’s weekly update, she always puts her finger directly on the key issues at hand — and leaves me and the other execs with a sense of confidence that the right things are happening to address them.
5. You have a paranoia and sense of urgency matching my own. I’m constantly in a state of mild panic about the company and how we’re doing, and you share this with me and in some sense help relieve me of it. You can operate in this vigilant and paranoid manner while maintaining an eternal optimism that our company can solve any problem that comes our way.
I’m hoping that carefree sunny disposition of yours doesn’t suggest that you’ll shrug off the looming failure of our company like the loss of an NFL pre-season football game. I need you to be sweating this thing as much as I am!
6. I’d trust you to meet one-on-one with our most critical constituencies on the most difficult topics. Be it customers, board members, investors, or future employees, I know you’ll think on your feet and represent the company well.
I admit it — I’m maniacally obsessed with how the world perceives my company. I care about the words that are used, the anecdotes that are shared, the tone and the rhythm. If the 60-Minutes van pulled into our parking lot and Mike Wallace was knocking on our door, this is the exec I’d want to be home.
If you’re a founder or CEO, your criteria will undoubtedly differ from mine — there’s no perfect or universal method for evaluating leaders. But explicitly stating your leadership model is a powerful way to describe the company you aim to build. It informs your hiring process, your talent development process, your promotion and rewards process, even your succession planning. Most importantly, it reinforces your commitment to excellence.