Performance Reviews Don't Have to Suck. (Here's How We Do Them.)

Quick heads-up…

Starting in May, my team and I are helping a small group of clients do one thing: exit the org chart.

We're going to install the operating system, hand you the hiring kit we use to recruit operators (including how we compensate them), and give you the behind-the-scenes playbook for how my operator and I divide responsibilities and run the business day-to-day.

We only have capacity for 30, and 16 spots are already taken.

Get the details and apply here. (Applications close Wednesday at 5 pm.)

-Ryan

I once hired an outside company to run our performance review process.

They showed up with a list of 40+ questions and scheduled 90-minute meetings with every employee to answer them.

We thought we were being thorough…the team thought everyone was getting fired.

Our best people nearly quit. (Some actually did.)

That's when I realized most performance review systems aren't built to develop people and culture...they're built to check an HR box.

So I rebuilt the whole thing from scratch.

What I landed on is a 7-step process we now run quarterly across our entire portfolio. It takes what used to be a culture-destroying waste of time and turns it into the most valuable conversation a manager will have with their team all quarter.

Here's how it works...

Most performance reviews try to measure everything. Ours measures three things: quality, productivity, and results.

Quality = does the work consistently meet or exceed the standard?

Productivity = is the output tangible, usable, and completed on time?

Results = does the work have a direct impact on the company's stated goals?

That's it. No 40-question survey. No laundry list of competencies that have no bearing on someone's actual job performance…

…just three questions, scored 1 to 5. (I’ll get to the difference between a “1” and a “5” in Step 4.)

And here's the key...go with your gut. The first number that pops into your brain is usually the right one. Overthinking is the enemy of honest feedback.

This is the part most companies skip, and it's the part that matters most if you care about your culture.

In addition to scoring your team members on performace, you also need to score their “fit” (same 1-to-5 scale) based on how well they live out your company’s core values.

A 1 means they rarely embody the value.
A 5 means you'd hold them up as the walking example of it to the entire company.

Here's why this matters...

Good culture fits aren't always good performers, and good performers aren't always good culture fits. If you're only measuring one, you're flying blind on the other. You need both...on the same axis.

Now you've got two scores for each person: an average fit score and an average effectiveness score.

The next step is to plot them on a simple 2 x 2 grid. Fit on the y-axis, effectiveness on the x-axis.

Here’s what you do with the team members in each quadrant:

High fit + high effectiveness = A-players. Protect them.

High in one, low in the other = Under-performers with potential. These folks need an alignment conversation to improve fit or effectiveness.

Low fit + low effectiveness = Termination zone. These people need to be released to the marketplace.

Here's the part that surprises people...

The most dangerous person on your team is NOT the obvious under-performer in the red zone. (They’re easy to identify and typically opt-out on their own.)

Believe it or not, the most dangerous person is the employee who's a great culture fit but who can't execute. (The upper-left quadrant)

Everyone loves them, but everyone is also tired of picking up their slack.

The temptation is to tolerate them forever because they're so nice...and meanwhile, your best performers are quietly updating their resumes because they see you tolerating underperformance.

The second most dangerous? The “threes.” The people who are just "okay" enough at everything that you never have to do anything about them. Not bad enough to fire. Not good enough to promote. Just...there.

These are the people who are quietly holding your team back, but they’re also the people who you’re most likely to let linger…quietly sucking up payroll that could be deployed on 4+ talent.

If you want to scale, you have to get them “up,” or get them out.

Here's where most review processes go wrong...they're one-directional. The manager grades the employee, delivers the verdict, and the employee sits there wondering what hit them.

We flip that.

Before the review meeting, every team member scores themselves on the same questions the manager answered. Same scale. Same criteria.

And it all happens via email, so it's quick, easy, and doesn’t require any fancy technical setups.

Here’s what it looks like:

This gives you two sets of data to compare (the manager’s assessment and the team member’s self-assessment), which is critical for Step 5…

This is the step that makes the entire system worth it…

Each manager should meet with the team member and compare scores. Start with the positive areas of agreement. "Hey, I agree...you absolutely crush it here."

Then process through the negative areas of agreement. "Yeah, we both see this. Let's talk about it."

Finally, discuss the areas of disagreement.

Where did you score them lower than they scored themselves, and they could use some additional context (or maybe a dose of reality)?

Where did they score themselves too low, and they could use some encouragement?

Some of your best performers will score themselves lower than they should. They're hard on themselves (that's why they're so good), but this is your opportunity to let them hear that you see their value and appreciate the work they do.

The areas of disagreement will trigger the most important and valuable conversations. Don’t skip it, and don’t gloss over it.

The scoring is important, but it’s the conversations informed by the scores that will have the real, lasting impact.

The goal for each meeting (whether the score was high or low) is for the employee to leave with a clear, executable growth plan.

For your A-players (fours and above across the board), the question is:

These people don't need fixing. They need fueling. Find out what resources they lack or opportunities they want to pursue, and collaborate on a plan to get them what they need to do their best work.

For yellow zone team members, the growth plan needs to address where they are falling short, and get a clear agreement on what needs to be improved and by when.

For red zone team members...it's time for an honest conversation about whether this is the right fit… for either of you.

Everybody leaves the meeting with a next step. Either they're growing into excellence, growing into alignment, or growing somewhere else.

I've tried annual reviews. I've tried twice a year.

Quarterly is the cadence that works, because the process is simple. Nobody has time for 90-minute meetings where they answer 40+ questions, but a quarterly conversation built on the answers to a simple email survey is sustainable.

And because it happens every 90 days, it never feels like a high-pressure event...it's just how you operate.

Each quarter, the conversations get easier, the alignment gets tighter, and the team gets stronger.

When you do this consistently, you don't just get better employees...you build a better company…

…one that doesn't require you to micromanage everyone and everything.

⚡️ Action Step: Pick one team member and run them through this framework right now. Score their effectiveness (quality, productivity, results). Score their fit against your core values. Plot them mentally on the grid. Now ask yourself: "What's the conversation I need to have with this person...and when am I going to have it?" Put it on the calendar this week.

And if you want the actual tools and templates we use to run this process, you can grab the free Team Impact Toolkit here.

Give it a shot and let me know how it works…

-Ryan

Ryan Deiss
Co-Founder and CEO, The Scalable Company

P.S. Starting in May, my team and I are helping thirty (30) burnt-out, overwhelmed business owners “exit the org chart” by installing the systems (and team) that can run their business without them.

Sixteen (16) spots are already taken, so click here for the details if you’re interested in claiming one of the remaining spots.