Performance reviews and compensation questions are frequently on the front seat. It is possibly one of the most deeply rooted problem to get rid of when working with agile teams.

According to Jeff Sutherland, “surveys show that 90% of companies report ratings don’t work but they still keep doing them. It is kind of like the waterfall process. In the face of overwhelming failure people keep repeating the mistake.“

Mary Poppendieck summarized this yesterday:

“Using money as a motivator is like playing with dynamite because money is a VERY effective motivator. Monetary rewards motivate people to do EXACTLY what is being rewarded – not necessarily what the organization intended to reward, but EXACTLY what is being measured to generate the reward. Therefore monetary motivators have a long track record of generating unintended consequences. If there is any apparent competition for the money, money motivates people to get as much as they can for themselves. Thus monetary motivators have a track record of suppressing collaboration. Finally, bonuses for performance rapidly come to be an expected part of the landscape, replacing passion and dedication as motivators . These are things you probably cannot change about using money as a motivator. “

A great book on the subject: Abolishing Performance Appraisals: Why They Backfire and What to Do Instead

So I asked Jeff what he is doing when you have to do performance ratings. He said that “you must take into consideration why they do not work in general and use a collaborative style to avoid the pitfalls.“

Jeff wrote a memo in 1996 on how to conduct such reviews. After contemplating many options, I think his review process is best (if you have to do one).

I kindly clarified some sections to pass the approval of our employment lawyers. Please check Jeff’s original post for reference.

Review Process for Agile Team Employees

Objective

• Create a rating process to surface disparities between market perception, customer perception, company perception, team perception, manager perception, and individual employee perception of their own performance
• Create a simplified process so frequent feedback can be communicated to employees (quarterly)
• Incorporate a team score and an individual score into a performance score

The Review Process

The employee’s focus is to please the customer and meet their manager’s expectations in fulfilling their job responsibilities. This review process is forged as a collaborative rating system (360 degree feedback) and creates an accurate and realistic scoring without rating inflation by focusing attention on the user’s experience of the project or product being developed, along with time to deliver or market. The subjective experience of the manager is deemphasized. It requires raters to all work closely with one another to check ratings.

The Process Takes Three Meetings to Initialize

Meeting 1

Manager meets with employee and goes over the document. The employee is then asked to write his own individual review after the meeting by responding to the key individual performance questions (see below) and rate him/herself. The employee should be specific and concise and cite specific examples where appropriate. This review is designed to minimize the amount of writing that is general or vague.

Meeting 2

The second meeting occurs when the employee returns the review (along with soft copy). The manager discusses the employee’s perceptions to get a good understanding of them. After the meeting the manager carefully edits the review to incorporate his/her, the product team, senior management and customers’ perception of performance.

To gather the individual performance from the team, the manager sends a rating request using the rating scale below.

The employee’s 360 feedback will be a rating score based on the following percentages:

• Team performance as per executive management: 25%
• Team Rating of Individual’s Performance: 25%
• Manager’s assessment of performance: 50%

Meeting 3

The third meeting occurs after the manager has finished editing the review and the ratings. The updated document is discussed with the employee. Any differences in perceptions is discussed and noted accordingly. If there are disagreements regarding assessments, the employee will have an opportunity to give feedback. If there are any changes in the assessments they will be incorporated into the final review and signed off by the employee and Supervisor. The employee’s signature does not imply agreement but acknowledges receipt.

Team Performance

Performance Objectives will be determined by senior management and will be appropriate to the Team. The score will be based on the rating score below.

Team Rating of Individual’s Performance

Each selected individual will be asked to give an assessment of the employee’s work performance based on the rating scored listed below. The score is calculated as an average.

Manager’s Assessment of Performance

The manager rates the employee on a set of questions that drives the review process away from a standard list of items accomplished. These items are used to justify responses to the questions. These questions are designed to focus the performance review on the issues that are critical to company and department success. The questions lead the discussion away from the reviewer’s personal opinions and focus the discussion on the impact this person has on the work or the department.

In most circumstances, the rating scores of the manager, the team and senior management will be close. When this occurs the weighted average will be the final score. If ratings are widely different, the most extreme rating supersedes the lower.

Customer’s ratings supersede senior management, who supersedes the team who supersedes the manager.

Example 1:

• Manager’s score: 5
• Team’s score (of individual as an average): 7
• Senior Management’s score: 5

We treat a 5 as no opinion. Team determines the result with a 7.

Example 2:

• Manager score: 5
• Team score (of individual as an average): 2
• Senior Management score: 3

This person did not meet expectations of the team or the senior management. He/She is a 2 or 3. This appears that the manager is not managing the employee. How can a person meet the manager’s expectation but not meet the team or senior management’s expectations. A discussion with the manager is needed by their Supervisor.

There may be a unique case where one bad event is exaggerated and the manager feels the person is being treated unfairly. In this case, the highest score would be a 4 and the employee would be informed that this is an action item that they and the Supervisor would need to work together to devise an action plan to get the team members to raise the score.

Rating Scale

10. Trade and blog journals are writing rave reviews about employee’s work saying it is best in its class

9. Customers (externally/internally) are writing rave reviews about employee (must be documented in writing)

8. Exceeds expectation of the company senior management

7. Exceeds expectation of Product Owner and Tech Team

6. Exceeds reviewer’s expectations

5. Meets reviewer’s expectations / no-opinion

4. Does not meet reviewer’s expectations

3. Does not meet expectation of Product Owner and Tech Team

2. Does not meet of the company senior management

1. Customers are complaining about employee

0. Employee work is externally criticized by members of the technology community (e.g. PC Week)

Under this system, the manager can give a 4, 5, or 6. Any other rating requires outside input from the development team, the engineering group, senior management, customers, or the press.

Key Individual Performance Questions

The following questions can vary slightly from team to team. The manager rates the employee on a set of questions that drives the review process away from a standard list of items accomplished. These items are used to justify responses to the questions. The questions are designed to focus the performance review on the issues that are critical to company success and growth. They lead the discussion away from the Manager’s personal opinions about the person, and focus the discussion on what business impact this person has.

Feedback for a line Employee

• Individual Contribution to Product Delivery: How effectively did this person produce deliverables required to bring product to the company or department? 20%
  • Past quarter feedback
  • Areas of growth next quarter

• Individual Contribution to Process Improvement: How fast did this person learn and implement new technologies and processes required for producing better product, shorter time to deliver a finished product, which is live in production for the customer’s immediate use and lower costs? 20%
  • Past quarter feedback
  • Areas of growth next quarter

• Individual Contribution to Organizational Flexibility: How flexible and adaptable was this person to changes in processes, organization, or personnel required to deliver products in Internet time frames? 20%
  • Past quarter feedback
  • Areas of growth next quarter

• Individual Contribution to Group Learning: How well did this person transfer learning in the development team? Can their work easily be supported when this person is absent? 20%
  • Past quarter feedback
  • Areas of growth next quarter

• Individual Contribution to the Product: How good was the product that this person brought to the client/department/company? 20%
  • Past quarter feedback
  • Areas of growth next quarter

Feedback for a manager

• Individual Contribution to Product Delivery: How well did this manager influence the product/project/team to be customer (internal and external) focused? How effectively did this manager’s team produce deliverables required to bring a finished product to the customer or company? 20%
  • Past quarter feedback
  • Areas of growth next quarter

• Individual Contribution to Team building: How good was this manager at selecting A players, coaching and redeploying B/C players? Are teams under this manager empowered, self-organized, inspired and accountable? 20%
  • Past quarter feedback
  • Areas of growth next quarter

• Individual Contribution to Enterprise Collaboration: How effectively did this manager (and by extension his/her team) collaborate with other managers (and teams) on cross functional / team issues? Can he/she listen to other point of views, negotiate and be sensitive to others and aware of office culture? 20%
  • Past quarter feedback
  • Areas of growth next quarter

• Individual Contribution to Process Improvement: How much did this manager influence (not dictate) and implement new technologies and processes required for producing better product, shorter time to market, and lower costs? 20%
  • Past quarter feedback
  • Areas of growth next quarter

• Individual Contribution to Group Learning: How well did this manager transfer learning in the development team? Can their work easily be supported when this person is absent? 20%
  • Past quarter feedback
  • Areas of growth next quarter

Overall Rating:

Career Goals:

What does this person passionately want to do?

The overriding objective of managers should be to identify what the person really wants to do and align job objectives accordingly. If this is not possible, the person should be encouraged and coached to find opportunities that will unleash energy and creativity. Super-performance teams can only be built with people who are passionate about their work. The greatest challenge of a manager is to creatively align the inner driving force of an individual with the corporate objectives required for success in the marketplace.

Training Needed:

What training is needed to move toward career goals?

Goals for next rating period (3 months):