Building high-performance teams

Hey there,

For all the 6 years of building Flexiple, I have never thought of having a rating system for employees. I just felt it created an unnecessarily stressful environment and might also lead to unhealthy competition.

But, my view on that has changed.

So today I want to share my thoughts on this. I believe this has helped us improve our team-building process. I am quite positive it will help you too.

Is a rating scale needed?

Firstly, when our team was small, things mostly seemed homogenous and hence ratings un-useful. However, as our team size has grown, we have people with different levels of passion and capabilities.

So, without a clear rating scale often everyone is nurtured and rewarded similarly. This is unfair to the top performers. While you might believe that even without a rating system you will be able to ensure top performers are treated well, on a day-to-day level it is tough to maintain that.

Further, the rating scale serves as a constant reminder of the expectations you should have of a particular person. Since the rating is given periodically, you are still aligned to not react to the daily ups & downs a person might have. You naturally give them space to deliver success, rather than benchmarking it every minute of every day.

Finally, from an employee perspective, it gives a lot of clarity. With a clear label, you ensure there is nothing lost in translation. Top performers know how much you value them. Poor performers know that they need to improve and any consequence is not a surprise to them.

Here’s how our rating scale looks

OK, so our rating scale looks like: E, M+, M, M- and NF. This is something I borrowed from my time at J.P. Morgan. It has enough levels but not too many such that it becomes painful to manage. So basically:

E = Excellent
M+ = Exceeds expectations
M = Meets expectations
M- = Below expectations
NF = Not a fit

To ensure the process doesn’t become super subjective, we evaluate each person on three parameters: Cultural fit, Reliability, and Capability. Each parameter gets a score from 1 to 3 and based on the score on these parameters, a person is assigned a rating.

Let me explain the process a bit more.

A) Culture

This is broadly a non-negotiable. No matter how skillful a person might be, a person who isn’t a cultural fit poses more harm than good.

Therefore, anyone who scores a 1, is straight out an “NF”.

A person who scores a 2, needs to be told to improve to 3 over a designated period (say 3 months). During that phase, if the sum of their scores on Reliability and Capability is less than or equal to 2, then again they are given an “NF”.

If the sum of the score is greater than 2, then they get an “M-“. They remain at M- till their culture score gets to 3.

B) Reliability & Capability

Almost all of your team should score 3 on Culture. So, for them, the final rating is decided based on their score on Reliability and Capability.

We again do this based on the sum of the score of Reliability (R) and Capability (C).

Sum = 2, Rating => NF. Happens for (R, C) => (1, 1)
Sum = 3, Rating => M-. Happens for (R, C) => (1, 2) or (2, 1)
Sum = 4, Rating => M. Happens for (R, C) => (1, 3), (2, 2), (3, 1)
Sum = 5, Rating => M+. Happens for (R, C) => (2, 3), (3, 2)
Sum = 6, Rating => E. Happens for (R, C) => (3, 3)

Finally, what’s the impact of rating?

“E”

They are your gods and there won’t be too many of them. They are usually self-motivated. They just need to be given the best environment possible to keep performing at their best. Your goal is to ensure they know how much you value them.

“M+”

They are your heavy lifters who typically get negatively affected without a rating system because you don’t give them the rewards they deserve.

You should quickly assess if a person at this level even strives to go to “E”. If they don’t, you shouldn’t pressure them to do so. You just need to keep them motivated enough to continue at this level and ensure that they know that they are very important to the company.

“M”

This is a difficult level because people possibly have the potential to be better, but are just not consistently good. Your goal is to spell this out to them and get them an M+ rating. Be specific about what you think they can improve on: “Reliability” or “Capability”.

“M-”

They are the group who are a drain on your company. Not obvious enough that you realize that you should part ways immediately, but enough that long-term they will have a negative impact.

You need to inform them to get to a minimum of “M” in a designated period, or else call it quits. It is just the best plan for both parties.

“NF”

Part ways with them immediately. Just no point for either party to put in the effort to make this work.

Best,
Karthik

P.S. Please consider forwarding this to a friend! It would really help my two startups.

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