Key Elements of a Performance Management Process For Start-ups

Performance management is critical for start-ups. A well-designed performance management framework and a system that helps implement it can enable start-ups thrive in a dynamic business environment as well as institutionalize practices that enable high performance, growth and employee engagement.

 Here are the elements that any start-up must incorporate in their performance management framework:

  • Incorporate alignment with organizational vision, mission and values
  • Incorporate flexibility to allow modification as and when needed
  • Incorporate transparency and objectivity in the system
  • Involve employees in setting goals, with clear understanding of the organizational vision, mission and values
  • Identify competencies needed to perform job at different level
  • Use performance assessment for identification of competency gaps and employee development needs
  • Incorporate the ‘must-have’ characteristics of a performance management process
  • Select a Performance Management Software that allows implementation of the above


Start-ups are characterized by teams of highly energetic employees, sharing the organization’s vision/ mission and aspiring to achieve personal career goals and development at the same time. Typically, it is a bunch of talented employees that, when guided well, can drive high performance for themselves and thereby for the organization. In the hustle bustle of the early years of start-ups, it is critical to remember that employees are the core of the organization. The organization needs their loyalty, efforts and the drive to perform. It is extremely important to inspire these employees, engage them and cultivate a culture of high productivity.

A well-designed Performance Management System (PMS) enables a start-up to derive significant benefits through high performance.

Check our blog : Employee Performance Management System – A Buyer’s Guide

How can a Performance Management approach guide start-up’s Mission?

An organization’s vision/mission and values should be the guiding factors for designing the PMS. Organizational vision (long term) drives the mission (short term) which in turn drives the annual goals. Vision, Mission and Values are important to every aspect of an organization and will influence everything from recruitment to the organization’s overriding objectives. Given the dynamic environment that start-ups operate in, the flexibility in resetting the short terms goals becomes crucial. Flexibility, therefore, becomes an important characteristic of the PMS for start-ups. Similarly, the values of an organization like transparency, objectivity, creativity need to be brought into day-to-day practice by employees only if and when the PMS imbibes these and facilitates practicing the same.

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Basic questions to consider before choosing the Performance Management process

Here are a few essential questions to guide you to the best performance management process;

  • What should be the frequency of performance reviews?

A PMS evaluates employee performance as and when needed. In traditional PMS, the frequency of review was annual. However, with the fast-changing business environment that start-ups operate in, where quick actions & results are desirable, the frequency of reviews has increased significantly. In some cases, managers carry out performance reviews even once a week.

Another benefit of frequent reviews is assessing gaps in performance and outlining development needs of employee progress in addition to meeting targets. The beauty of these regular performance conversations is that they lead to an increase in productivity and creativity.

  • How much flexibility should it have?

Flexibility at the workplace becomes important for start-ups given the dynamic nature of their operations. Start-ups need to experiment, course correct based on market response, set new experiments, targets etc. All this determines the flexibility that a start-up will need. Flexibility is generally defined in terms of providing employees the ability to set their own goals in line with objectives of the organization, high frequency of reviews, etc.

  • How transparent should the communication be?

Transparency and accountability are the best strategies for a dynamic start-up workplace.

A PMS that has a transparent communication process within the workplace ensures that;

  • Employee knows what she is expected to deliver, how her performance will be evaluated
  • Employees also understand clearly how their performance is aligned with the organization’s objectives and how they are contributing to it
  • Transparency also incorporates regular feedback and recognition of employees for their contribution to various aspects of the business

Such ‘well-informed’ employees become increasingly accountable and can manage well; therefore, reducing their managers’ need to micromanage.

All the employees feel trusted and respected when there is transparency in the system and performance management system can institutionalize that transparency very well. A start-up adopting these elements prepares itself well for further scale up.

  • How should employees get ownership of their goals?

Employees need to have clarity on the following:

  • The organizational objectives,
  • How their own performance is aligned to and contributes to the organizational performance
  • Alignment of objectives throughout the organization
  • Their performance contributing to their own career growth
  • Competencies required to perform their job

A performance management system that incorporates all of the above enables and encourages employees to craft their targets, learning journeys and implement their learnings. When employees focus on planning for success and accomplishing goals, they naturally start taking ownership of their goals and hence their performance.

  • What competencies are needed to perform?

To efficiently complete any job, one requires a certain level of proficiency of both functional as well as behavioral competencies. As an organization, it is important to identify, prescribe such competencies at all levels of the organization. Monitoring performance enables the organization to identify gaps in the required competency and proficiency levels. These identified gaps clearly outline the development needs not just at the same job level but also at the next job level. This will run through the entire life cycle of the employee right from recruitment. The importance of competencies throughout the life stage of employees across levels makes it important for a start-up to adopt this approach.

  • Which training can help build competency in employees?

Not identifying competencies needed to perform well means that the organizations will struggle to develop and measure employee competencies. However, a competency-based system will help organizations identify and measure the gaps early enough and also implement the necessary training. The key aspect here is the ability to identify these ‘early.’ For start-ups, this becomes quite critical given the business dynamics.

Once these strategic aspects are considered and debated, start-ups can define the outline of their performance management system. The next task is to identify the specifics of the performance management system that will incorporate the above principles.

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Here are a few must-haves that align with the above principles for a performance management software.

Must-haves of a Performance Management Software

  • Alignment of employee goals with the organization’s objectives

Alignment of employee goals to organization’s goals have significant benefits as already outlined above. A performance management system that enables such mapping is a huge asset, especially for start-ups.

  • Clear SMART Objectives & Key Result Areas

Goals that are clearly outlined, follow the S-M-A-R-T (Specific, Measurable, Attainable, Relevant, Time based) principle enabling transparency across the organization. This in turn allows better measurement of performance.

  • Importance & impact of frequent feedback

It is the role of the manager to enhance employee performance. To attain the best results from employees that align with the start-up’s goal, timely feedback does all the magic. In the dynamic and quick changing business environment that start-ups operate in, frequent feedback becomes a necessity. This allows course correction, if needed as well as inputs to employees about their progress on all fronts. The success rate of employees increases with positive and frequent feedback.

  • Employee Recognition Schemes

Recognizing an employee’s contribution in all aspects of business goes a long way in improving employee engagement and performance. Some recent findings show that

  • More than 70%of employees feel that a ‘thank you’ note motivates them more than an increase in salary
  • Celebrating their work across the organization is far more valued than that within just a team
  • Employees tend to go an extra mile if they feel their work is valued and recognized at work

A Performance Management System which incorporates employee recognition mechanisms can add significant value to the overall process.

  • Enable Managers to become better people managers

Performance Management of teams is a specific skill and line managers need to equip themselves with the right skills and resources to manage their teams. Performance and growth of the team depends significantly on the people management skills of the managers.

A good performance management system enables line managers to become better people managers by

  • Providing them data, analytics on employees’ performance, competency gaps, training needs
  • Nudging them to hold regular sessions with the employees
  • Enabling them to mentor their team by utilizing the system

These are crucial aspects of performance management which if incorporated early enough, will enable start-ups perform better, manage their employees better and also be ready for scale up.

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Wrapping Up:

Performance Management is a critical business process. Adopting a modern PMS early in the life of an organization becomes crucial as it also contributes to the development of performance culture of the organization. Thus, designing a performance management process is vital for every start-up. Start-ups need to focus on the performance management framework that allows them to thrive in a dynamic business environment, institutionalize practices that enable growth and employee engagement. It becomes equally important to select a software that enables them to map and implement these practices.

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