Google’s Performance Management Practices

This article is a chapter of our newest ebook, Google's Performance Management Practices, which you can download in full here.

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Introduction

"We need people to know how they’re doing, and we’ve evolved what might at first seem like a zanily comples system that shows them where they stand. Along the way, we learned some startling stuff. We’re still working on it, as you’ll see, but I feel pretty confident we’re headed in the right direction. And with any luck I can save you some of the headaches and missteps we had along the way."
- Laszlo Bock, SVP, People Operations, Google

Google has probably Silicon Valley’s, and maybe the world’s, most advanced human resources (or, as they call it, People Operations) practice. As it becomes clear by books like Work Rules, written by its SVP of People Operations, and How Google Works, by Eric Schmidt, its former CEO, and Jonathan Rosenberg, current SVP of Product, the company continuously iterates on people practices, based on uniquely huge amounts of data, gathered among its more than 50 thousand “smart creatives”, employees in the fields of engineering, design, and sales, all handpicked at the world’s top universities.

Google’s people operations cornerstones are:

  • Hiring only the best: sourcing, and selecting, only the best fit candidates amongst the best pool of candidates worldwide, and, if it can’t reasonably achieve 100% perfection in hiring only amazing fits, skewing errors towards false negatives (eventually passing on a great candidate) instead of false positives (eventually hiring a bad fit);
  • Creating a meritocratic environment, where the best performances are correctly identified and rewarded; and,
  • Developing employees to their full potential, through great people management and on-the-job coaching (see our Project Oxygen paper here), peer-to-peer and outside training, and through a comprehensive 360-degree feedback collection process;

The purpose of this paper is to explain a bit better, and in detail, how Google does the second bullet point, meritocracy, and bits of the third, development, through its performance management procedures.

But why, you may ask, look at Google for a benchmark? Apart from the obvious reasons (it seems to be working for them, eh?), it our view that smaller, less resourceful companies (and here we’re talking more about sheer cash and headcount, as opposed to attitude), can greatly benefit from using Google as a starting point for their own practices, and then iterating on that (what is commonly known as standing on the shoulders of giants). Why should you, HR manager, or C-level executive, reinvent the wheel when this giant company has not only spent millions and millions of dollars finding its best self, but talked at length about it, so that you can benchmark yourself and use many of these practices? There’re no good reasons not to[1].

We’ll have achieved our goals if you find some inspiration and best practices on this paper. Remember we, at Qulture.Rocks, can help you get your performance management practices (be them inspired by Google or not) running in a matter of hours.

Where did we take all this stuff from?

Great question! Google, as many of the world’s top companies (like GE, AB InBev, Walmart, etc), talks frequently and openly about its own culture. So we basically read everything that’s out there – and actually written by Google and its current and former employees -. We’ve also scanned online platforms like Quora, Medium, and Twitter, read many pieces by the press, and, finally, interviewed as many as 10 former executives, both from People Operations and from areas like Search and Google Ventures, in order to form a holistic understanding of Google’s practices.

We’re confident that you have a very faithful description in your hands. Some of the processes may have already been iterated out activity, but for the most part, we strongly believe you have an accurate picture of the company’s current practices.

Overview

For the purposes of this case study, we’re calling performance management the collection of the following human resources tools and processes used at Google:

  • Annual performance review (including mid-year checkpoint)
  • Monthly performance check-ins (part of regular 1:1 meetings that also comprise other themes such as career development, coaching, personal issues, etc.
  • Googlegeist engagement survey (that spans much more than just the regular engagement axes, but measures basically everything that’s to be measured)
  • Annual Upward Feedback Survey, a feedback review (similar to 360-degree review) where only supervisors are reviewed by their direct reports, and that is based on Google’s Project Oxygen
  • OKRs, or objectives and key-results, a mildly different form of Management-by-Objectives, that we explain in this post, and
  • Meritocracy, or compensating people unequally, based on their perceived performance, through bonuses, equity stock-option grants, and prizes

Performance reviews

Google’s annual performance review cycle is comprised of two parts: a “preview”, in the end of the first semester, and a complete review, that happens between October and November, and which happens concurrently with the company’s 360-degree feedback collection process.

Managers take two main things into account when attributing their employees’ performance ratings: results attained, or what the employee accomplished, and behaviors, or how the employee attained these results. The employee starts with a self-assessment, which is followed by peer-reviews, whose authors are only visible to managers (reviewees may have access to the anonymized content of peer reviews).

On the review side, Google employees are asked to review each other, and their direct reports, according to the following criteria:

Googleyness: The employee’s adherence to Google’s values. This is the main component of the “how” axis.

Problem solving: Analytical skills applied to work situations (problem solving).

Execution (high quality work with little guidance): Delivering great work without the need for a lot of hand-holding from managers and peers (autonomy).

Thought leadership: How much an employee is seen as a reference for a given niche of expertise. As Google grows in size, these niches may tend to become smaller and smaller, but still, Google wants employees that are go-to resources for specific themes, training colleagues on tech-talks, traning customers, and producing high-quality content.

Leadership (or emerging leadership): Albeit many young Googlers have little or no exposure to managing complex teams, everybody is required, nonetheless, to show emerging leadership skills, such as taking the lead of problems and projects, being pro-active, and owning results personally.

Presence: Presence is the employee’s ability to make himself heard in an increasingly large organization, and intimately related to emerging leadership.

 

Self-Evaluation

The self-evaluation is the first step in the performance review, and where the employee evaluates himself in the five criteria described above (on five grades ranging from “never demonstrates” all the way to “always demonstrates” and invited to share examples of his actions that support these grades), and highlights his main accomplishments for the last cycle (in a text field limited to 512 characters). These accomplishments will appear in the next step (360-degree reviews) to reviewing peers, who’ll be then asked to assess their proximity with these projects, and the reviewee’s impact on their results.

360-degree Feedback

Google’s 360-degree review process serves the purpose of giving managers a holistic picture of their direct reports, since they may carry a biased and restricted impression of reports’ impact and behavior (some employees may be great at “managing up” a rosy picture of their contributions, for example).

The process starts with a back-and-forth between employee and manager, so as to pick a representative, fair sample of peers to participate. The employee suggests a shortlist, that is discussed and validated with the manager, taking into account how close the peer was to the employee’s contributions, and how well she can assess the employee’s performance.

Peers are expected to give assessments in three different media: strengths, or things that the person should keep on doing, and weaknesses, or things that the person should consider working on/developing; rating each other on the five criteria discussed above; and finally, commenting on the reviewee’s contribution to specific projects. These two open-ended fields (positives and negatives) have evolved from a larger form a few years ago. Laszlo Bock, Google’s SVP, People Operations, observes in his Work Rules that the simplification reduced aggregate time spent on this step by more than 25%, while improving the share of participants who perceived it as useful from 49% to 75%.

Calibration

After all data has been collected, in the form of self-reviews and peer-reviews (or what’s known as 360-degree feedback), and results achieved are understood, managers draft a rating for their employees, based on the following scale[2]:

  1. Needs improvement
  2. Consistently meets expectations
  3. Exceeds expectations
  4. Strongly exceeds expectations
  5. Superb

As you may have noticed, I said they draft their ratings. That’s because no ratings are final before the calibration process, again, described by Laszlo Bock:

“The soul of performance assessment is calibration... A manager assigns a draft rating to an employee – say, “exceeds expectations”- based on mainly OKRs but tempered by other activities, like the volume of interviews completed, or extenuating circumstances such as a shift in the economy that might have affected ad revenues. Before his draft rating becomes final, groups of managers sit down together and review all of their employees’ draft ratings together in a process we call calibration... A group of five to ten managers meet and project on a wall their fifty to a Thousand employees, discuss individuals, and agree on a fair rating. This allows us to remove the pressure managers may feel from employees to inflate ratings. It also ensures that the end results reflect a shared expectation of performance, since managers often have different expectations for their people and interpret performance standards in their own idiosyncratic manner... Calibration diminishes bias by forcing managers to justify their decisions too ne another. It also increases perceptions of fairness among employees.”

Calibration, a process also adopted at other leading companies such as AB InBev, GE, Kraft Heinz, and Goldman Sachs, is therefore of crucial importance in ensuring the fairness of performance ratings. It’s where heavy-handed raters are identified and discounted for (and the opposite is also true).

Outputs

The calibration meetings output each and every employee’s performance rating for the period. After the rating is closed, managers go on to hold two meetings: one where feedback is given, taking into account peer reviews and managers’ impressions of their employees, and another where compensation and promotion decisions are communicated.

The two conversations are held in different meetings and at least a month apart from each other in order to ensure their quality. Google understands that a compensation-focused employee is no good a listener of feedback, whether compensation expectations were not met, met, or exceeded:

“a [negative] dynamics exists when managers sit down to give employees their anual review and salary increase. The employees focus on the extrinsic reward – a raise, higher rating – and learning shuts down.... We have an embarassingly simple solution. Never have the [pay and feedback] conversations at the same time. Annual reviews happen in November, and pay discussions happen a month later.”

The theme is also discussed by Prasad Setty, member of Google’s People & Innovation Lab[3]:

“Traditional performance management systems make a big mistake. They combine two things that should be completely separate: performance evaluation and people development. Evaluation is necessary to distribute finite resources, like salary increases or bônus dollars. Development is just as necessary for so people grow and improve.”
Diagram 1: Google’s simplified performance management schedule

Diagram 1: Google’s simplified performance management schedule

This article is a chapter of our newest ebook, Google's Performance Management Practices, which you can download in full here.

Footnotes:

[1] Actually there is one good reason not to: You’re in a business where the majority of your employees are not “smart creatives,” but maybe less educated, operational, hourly workers, maybe not as capable of self-management, and maybe not as high on Maslow’s pyramid. Valid argument, but we won’t discuss it in detail here. Enough to say that you’ll have much more to gain from learning with Google than ignoring it, for now.

[2] Before a five-point scale, Google rated its employees on a scale from 1 to 5 in 0,1 increments, having, in fact, 40+ possible ratings. The scale, according to Laszlo Bock, beared many inneficiencies, as was ditched after more than 10 years in use for a simpler scale.

[3] Google’s People & Innovation Lab, or PiLab, is worth a book itself. In short, it’s a team of quants whose only attribution is to study people data (performance, engagement, happiness, etc), iterate on people practices (testing them), and to continuously support Google’s people practices with heavyweight data analytics.

Cover image: Hooli, the fictional Silicon Valley company – openly – inspired by Google / Source: HBO’s Silicon Valley