Ending performance reviews

The WSJ small biz blog this morning highlights a provocative column on HR practices by UCLA Professor Samuel Culbert. That it’s provocative seems to go without saying, since Culbert’s motto (and subtitle of his latest book) is “straight talk at work.”

Culbert wrote in Monday’s WSJ arguing that performance reviews are a bad idea. On the WSJ (inside the paywalll?), he also has a video on dealing with bad performers and a podcast for employees on dealing with a bad review.

From my days as a software entrepreneur, the column resonated with me, because my employees (including the software engineers and testers) always wanted a review, and I always hated doing them. So having someone telling me I shouldn’t do them seems like found money.

To summarize from the pullquote:

The Promise: Performance reviews are supposed to provide an objective evaluation that helps determine pay and lets employees know where they can do better.
The Problems: That's not most people's experience with performance reviews. Inevitably reviews are political and subjective, and create schisms in boss-employee relationships. The link between pay and performance is tenuous at best. And the notion of objectivity is absurd; people who switch jobs often get much different evaluations from their new bosses.

He lists 7 reasons why they’re a bad idea:

1. Two People, Two Mind-Sets. The review is confrontational because the two sides have different goals.
2. Performance Doesn't Determine Pay. Often the review is a rationalization for the eventual (budget constrained) salary decision, rather than a review of performance.
3. Objectivity Is Subjective. Objectivity is a myth: employees change bosses, their reviews change dramatically.
4. One Size Does Not Fit All. The same checklist is used for all, although people have different strengths and should be evaluated by different criteria.
5. Personal Development Is Impeded. Employees won’t be honest about areas where they need to improve if it comes back to haunt them at review time.
6. Disruption To Teamwork. The boss is supposed to lead a team but the review causes employees to conceal and be dishonest, undercutting trust.
7. Immorality Of Justifying Corporate Improvement. The reviews are supposed to improve performance and the company, but actually they just encourage political behavior.

I don’t completely buy his proposed alternative, which he calls a “performance preview.” However, as a teacher, a parent and someone who was a tech employer for 15 years, I do agree with the goals of his alternative process:

Holding performance previews eliminates the need for the boss to spout self-serving interpretations about what already has taken place and can't be fixed. Previews are problem-solving, not problem-creating, discussions about how we, as teammates, are going to work together even more effectively and efficiently than we've done in the past.

Anything that turns a review from a win-lose to a win-win is a good idea in my book. Also, my personal and business philosophy was always look forward, not back.

The only thing missing is how to adjust salaries, since that was the entire reason employees all pushed for a review. I guess for that I have to buy the book.

Cleantech Venture Challenge

Cross posted to Cleantech Business

The University of Colorado at Boulder is preparing to host its 4th annual Cleantech Venture Challenge, an international business plan competition for new ventures that somehow address a “sustainability” need. The business plan competition is sponsored by the Deming Center for Entrepreneurship at the Colorado’s Leeds School of Business.

The competition uses a three-stage process. An intent to compete must be filed by Nov. 21, followed by a complete business plan on January 30, 2009. The eight semifinalists will come to Denver March 17-19 for the final rounds and the ultimate selection. The National Renewable Energy Lab (in nearby Golden, CO) will also invite the top renewable energy project to present at NREL.

The top prize is $25,000. The finals will also coincide with a sustainable business summit to be held at the Denver convention center, part of the state’s efforts to position itself in the cleantech business.

10 fatal assumptions

In providing feedback to my MBA entrepreneurship students, I went looking for information on market sizing assumptions.

I didn’t find what I was looking for, but I did find another interesting document, from Purdue University’s extension program. The note on “Fatal Business Planning Assumptions” by Cole Ehmke of Purdue offers a list of 10 common but flawed assumptions made by new ventures.

Although he’s in agricultural economics, the first three would resonate with any tech entrepreneur or investor:

1. We have no competition
2. All we need is 2% of the market
3. Our product will sell itself

I would love to see a “10 most common tech startup mistakes” list, but for now this is a suitable cautionary list.