How employers are making performance review data actionable

For decades, performance reviews have been a necessary evil for employers — necessary because they are still the basis for most compensation and promotion decisions; evil because they are time consuming and subjective, often based on a single manager's whims.

But a new generation of HR pros are weaving data into the performance review process, seeking to make reviews actionable.

An example is Joe Bast, VP of people & operations at New York City startup Thoropass. Bast, who holds a Ph.D. in industrial/organizational psychology, was keen to go beyond the usual performance review process at Thoropass, instead following an approach grounded in Organizational Network Analysis (ONA). ONA is based on the theory that people now work in networks, rather than in fixed hierarchies. 

Strict hierarchical reviews may have made sense in the days of assembly lines, when employees worked alone or maybe collaborated only with the person beside them. But they don't make sense for today's knowledge workers. An engineer, for instance, might collaborate with product managers and sales and marketing teams. A finance manager interacts regularly with people in many other departments as they work together on budgets and spending. 

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ONA assists employers in collecting feedback not just from a person's direct manager, but also from others in the company with whom they work regularly. Each quarter, Thoropass runs a survey of its entire employee base, asking questions such as, "Who do you go to for help and advice?" and "Who at Thoropass energizes you?" The answers help Thoropass identify its top performers, its top influencers, and those who might be struggling.

In 2022, during the Great Resignation, Thoropass wanted to focus on identifying its top performers so that it could retain them. ONA data helped the company identify 27 must-keep employees. Bast and the rest of the Thoropass executive team then did in-person interviews with each of those people, asking for their input on the business, brainstorming on how best to move the organization forward, and discussing the future of the business.

As a result, during a period when most companies were losing 30-40% of their workforces, Thoropass had less than 10% turnover. In addition, the company retained 100% of its list of top performers.  

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People are typically the top expense for a tech company like Thoropass. To put Thoropass's retention accomplishment into perspective, Gallup estimates that replacing a top performer in the U.S. costs 1.5 to 2 times their annual salary. This includes hidden costs such as recruiting and training. Keeping those 27 people saved Thoropass millions of dollars, but more importantly preserved a core, valuable piece of culture and influence, one that is critical to the company's success. "Replacing a top performer is of course doable, but difficult — working to retain one is a better investment," says Bast. "This project showed our executive team the power of performance review data." Bast and team are currently working on using review data in other important ways, including measuring and improving DEI.

Another good example comes from Alfred, a tech-enabled, resident-first management platform and home management app for renters. Its founders are big on data, and always looking for ways to leverage data to make better business decisions. In 2022, the company embarked on a project to better leverage data in its People group — specifically for performance reviews. Julia Psitos, VP, people & talent for Alfred, led an effort to adopt ONA as a process.

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Now, instead of facilitating semi-annual reviews written by managers, Alfred surveys its entire employee base (over 100 people) each quarter, asking questions similar to the ones used by Thoropass. Alfred has seen a 100% participation rate and is leveraging the data to discover high performers who aren't necessarily self-promoters. "Sometimes the loudest voice in the room gets all the attention," says Psitos. "But there are others who are strong influencers and performers but not knocking down the door." ONA helped Alfred discover one high performer who was a quiet individual contributor — the flip side of quiet quitting. "We might not have recognized her outsized impact without Confirm data," Psitos says. 

Leaders like Bast and Psitos are demonstrating how core and strategic HR is to a growing business, and the impact HR can make on a company's success. Based on my discussions with dozens of senior HR pros in recent months, I'm convinced we'll see much more of this in 2024.