EP 110: Performance Reviews. Rethinking evaluation systems and embracing Organizational Network Analysis

Join host James Mackey and guests David Murray, Cofounder & President, and Joshua Merrill, Chief Executive Officer from Confirm as they challenge the status quo of performance evaluations. Gain insights into the limitations of outdated methods and explore the potential of Organizational Network Analysis to provide a holistic perspective. 

Discover the truth about quiet contributors and uncover the hidden dynamics that shape talent recognition. From biases to future data ownership, this episode explores a new era in assessing performance.

   0:31 David Murray's background
   1:08 Josh Merril's background
   1:54  Rethinking performance reviews in the workplace
   8:29  Reimagining performance management with network analysis
20:36 Organizational network analysis
32:19 Bias and performance reviews in organizations
40:53 Improving the hiring process with performance data

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Our host James Mackey

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Transcript

Speaker 1: 0:27

Hello, welcome to the Breakthrough Hiring Show. I'm your host, james Mackey, very excited for hosting our guest today. We're joined by David Murray and Josh Merrill. Welcome to the show, guys.

Speaker 2: 0:39

Good to be here. Good to be here.

Speaker 1: 0:41

Yeah, it's great to have you. And before we dive into our topics, David, would you mind telling us a little bit about yourself?

Speaker 3: 0:47

Absolutely so. My background is computer science and human computer interaction. I was an early chem Gmail back in like 2006, 2008 period. Then I've done product and engineering roles at startups of different stages and sizes, both on the consumer side, like gaming, as well as on the enterprise side. Most recently I was CTO at doctorcom we were selling marketing software to healthcare practitioners and now focused on the product and development side at Confirmer.

Speaker 1: 1:18

Nice Josh. How about you yeah?

Speaker 2: 1:20

So my name is Josh, co-founder of Confirmer with Dave. Dave and I met actually 20 years ago in undergrad, so it was actually kind of a huge thrill to be able to start a company actually kind of our second company together. But prior to Confirmer, I spent six years at a company called CARTA. I was the chief product officer there and, like Dave, at doctorcom, we experienced all the pain of performance management, both as people managers and people leaders and also as people who wanted to improve our own performance and just saw how incredibly broken the system was and decided to do something about it.

Speaker 1: 2:00

Love it, love it, and that's why I'm so excited for today is to really get into performance reviews, understand what's broken. There's issues with feedback cycle, there's issues with bias. There's a lot of problems when it comes to doing performance properly, and maybe we need to really step back and totally rethink what we're doing. And so I would love to just dive into at a high level what really, what problem are you solving and how are you going about doing it? So I don't know who wants to take that first, but that would be great to just do kind of like the high level overview there.

Speaker 3: 2:35

Josh, I'll let you do the high level overview, but just to plant a brief seed in terms of, like, some of some interesting stats and stuff. You know we oftentimes have performance reviews with manager ratings. I'll just mention there's a lot of research on this About 60% of the manager's rating as a raider is based off of their own idiosyncrasies as a raider, like are they easy raider or hard raider? And then 20% is error and then the remaining 20% is the person's actual performance. So just setting the stage, we're dealing with a pretty broken process, but I'll let you take it away, josh.

Speaker 1: 3:09

So I'll admit that's like way worse than I thought. I mean, I would assume that there's, it's pretty inefficient, but like that is total trash. That is, that's not helpful at all, right.

Speaker 2: 3:20

It's a totally broken building. On some of those stats, 60% of employees, over 60% of employees, believe that performance reviews are a partial or total waste of time. So it's not a, it's a system that's working for nobody. I think it's important to understand why and to to understand that you kind of have to look at where they came from. So performance reviews are they're 100 years old, right. They came out of the US military after World War One and they were away for the commanding officer to raid the subordinate officer on a five point scale. That was the innovation 100 years ago and work was hierarchical and so we brought that methodology into the workplace and that is the manager review that we still use today. So work got more complex as the decades went on. So he had kind of the rise of the 360 in the 80s and 90s. But the problem with all of those old methodologies is they fundamentally don't match the way that we work today.

Speaker 2: 4:19

The way that we work today is in networks, and what that means is you can hop onto Slack or you can hop onto Microsoft Teams. You can direct message anybody in the company, right. The CEO of the intern, everybody in between. They have direct access to you, work is collaborative and cross functional. Almost nothing of real significance gets done anymore without a team of people. And, by the way, that team could be all over the world, because we have Zoom and we have Google Meet and WebEx. So the point is that while we work in networks, the way that we evaluate that work is based on a pre digital conception of getting things done, and it doesn't work anymore. That's where a lot of the problems come into performance reviews, a lot of the problems around managing up, often to the exclusion of helping others. Manager visibility is lower than it's ever been, so we see a lot of those problems come into performance reviews. Yeah, I mean there's a ton of issues here.

Speaker 1: 5:24

So I would love to just get a sense on what is the solution that you guys recommend right, based on all the problems. How are you going about solving it?

Speaker 3: 5:35

Well, one thing we can say is what we don't recommend just to start right.

Speaker 3: 5:40

So manager reviews definitely have their utility, but the problem is, managers can shield the folks below them right.

Speaker 3: 5:46

Somebody who's really good at managing up and has sharp elbows, that can get away with it pretty well, and some folks do.

Speaker 3: 5:53

Peer 360s is trying and get an additional view beyond the manager's perspective, but the problem is in most organizations, 360s are cherry picked, right.

Speaker 3: 6:03

People pick the people that are going to say the right things about them, the good things about them, and you know who's not benefiting from 360s are your amazing employees, because those are the people. They're getting asked by like 20 people to fill out these peer reviews, because everybody wants a review from from so and so and so, because there's this like cherry picking selection bias you're already starting with muddied waters and you have to end up filling out these massive pieces of information which maybe feel good to the recipient. But when it comes to like, let's just say, a CEO or executives or management teams that are trying to make hard decisions about their talent, you know we've seen a lot of organizations have to go through rifts in the not too distant past, like when you're making those decisions. It's really hard when all you have is this random one to four rating, and then a bunch of words from people who are just saying all of these good things because they were selected ahead of time. So so you probably want to do something other than the current status quo.

Speaker 1: 7:05

Yeah, for sure. I mean, I like just thinking at my own company, we do not have like traditional performance reviews, is more of a ongoing conversation on a weekly basis. I mean, we have very clear performance metrics in place, defined for our roles, and it's really just about tracking to that and every week it's like, okay, are we on track? Or if there is any type of performance concern, it's it's basically brought to surface immediately and I think like that like one of the things that company miss. Companies miss too. It's like if there are performance concerns that are not surface quickly, they could do a lot of damage. And so I think that's the idea of like doing an annual performance review.

Speaker 1: 7:50

If you do wait a year before you have any kind of like data or insight on something happy with performance like, what is the damage that's being done within that year? And so like, just think about in like, particularly if it's something I mean everything that you shouldn't have roles in the company that don't impact the like, impact the customer and revenue. It's like if you cannot show a causal relationship between the work that somebody's doing and how it's actually impacting the company's North Star metrics, why are you hiring for it? Right, and so from there it's like if somebody's important enough to hire, like if they're not doing their job well or something is not aligned for an entire year, like imagine all the damage that can be done. So not only is it employee, it's beneficial for the employees, beneficial for internal promotions, but it's also helping to ensure that things are running smoothly for the organization. So I always see it as like this is an ongoing conversation versus something that you do at the end of the year or a couple of times a year.

Speaker 2: 8:45

In my opinion, Totally and actually to make it even worse. In traditional performance cycles that happen once every year. Let's say where you think of that manager rating as maybe being a five point scale. It's not really a five point scale because what usually happens is that the needs improvement like the one rating almost never gets used and the five rating is usually really hard to get because a lot of managers don't don't feel like taking the risk. So what you end up with is this three-point scale where a lot of people who really need that critical feedback and needed it months ago are now actually going to get like a meet expectations rating, because that's just the easiest way for a manager to avoid having a difficult conversation and having to bring in HR and things like that.

Speaker 2: 9:32

But I think the problem that you're highlighting, james, is in continuous feedback is great. When I do something as an employee, I want to get feedback positive or constructive right away. The challenge becomes when you have to start to make decisions, and especially when you have to make decisions at scale. So imagine that you and I are both managers and we each have somebody really great on our teams and they're performing above their level and we want to see them promoted and the company comes to us and says look, we only have one promotion. It's going to be the person on your team, james, or it's going to be the person on my team. How do we decide who's going to get that promotion?

Speaker 2: 10:15

And in the world that we live in today, where manager ratings are the end-all, be-all of some of these performance, what's going to be the deciding factor is your ability to influence other managers and whoever is making that decision around the promotion, versus my ability to influence them. What's actually left out of that is the actual employee's performance. That's not an input. What is an input is our ability to advocate and to influence. You might say well, if we were creating performance management from a clean sheet of paper, would we want that kind of system or would we want one that really is about the impacts and the contributions of those individuals and not of their managers?

Speaker 3: 11:01

And to add to that, the interesting other thing that's come out of research is, if you look at specifically knowledge workers right, so I'm not talking about factory workers, but knowledge workers there's a bunch of research that shows that talent for knowledge workers does not follow a bell curve.

Speaker 3: 11:18

Even though, ironically, all of these one to four, one to three, whatever rating system we use, we have these bell curves, it turns out talent follows a power lock right, the Pareto principle, the 80-20.

Speaker 3: 11:27

And this resonates with anybody that works in any large organization that 80% of the results of any organization comes from 20% of those individuals that are giving outstanding impact and similarly, 80% of the toxicity, the problematic behavior, the really big problems come from 20% of that set of people that are bringing everybody else down. And so the problem is is that when you're doing this manager rating thing and even this continuous feedback thing James, it's great that you're doing that right, Continuous feedback is important but it doesn't actually enable you to solve this problem at scale. When you have a company that's even more than 100 employees, you're going to start having trouble figuring out things, and today's world, it's those managers it's Josh's point, it's those managers that know how to sell their employees that are benefiting. So we need a world where we can get some more visibility, and it turns out there's a way to do that through a process called organizational network analysis.

Speaker 1: 12:29

I want to learn more about that because I'm not familiar with it. I mean, my whole thought process historically has been making sure that managers are essentially promoted properly, that they're qualified to measure performance properly, that before they open a role they should have everything from 30, 60, 90 day plans to showing again like a direct cause of relationship between the role they're hiring for and the North Star metrics. And measuring performance appropriately through that. And that's kind of how people are promoted is looking at their impact, the direct impact that they have in accomplishing those goals, and of course it comes down to the competency of the manager. But I've always seen it as like that type of motion versus like a more sophisticated approach to it. So I would love to learn more about what you mean by that and just I mean that'll just be really helpful and I'm sure a lot of people tuning in too have like don't know that right. So I'm curious to learn more there.

Speaker 2: 13:23

Yeah, so. So organizational network analysis, or ONA, is. It's a research methodology. It's been used in academia for a couple of decades now. It's just never really made into the HR toolkit. But what ONA essentially says is, because we work in networks, we should actually measure the flow of information, communication, the flow of work across those networks.

Speaker 2: 13:48

And the way that it would work in practice is if you went to your organization and, as part of a performance review, instead of maybe asking a manager to simply rate an employee on a one to five scale, what you would ask every employee is a series of questions and they're questions about their network.

Speaker 2: 14:11

So you might see questions like who do you go to for help and advice, or who do you go to when a decision needs to be made, or who do you believe is making an outstanding contribution. So you're asking everybody in the network about their other, about the other connections in their network, and what tends to emerge from that. Do you ask everybody in an organization who do you go to for help and advice? What actually will emerge from that are who are your subject matter experts? Who are the people actually creating and sharing the knowledge across the organization? If you were to ask a question around who are you concerned is creating a problematic workplace. You'll find those problematic employees very quickly because people tend to know who they are. The challenge is how do you actually capture that information and surface it in a way that managers and leaders can use?

Speaker 1: 15:09

So I love that and that's actually very clear and easy to understand, which I'm really happy that I was able to kind of grasp it very quickly and everybody tuning in, I think, will as well. I think it's like so what you're basically saying is you're collecting feedback from employees on other employees, essentially to get like a more holistic view on somebody's performance, versus just like maybe something coming across as more subjective or just not as potentially accurate coming from one manager, it's like from everybody, like on the team, I guess.

Speaker 3: 15:42

Yeah, you're absolutely. You're trying to get more perspectives. Now, to be clear, every perspective is a subjective be biased right, we all have implicit biases. But being able to be in a world where, instead of one person's subjective bias perspective which is a manager who may or may not be well informed, who may or may not have your best interest in mind, who may or may not have a deep amount of personal biases that they may or may not be aware of to broaden out to a larger group, the group of people that you actually work with, who you directly impact and who impact you. So the idea is, I mean, when it comes to people, there's no perfect solution in terms of, like, eliminating bias or eliminating, but to be able to enrich the perspective. So it's not just what a manager sees.

Speaker 3: 16:31

You see way more, and so, particularly, like in remote work settings, for example, when you have a manager who maybe isn't even like interacting or able to see what's happening with the folks below them in the chain of command, turns out you can get a lot of rich information just from hearing oh wow, this person is sought to for help and advice on these topics by 12 people or 25 people. And the crazy thing is, is that this data, when we do this and we measure this I mean, this is part of what Confirm does. We've done this with many organizations and what we find is that power law, that 80 20, the Pareto principle the thing I mentioned before that all research shows knowledge workers follow instead of a bell curve. We see that in the data. So the people who are most influential in terms of the ones that everybody goes to for help, advice, you know, energy, motivation that's a power law and you can see that that 20% who are standing out dramatically.

Speaker 3: 17:32

And the crazy thing is and this was really when Josh and I went oh my gosh, the world is really, really doing this wrong was when we started looking at that ONA data and correlating it against the manager rating. It was shocking. We saw just as an example right, and you don't have to do like comparison. You know product managers, maybe they have more visibility than like a typical engineer. Whatever, let's just do an apples to apples comparison. Right, we had many examples of this, but just to give one, the one that we talked about a lot. We had an L four software engineer, another L four software engineer.

Speaker 3: 18:07

They both got the same meets expectation manager rating one of them and they both have been at this company for the same amount of time, a couple years. One was female, one was male. This female employee she was recognized by a significant number of people as an outstanding contributor, somebody that was sought out for help and advice by a large number of people and had no concern surface from the network. This other person little to no recognition, little to no sought out for help and advice, indicators and actually a couple concerns about this person we saw from the comments they were seeing concerns about some integrity issues. They got the same manager, rating the same, so they're going to get the same promotion opportunities, they're getting the same comp although wouldn't surprise me if the female was underpaid and all of the ways that the organization see these people is going to be identical. This is where our current process is failing us and this is why, if you're doing a cycle that doesn't have ONA, you are doing a disservice to not only your employees but to your bottom line.

Speaker 1: 19:16

Okay, so quick question Is the feedback that people are providing? Is it confidential?

Speaker 3: 19:22

So I mean, there are many ways to do this methodologically, but what we find is psychological safety is probably one of the most important things about these surveys If you want to be able to get authentic data. So the recipient of the feedback, in terms of the person who's being talked about, they are unable to see directly any criticism or negative feedback directly. Only their manager or an above can see that. But from a positive perspective, in terms of like any positive comments or mentions, et cetera, they're able to see that information anonymously so that they can actually be recognized for their work. But there's not this kind of like obligatory incentive Cause, you know, if people know who I'm going to say this about, who I'm not going to say this about, I might feel pressure to be inauthentic. So the idea here is we find the, the, the, enough anonymity so that people can be authentic.

Speaker 1: 20:11

Right, and so then my next question is to some extent doesn't it depend on the size of the team, Like if you're on a team with five people, right. So like, how do you is it like teams that interact with your team as well? Like, how do you kind of define the group of people that are involved in this process?

Speaker 2: 20:27

Yeah, well, one thing I would say is it's always important to make an apples to apples comparison. So, as much as you can, you know you want to look at peer groups. These are typically people who share the same job description or share the same comp band together. So that would be maybe a functional split and a level split. So we, essentially, we can say these people are doing the same jobs. But what I would also add is what this methodology, what what organizational network analysis also allows us to consider, is all of the people outside of a person's team that they're impacting. And that's really important because we are so collaborative and cross functional today in the way that we work.

Speaker 2: 21:08

The number of touch points that any single employee can have has just exploded. I mean, in a network world where work is happening over Slack and Teams and Zoom, I mean you can have dozens of interactions with your coworkers every day. You know when I was, when I was in college, like they taught me to manage by walking around and like nobody has shown me how to do that over Zoom. Right, there's just so many. Not only that, but we actually reward and value autonomy, like the employee that that I value the most as a manager, is going to be the one who I can give a problem to and then say, hey, you know, call me if you get stuck Right, and then a week later they come back and they have the answer. But there were dozens of interactions that happened for that person in that period of time that I wasn't a part of, and ONA is a way of capturing those interactions and starting to make them quantifiable. That's the power of it.

Speaker 1: 22:04

So like, what size of organization does this really start to work for? Like? In my head it seems like there's an employee head count number where this becomes even a lot more beneficial. Like, of course, I see the application for early stage organizations. But what is it? I would see this more as like a late stage. You've got a company it's starting at like 500 employees, a thousand plus, where it's like they have a team of engineers, 30, 100 people. Like I see the application really fitting there. I mean, am I in the right ballpark or what are you seeing?

Speaker 3: 22:39

Yeah, so high level. The quick answer is Dunbar's number. Which is this number? It's like this theoretical number of win organizations, stop knowing each other's names and like, stop really like having that cohesive connection. Some say it's like 100, it could be higher, it could be lower. There is some hypotheses that Dunbar's number is lower in remote settings. It hasn't really been proven or disproven yet, but I hypothesized. Dunbar's number is somewhere around 50 in remote settings and maybe around like 100 to 150 in non-remote settings. That's the number where, like, the managers start getting less and less visibility. So anywhere from 100 to 200 people, depending on how your organization is distributed. You can start getting value from doing some organizational network analysis, because the moment that your managers can't see everything that's going on directly, that's the moment when there's a benefit by getting this additional information from the network.

Speaker 1: 23:40

Okay. So would you say, do you start in scale positions, scale individual contributor positions that you're hiring for and a lot of openings, or do you see what I'm saying? Is that where you start?

Speaker 3: 23:54

I'm trying to follow.

Speaker 1: 23:55

Okay. So like if you hire 50 SDRs or 20 SDRs, versus if you have a position you only have one product marketing director of product marketing but you have like 20 engineers Like the application, would it be more so for the larger group of people that are in the same position or could you leverage it for positions that maybe they're not scale positions, as in you're not hiring dozens of them at the same time?

Speaker 3: 24:23

It's so interesting because kind of in implicit in your question, is this idea of kind of like, almost like, doing it with like subsets or with groups of your organization. But the irony and part of the reason why this methodology is so useful today, right in this network connected world, is it really is best done with everybody, regardless of your team size, right, because we're so cross collaborative. I mean, even if you have a team of 25 SDRs, you're super sales driven as an organization. Maybe some of those SDRs might be chit chatting with some of the marketing folks, so they might be. There might be some very inquisitive folks that have a product bend that might actually be interacting with the product team.

Speaker 3: 25:00

I mean the way that people or even I've seen the opposite, right, I mean I was, you know, dr Collins was a sales driven organization. We had some fantastic sales people that were actually like driving feedback and information from their meetings to the products team and the products team found them to be incredibly valuable. In a world where you're just doing these like siloed manager reviews and people are just focused on like the five people that they talk with, like next to them, maybe in a physical office, you're going to miss these cross collaborative opportunities to see where people are actually providing tremendous value to the organization. So the short summary is if you're going to do ONA, you kind of want to do it with everybody, because you want everybody's perspective and you want to have these diamonds in the rough things that you're not aware of. Outstanding network contributions, manifest and become aware to the managers that you wouldn't be aware of otherwise.

Speaker 1: 25:55

Right and I think so this makes sense to me. I have a few kind of like nuance questions where I mean I get the value overall. But some things that are coming top of mind to me is like knowing exactly who to pull in for each role, and that I guess has to be a bit of a manual process, because you only want to pull in people to the to this like survey, if you will, about somebody's performance, or asking not performance. You, I know you ask like who do you go to for help with that kind of stuff, but you don't want people that don't really know that person to weigh in on on them necessarily, right, because? Well, so it's interesting because, again, implicit in your question.

Speaker 3: 26:34

you're almost I think you're thinking about these like their 360s, but they're completely different from 360s and this is like the big mental shift right we come from a world where, in performance reviews, you pick ahead of time who you're going to talk about and then you share a bunch of information about that person, whether it's upward or lateral or downward, and then you're exhausted and then you throw this information away for a year and then you don't do anything with it. Organization Network Now is completely different. It's like a 15-minute survey and it's completely open-ended. So you ask these questions you don't ask about, like, what do you think about?

Speaker 3: 27:07

So-and-so, it's literally open-ended and you go who do you go to for help and advice? Okay, who energizes you at work? Who are you concerned about? And so people can choose to mention nobody, or they can mention 15, 20 people, I mean, and we see that actually. I mean we see a long tail of output in terms of who people go to, etc. So you're literally starting with that blank slate and then you're letting the network tell you who's valued by the network, who's being seen and recognized.

Speaker 1: 27:33

And they're obviously not going to bring somebody up if they don't interact with them.

Speaker 3: 27:37

And that's what's most telling is, in a world where people feel unsafe to share, to snitch if you will on others, what you find is the best ways to get signals are to see no signal. In other words, in an organization where and I say this as an introvert myself, actually, because some folks listening might go oh, does this bias towards extrovert or does this is popular to contest? Turns out from our research the answer is no, and in fact our data identifies quiet contributors. So if you've heard of quiet quitters, right, they're these quiet contributors, these folks that tend to be introverts. They tend to contribute significant amounts of work, they tend not to know how to sell themselves upward and those are the people that often get recognized in these surveys that they would not get recognized for in a traditional review process.

Speaker 1: 28:33

Yeah, that was actually that was my like cause?

Speaker 1: 28:34

next question cause my initial, where my brain initially went, was like well, is there gonna be some kind of bias, like if somebody speaks up on meetings a lot, then they're gonna be top of mind for these surveys, and so like, and I think that still could be potentially a concern, right Cause, like no system is perfect, but like then there's the layer deeper where you go into it and you're like well, actually this is a way to ensure that quiet contributors like do get recognition, because, based on how the questions are framed, like you can kind of get around that, but like I could see, like I still see people that are loudest might be more top of mind right?

Speaker 2: 29:12

Well, those are the people who the manager is already aware of, right? The people who are the ones who speak up in meetings and who are great self advocates, right? Who know how to sort of make a name for themselves. Those people, they don't need any additional recognition. The manager knows who they are. In fact, everybody probably knows who they are.

Speaker 1: 29:32

Sometimes too much right.

Speaker 2: 29:33

That's right. We've all worked with people like that. But the people who get overlooked in that system are those quiet contributors. So you have these people who are not great self advocates, they're not the loudest voice in the room, but when you actually look at all of the people that they're impacting on a day to day basis, you know people who they're helping with their work, people who they're motivating, and they often do it in a way that tends to be kind of behind the scenes. We wanna capture those people's contributions right. They may be really critical players in the organization and, by the way, you know when you start to connect this to talent acquisition, those people who are really key influencers and key contributors. We also want them to refer the best people they've ever worked with right. That's how we bring in talent and grow the talent of the organization. So it's critical to identify those people, even when they're not the loudest voices in the room.

Speaker 1: 30:31

Oh yeah, those are the ones you want. I mean, like, cause you know, I don't know if you've ever been on Zoom meetings where it's like a relatively big team and then it's like the same two people just talking the whole time and, of course, like you appreciate people that are engaged or whatever to some extent, but you don't necessarily get to hear the perspectives, like of people that don't have as like a domineering, like domineering personalities right, like you want to get everybody's perspective, hopefully. I feel like this is a good way to do that and, quite honestly, like every question I have or potential, like you know, follow up question, like I feel like you guys have provided very logical, reason-based reasons to overcome those concerns thus far. So this has been really cool, cause I'm like, well, what about this, what about that? And you guys have a good answer for everything.

Speaker 3: 31:16

I'll mention one, just because you haven't mentioned it explicitly, but it's one that I'm sure our listeners might wonder about. Which is this question of? Is this a popularity contest? If you're asking people to pick, you know or mention these people, you know around them, and what I'll say to that is if you don't ask people to substantiate why they wrote what they wrote, there's risk of that, and that's actually one of the most important things that we do is that we ask when, when, when people say I go to so-and-so for help and advice, we ask them to say about what you know you have to say why did you go to them for help and advice?

Speaker 3: 31:47

When you're recognizing somebody for outstanding work, why did you recognize them? If you're concerned about somebody, we actually raise the character limit. If you have a concern to say, why do you have that concern? So when people provide the substantiation actually this is where you know we've had CEOs who use our product that describe it as feeling like it's God mode for their organization, cause they have a dashboard where they just like hover over each person and they see, you know, like 200 characters or less each, like these snippets that describe in full detail everybody around them, like the perspective of where they're sought for help and advice, where they energize, where they outstanding and where there might be concern. And, of course, again, everybody's biased.

Speaker 3: 32:27

but now we have a way to measure it. You know a lot of people talk about bias in this concept, like, oh, you shouldn't do this or anything, because what about bias? And it's like well, first of all, let's talk about the status quo today that is horribly biased, with one person who's a manager, who you know tends to I won't go into more detail there, you can imagine where I'm going to go with that but and let's actually like consider looking at what people say and then we actually can measure bias and we can do a lot more with that data than the world we live in today.

Speaker 1: 32:56

All right. So I have like a six year old analogy like which I always like it helps me understand things a little bit better. But, like you know, when you go to like a fair or something and they have like you're guessing how many gumballs are in the machine or how much somebody weighs, and then you take like the aggregate number that a bunch of people give and it's insanely accurate. Have you ever experienced that?

Speaker 3: 33:17

Although I haven't like it totally makes sense.

Speaker 2: 33:19

Yes, absolutely yeah. The gumball analogy is really apt here. The ability for one person to hazard a good guess on how many gumballs are in that machine is pretty poor, and you could very much liken a manager's point of view to that. You know the manager has an important job to do, but it also comes with bias. It comes with idiosyncrasies. Some managers are easy graders, some managers are hard graders. You could think of this as a sort of crowdsourced guess right as to how many gumballs are in that machine and what we see in our data is. It's much more accurate than merely getting a single point of view.

Speaker 1: 34:11

Right, right, I think so. I would like to also dial in on negative feedback. So like what question? I mean? You said you have any concerns. I mean, I think that this is a big part of it too, because sometimes, well, I think performance and people that are kind of problematic in terms of their interactions with people a lot of times there is overlap. Sometimes performance might be all right, but it's like somebody's toxic, so they're not necessarily a direct. There isn't a direct relationship there. I think it just depends. So what are some of the questions you ask to identify concerns, right?

Speaker 3: 34:51

We literally only ask the one. It's who you're concerned about needs additional support or attention. And what's interesting is this is a question that nobody ever asks, right? Isn't this interesting? Like you talk with your friends, you talk with the people that you know at any workplace and everybody's constantly like sharing whatever the tea in the office, but nobody in leadership is often aware of, like all of the reality that's actually happening because they never ask, because there's never been a vehicle to ask.

Speaker 2: 35:26

Yeah, I think that if you were to bring this into a manager rating scale, we talk about having a one through five scale of manager ratings.

Speaker 2: 35:35

But the reality is we speak with a lot of CHROs who basically say, yeah, I have a three point scale.

Speaker 2: 35:42

I have most people meeting expectations, I have a smaller number of people exceeding them and I have very, very few people who are outstanding. And then a lot of the lower ratings never get used because often managers just want to. They want to avoid difficult conversations. You know, if I give somebody a needs improvement now, hr is going to get involved and if that person leaves, then I've got to go through a hiring process again and it's just work that they don't want to do. But what we find is, you know, if you have this problem of ratings, bunching up at kind of the three or four ONA is actually a great way to sort of bust the myth of meeting expectations, because what you'll see is wow, actually tons of people who six months ago were getting a meets expectations rating from their manager suddenly have a lot of critical feedback around them. It's very hard to sort of continue the status quo of sort of giving somebody that rubber stamp of meets expectations when the people around them have raised these concerns through a channel like organizational network analysis.

Speaker 3: 36:50

One of the biggest joys that we have I don't know if it's joy, but it's like I don't know a reality moment, let's just say like a come to your deity kind of moment, is when we do these reveal days where organization CHRO CEOs who've been doing it the old way, we take their data from the past and all of the manager ratings that they had and then we combine that with the data from this ONA process and what they find is, honestly, it's a little mortifying because they realized that in some cases they've promoted somebody horribly toxic oftentimes a lot of folks candidly and then they see these outstanding people that everybody went to for help, advice, energy. They were huge recognition. They were quiet contributors. You know who left the company for comp reasons. Those two things happen so often that it's not only is it boggling to the mind, but it's insane how much money people are losing by doing performance reviews the old way.

Speaker 1: 37:55

Yeah, for sure. So I have two questions. I have so many questions about this. This is so much fun. I'm really enjoying this conversation. I'm learning a lot. Okay, is this enough to make a promotion or raise decision just based on the analysis that you're doing with this methodology, or are there other factors that need to be considered in addition to this methodology?

Speaker 2: 38:20

Yeah, so the answer is the second. So, when it comes to things like promotion, it's not a promotion is the intersection of someone's ability or readiness to be promoted as well as the company's ability to promote. Right, we have to have the pot of money there to be able to pay these promotions, et cetera, et cetera. But what I would say is that out of every promotion cycle, and I would even say whenever, for example, a PIP is happening, what characterizes those done well is that nobody is surprised, right.

Speaker 2: 39:00

What you don't wanna come out of a promotion cycle saying is oh man, I can't believe they promoted Bob. He's such a jerk, right. Or man, they put Mary on a PIP. I mean, she's fantastic, right. What you wanna do is eliminate those surprises. That's what ONA will allow you to do. What essentially is happening is that you have the organization expressing its point of view on who it wants to elevate and also, occasionally, who it wants, kind of voted off the island. Now, as a manager, you may still have the rubric these are the five responsibilities of this job that have to be fulfilled, or the five responsibilities of this level. That's still important, but at least we can make these decisions with a complete picture of what this person is doing that's impactful and sometimes what they're doing that's destroying value as well.

Speaker 1: 39:54

Right, right, okay. So here's, that's also very helpful. My next question this is just kind of like a side thought I had. I'm almost wondering and I haven't given this any thought because I literally just thought of it five minutes ago, hearing you guys talk when it comes to hiring, right, I almost wonder, because if you think about a traditional interview process, right where it's, you have your screening round, then you have the recruiter, then you have your call with the hiring manager and then it's whatever how many steps afterward, and it's like, at any stage in the process, based on a interviewer's bias, somebody could get passed after one round despite, let's say, three rounds. They get an excellent rating, and then one round somebody's like nope. And so I'm almost wondering if there's a place to think about people progressing to the next round of an interview based on an aggregate score. Absolutely.

Speaker 3: 40:47

You're touching on like a future that we get really excited about, which is a future where people are owners of their performance review data, even after they may leave or be interested in leaving a company. That's actually a world that we're excited to build towards. And if you think about just to give a weird analogy right Like loans and credit, right Like a hundred years ago, before credit bureaus existed, like the way that you got a loan, you probably needed to be a married, white, heterosexual male like who was charismatic. You'd have to go have an interview and convince them to give you a loan. The way that hiring works today looks a lot like how getting a loan looks like a hundred years ago, which is kind of sad, right, Because all the same biases, all of the same problems that you just touched on, they are inherent in the hiring process, and the reason is it's an information asymmetry problem.

Speaker 3: 41:42

The people hiring don't know about you, you don't know about the people that are hiring, but the irony is there are tons of people on both sides that know all of this information and it's literally just a matter of getting that information surfaced and having it be trusted and accurate. And so, yes, we would love a world where people have the ability to export their performance information and share with somebody who's hiring that information and you can actually get that context and that could enable somebody to then have a much less biased perspective in the interview process and that one awful, toxic, really really biased interviewer, their opinion will matter less once you have more data from more people.

Speaker 1: 42:31

Yeah, I think that that's incredible. I think the so I think that there's two ways to look at it. There's one where people own their performance data and bring it with them to the interview with another company. There's another way where I was referring to it. It's like in the interview process with the other company, their ability to pass through the next round is based on aggregate, based on scores at least, to a final round, to where it's like there isn't bias of one interviewer and it's looked at in aggregate.

Speaker 1: 42:58

So you don't have a great person who's just passed on by somebody because they're having a bad day or because they're not like a trained hiring manager. So, like to me, I see like two potential applications there. The former, what you're referring to, is like bringing in a long performance data. One of the things that, like my mind immediately goes to is like that's incredibly valuable, first off, right. Like I could see that being a total game changer, and I love the analogy you provided related to credit and a loans and it's like what do you think about that? That's so freaking scary, that's ridiculous. So I'm with you. I think the hard part in terms of implementation would come down to liability, some employers not wanting to release performance based data with the concern that there could be some sort of like litigation right, if somebody doesn't get a job based on what is some kind of information leaked from their performance previous company?

Speaker 2: 43:47

there are a lot of companies who have the policy not to release performance information, so Well, you know, the funny thing about that is that in a lot of big states, especially states that have a lot of tech workers California and New York every employee actually has the right, even after they've left the company, to request their employment file, and that includes performance reviews. Now, there are, I think, other reasons why those don't get shared. Like you know, even if I have my performance review, I'm probably not going to go to an interview and share it with a prospective employer. You know, it's kind of silly, right? A prospective employer looking at my last performance review and they're going to say, look, well, look, I don't know who your manager was, I don't know what it meant, I don't know what meeting expectations meant to them. Right, so really, what's the point?

Speaker 2: 44:41

But to build on Dave's analogy of what credit bureaus did is they didn't just make the information portable, they made it standardized. So if we were to say, for example, as an answer to that question, you know who do you go to for help and advice, if I were able to say, yeah, you know what. I was one of the, I was in the 90th percentile of most helpful experts in my company and I have the data to prove it. That's a powerful thing that goes a lot farther than a manager saying, yeah, josh met expectations, and the reality of the world that we live in today is that you can have a long and successful impactful tenure at a company, but when you go out into the job market again, you are suddenly on a level playing field with everybody else and it is on you now to prove to every prospective employer that you really are as amazing as you say you are. And that's where quiet contributors actually get the short end of the stick.

Speaker 1: 45:38

Yeah, for sure, and I think so. Basically, I think I was oversimplified and kind of confusing two concepts, right, like there's the idea of a reference call and there's an employee file. And I think that's an important distinction that I didn't initially make with my concern or potential area where it would be difficult to implement this. But you're right, if somebody has a right to their employee file, performance data, however it's structured, is something that they're able to pull right, like that's something that they would own right. So then there wouldn't be any potential liability issues, I would assume if somebody leveraged, or there'd be at least a lot less. I guess there's always some risk in business. We could always do whatever they want to do. But, like it's, if you wanted to share that with a potential employer, I guess everybody would have access to that if they wanted it, right? I?

Speaker 2: 46:25

mean. Our personal feeling is that your performance should be owned by you.

Speaker 3: 46:32

Right, it's kind of interesting. You mentioned reference checks, right, because I mean they're the best approximation that we have and you have to kind of hold in place right. I mean I hope that the person's going to be willing to give that information, right, and if they're sometimes employer, the company they have a policy right. They say, oh, I can't because of legal reasons, blah, blah, blah. But even if you do get it, there's a lot of like in terms of recency, a lot of the, a lot of stuff can get really old and you know, I was just watching a documentary on memory.

Speaker 3: 47:05

We all know how horrible memory is and how it degrades over time and how you can implant false memories and all sorts of stuff. So you know, that's where reference checks you know some they have mixed reviews in terms of their utility because of this right. But the interesting thing is is that if you have performance review information becoming the property of the employee, you kind of avoid all of these issues. You're being compliant by law, you're getting the information that was accurate and recorded in the moment by the people around you. And this is part of the reason why ONA is so, so, so important if we do do this, because if you don't have that ONA you're, the world is going to be run by awful managers who you know you have a crappy manager. They're going to make it hard for you to get your next job. So you know, if there's nothing that folks listening have learned, please learn that the way to take away the manager's you know siloed power, or at least reduce it, is to invite additional perspectives. Yeah.

Speaker 1: 48:06

I mean it's like the from a hiring perspective or just an organizational perspective too. It's just thinking about the impact of a great manager and the impact of a terrible manager, or even like somewhere in the middle right, Like it's never. You know, usually there's a spectrum, but yeah, I mean you're. It's like. Another way to think about too is like you're protecting against some, like a manager that maybe isn't that great, and there's just such a huge impact on the organization, If you have like, because the thing of the leverage right, you have one person leading a group of, you know, potentially four to 10 people then that's going to impact the performance and the ability for that entire, all of that headcount to deliver, and then also, not only the entire cost associated with that. What was the opportunity cost and how is that preventing the company from achieving its goals?

Speaker 1: 48:51

So there's like this massive cost and like what I feel like too is like when you're, you know it's for your product, right, it's like you're going to companies and you know I don't know how much your product costs or whatever, but like whatever it does cost, like the argument is like look, this isn't, you know, a problem of adding X amount of AR like costs to your, your budget.

Speaker 1: 49:11

We are solving literally, on average, a seven to eight figure problem for your organization. You know this isn't an X problem for our cost. This is like literally a multi, multi, multi-million dollar problem that you have that we're solving for you, which like the leverage of it, like I would love selling this product because like it's just like it's, it's very, it's very logical and, by the way, we usually don't get into like product talking about specific, it's more like high level, like theory, but like it's just really relevant because I actually don't know other products really in the market solving it or thinking about it this way. Maybe they are out there, I don't know. But this is really the first time that I've really like heard of this and have heard of a product that's solving this problem, so I just think it's really cool.

Speaker 2: 49:52

Yeah, well, I mean, you touched on something so important 70 to 80% of all the money that we spend to run our, our companies, that's going to payroll and benefits, like almost everything else, is a rounding error compared to the cost of people. Almost any product by, the biggest expense of that product is the people who made it. Yeah, and, and you would think, given that you would think that we have that we would have much better tools for measuring the impact and the contribution of those people. But up until now, I think our tools have been have been pretty crude.

Speaker 1: 50:25

I agree, I totally agree. No, it's. It's like it's all very logic, based like the very sound reasoning, very analytical, and I think it's it's pretty solid. It's really hard for me to think of anything that that comes close. So and again, like at the beginning of a call, just like not really knowing a whole lot about it. You know a lot of concerns that I would have had like initially, like I totally understand now that those shouldn't be concerns that in fact, on the contrary, like this solves a lot of the problems, and I think maybe some of that bias comes in from, like everything that we've experienced, like in this, like related to this topic, has just been so shitty historically that you almost assume that, like any solution is going to be like only incrementally better, but also sort of shitty. So it's actually pretty cool to see how you're solving this Exactly.

Speaker 3: 51:10

You know this is actually one of the hardest things that we we face is I mean, there's a whole set of people out there who basically say performance reviews are terrible. Kill the performance review. The performance review should cease to exist. Now the reality is performance management still has to happen somehow right. And you know they talk about continuous feedback and stuff which, again, it's it's you. You want that as like a baseline, but having a having no solution, of course you're going to say this thing doesn't work. But in a world where you have ONA, it turns out that actually, maybe performance reviews aren't the problem. Maybe the problem is that we've been giving managers too much power and we've been soliciting too little information from the network of people that we work with the thing.

Speaker 3: 51:58

The thing that I get most excited about about, you know, as more people become aware of ONA and the power of it in terms of representing accuracy more than a manager's viewpoint will, is that it enables organizations to rightly recognize their talent for the difference that they make at work. You know whether that difference is positive or negative. They can rightly recognize it. And in a world where there's a lot of injustice and there's a lot of bias and there's a lot of, I mean, we're seeing, you know, some pretty crazy Supreme Court decisions that are going to lead to a very interesting future, to say the least, and probably the splitting of organizations into those that care about certain topics like diversity, equity, inclusion, and those that don't. In that new world, I can't think of anything more important than to solicit the feedback and opinions of the network of folks that you work with, so that people can be rightly recognized for the difference that they make at work.

Speaker 1: 53:00

Yeah, I mean, I think it's like with the fundamental understanding that recruiting employee empowerment, it's not like a segment of your business, it's the core of your business. And I think a lot of people get it wrong when they think about the idea of a people first culture. A lot of executives, oh, like you know, it's just about fancy perks and all this stuff that doesn't correlate or doesn't have a causal relationship to us achieving our North Star metrics, the compounding growth, whatever the board's looking at. But they don't like stop to think about for a second that, like literally nothing great has ever been built in the history of humanity without recruiting and empowering an incredible team of people. Like that's how important this is. And I think like that's like the mindset set of, like that's what it means to be people first is understanding that truth, that logic and then building from there to ensure that you have the best people in your organization. So I'm with you 100% on that.

Speaker 1: 54:02

Well, we're past time, we went over, so I think we got a jump. I don't know about you guys, but I got something to jump on. I wanted to say thank you so much for joining me today. It's been incredibly insightful. I'm really impressed with both of you. We've had over 100 episodes. You guys are incredibly bright. Welcome to come back on the show anytime, and as we start to scale and enter the new growth market, I will be coming to a customer. So I'm just very excited to work with you guys in the future.

Speaker 3: 54:30

Thank you, james. So much for the opportunity.

Speaker 2: 54:32

Yeah, thank you for having us For sure.

Speaker 1: 54:34

Alrighty, and for everybody tuning in. Thank you for joining us. We'll see you next time. Thanks for joining us. We'll see you next time.