This morning, WSO2 rolled out a new approach to performance reviews for our employees.
Since software is a creative business, the performance review process for a software company must be a system that furthers the creative careers of the professionals employed by us.
WSO2’s leadership has 250 years of enterprise software experience. We’ve worked at numerous software companies, both large and small, including Oracle, Dell, Quest, IBM, venture capital software startups, and system integration providers. We’ve experienced performance appraisals of many different varieties, but they all emphasize numerical ratings and normalization of individuals into a bell curve. This is fundamentally wrong and a fast way to weaken the creative intelligence that is essential to making a software company great.
We believe our approach better aligns the interests of our employees with the company’s objectives.
Performance Ratings Sabotage Productivity
For the past five years, WSO2 has gone through significant growth. With this growth came an expansion of the employee ranks, and we are now striving to be close to 560 employees by the end of 2018. At one point, WSO2 hired more than 150 people in a single year.
To compensate for this growth-and being engineers-we developed systems to more fairly rate people across the company, especially two people who are performing the same function reporting into different leaders in different departments. Bonuses were tied to the rating achieved. The rating was a numerical rating on a 100-point scale with a unification process to ensure fairness. This was done quarterly. It was fair and balanced.
But we found that numerical performance reviews will ultimately sabotage productivity. In a numerical system, there is usually a bonus leap or compensation jump for those that rate above a certain threshold, in our case 60 and 80. In any system with a high degree of refinement, there will be people that are on the bubble of a numerical threshold. These numerical ratings were the composition of sub-ratings across a wide range of behavioral criteria that were weight averaged into a total score, so minute interpretations of sub-ratings could have big implications to perceived compensation.
When a performance review threshold is numerical, human nature causes everyone to analyze elements to gamify their score.
This opens the door to culture-sapping. Individuals on the bubble between one rating and another will formulate arguments to their benefit. People compare their ratings among one another with subjectivity (while ratings are intended to be private, reality demonstrates that everything is shared through the grapevine). The team leaders who are responsible for ensuring fairness subjectively applied the criteria to their team. Senior executives responsible for 100s of people will strive to develop systems to help measure and unify the ratings leading to a subconscious sense of bureaucracy and big brotherness.
After a couple quarters, savvy employees will learn the nuances of a numerical system and search for ways to gamify it to their advantage. People will change their operating point of view to obtain stronger ratings, even if these actions were not the most constructive to their own or the company’s interests.
We do a quarterly employee survey that asks a variety of questions about culture. Fundamentally, the most important question around whether people would recommend WSO2 as a place to work declined over a couple quarters from a world class rating to something that was in decline.
We felt that we were seeing the early signs of performance gamification that can be caused by numerical performance ratings.
Even though we only introduced the 100 point rating system last year, it was time for a change.
Creative People Need Creative Performance Reviews
Everyone in a software company is a creative individual.
This is not only our software engineers, but also our marketing professionals, lawyers, account managers, solution architects, accountants, and admin staff. Creativity trumps any skill set because the entire business of software is one where problems must be encountered and solutions proposed. Everyone within the company is a problem solver. And every time we release a new piece of software, we must rethink how our business must improve to better embrace that software for our customers. In essence, our company is in a constant state of improvement, and we can only address the problems that we encounter if everyone recognizes that they are on a journey of problem solving. During this journey, the nature, size, and complexity of the problems we must solve constantly shift. Your seniority, experience, and role within the company gives you opportunity to work on increasingly harder problems, making everyone’s journey, my own included, fulfilling and rewarding.
Creative individuals are on a career journey. It is the culmination of software experiences that define a career and create new opportunities for advancement. In exchange for committing to spending time to help the company or their team achieve their goals, the individual is rewarded with experiences that contribute to their career and a reciprocal commitment by the company to provide new, more challenging experiences.
An employment arrangement between a software company and its employees is a shared commitment to participate in and create new experiences that reward one another.
Why then do most companies provide a performance evaluation that attempts to quantify and sometimes monetize skills or tactical results instead of discussing the broader issues tailored to how each individual is on a creative journey?
The WSO2 Performance Evaluation
The performance evaluation is intended to facilitate a career conversation between an individual and the company. We also use the results of the performance evaluation to determine an individuals participation in the company bonus pool.
We want to know three things:
- How have you demonstrated your commitment to the company’s mission?
- How have you demonstrated your commitment to your team’s objectives?
- How have you demonstrated a commitment to your career and self?
Each individual is asked quarterly to self evaluate themselves by answering these three questions. These answers are then melded with a similar assessment from a Team Leader to enable and facilitate a discussion about each individuals software journey.
If each individual is true to themselves and make contributions that play to where they are at on their software journey, then they will have numerous examples of how they have and continue to demonstrate their commitment. The discussion with their Team Leader is then a focus on how to amplify their experiences and help each person better achieve results for themselves, their team, or the company.
We have three resulting ratings:
- Exceptional. You are demonstrating a commitment and everyone around you agrees.
- Successful. You are demonstrating commitment, but not everyone is aware.
- Needs Improvement. You are not demonstrating commitment, and perhaps this job or career is not yet your cup of tea.
Everyone who receives an Exceptional or Successful rating receives a prorata portion of the company’s bonus.
We are excited for and would love it if everyone in the company receives the bonus. There is no concept of unification. We would rather our employees and Team Leaders invest their time in aiding everyone to improve the experiences they have on their software journey.
While rare, and since we have a big commitment to continually hiring entry level talent, some people are not able to demonstrate the commitment to self or the corporate mission. In these situations, we place people on a performance plan and have an open dialogue about their reasons for being in the software industry. More often than nought, people leave WSO2 under these circumstances to pursue new careers having gained an increased awareness of their personal desires.
Every creative individual demonstrates their commitment in different ways.
Demonstrating commitment is a reflection of:
- Are you engaged and excited by the work that you do?
- Are you striving to make the people, products, and systems that you work with better?
- Is your attention to detail improving along with identifying ways you, your team, or the company can better itself?
- Are you contributing to industry peer group in work groups, standards bodies, open source projects, conferences, networking, and career advancement bodies?
This broad definition of commitment allows each person a wide range of freedom to define how they are contributing to the company and furthering their software career journey.
This definition also allows Team Leaders to have an open dialogue to identify people who are not a great fit for the type of software that we build and sell at WSO2. When an individual’s self assessment is filled with contributions and commitments in areas that fall too far outside the core of our corporate direction, it becomes easy to discuss and relate.
The CEO Self-Assessment
As CEO, I am not above or beyond self-assessment against these ideals.
I have day-to-day responsibilities:
- Setting strategy and direction
- Modeling and setting the company’s culture, values, and behavior
- Building and leading the senior executive team and board of directors
- Allocating capital to the company’s priorities
But beyond these items, I demonstrate my commitment in other ways.
Given my unique historical experiences in product management and DevOps, I personally am taking PM responsibility for Ballerina’s package management registry technology lines. Much of the success of our Ballerina initiative is tied to collaboration among developers and we need a package management system designed that exploits our unique integration qualities of Ballerina married to the best attributes of what other package systems prior to us have created. My background with package managers and connection to other industry contacts offered me a chance to apply my experiences to this domain to the company’s benefit. Delegating this to another PM who was new to the package management discipline might have been a disservice to the company.
For my executive leadership team, I am working to retain executive coaches that can interact with each member in private 1:1 sessions. These coaches have experience in high growth software startups or within publicly traded companies.
For my board team, I am working to improve involvement in strategic decisions and to deepen their access to business analytics. I would like WSO2’s board reporting to become real time and dynamic, so that management and the board can maintain a concise, unified, and current view of the business lowering the frequency of briefing meetings and allowing us to interact more frequently on high impact strategic matters.
I am a strong proponent of self-learning and industry networking.
To advance my understanding of technology, I am committed to obtaining committer status on at least one container or serverless related open source project. I continue to contribute lightly to Eclipse Che, a cloud IDE project, and I am working towards committer status rights on Ballerina. Obtaining committers status requires a focused contribution to the project itself, which requires hands-on study, learning, and skill acquisition that allows me to advance my broader understanding of technology.
To advance my understanding of the software industry, I am an avid daily reader of news, analysis, deals, and investments within the enterprise software segment. This is a 1–2 hour / day commitment to overview the day’s activities and proactively discuss with peer groups online (whether on Medium, HackerNews, or in private email groups). It is often these email discussions where insights and true learning develops. Additionally, I commit to attend at least 1 industry networking event each quarter (outside the dozens of customer meetings, technology conferences, and meetups that we do as part of our day to day). I’m particularly excited about attending the Open Source Software Leadership Conference in a couple weeks.
Be Creative—Enjoy Your Career
We are excited to be releasing this improved performance review system at WSO2. We hope that it will allow creative people to operate creatively in an environment that maximizes their career enjoyment and productivity. If you are thinking about a career in software, and want to be in an environment surrounded by talented, intelligent professionals passionate about working on large scale problems for open source and enterprise software, you should write me at email@example.com as we are growing and hiring.