Performance Management (Goals > KPIs; Effectiveness > Efficiency)

• Different from OKRs, having a strong performance management practice sends the right message to the team with respect to expectations & how it moves the needle at overall level. Given the absolute criticality of it, it still remains quite an afterthought, as firms generally start putting Performance Management in to formal practice, not until they are Pre-Series B or Series B in most of the cases. And the bus has gone past long back to be honest, cos having strong focus on PM right from start, also sets in the performance driven culture right from the start.
• Efforts > Results > Outcomes > Impacts. Initially, before hitting PMF, there are many uncertainties & blindspots that the team is operating in, & with an equal degree of experimentation, the metric of measure should be Efforts, & over a period of time, can shift to progressive dimensions (Results, Outcomes etc), basis the capability of the talent.
• Goals > KPIs, this is where most of the Performance Management practices get broken, leading PM practices to more a customary ritual, rather than a high value adding practice. The below table drives clear differentiation between KPIs & Goals, & high growth setups, solving meaningful problem statements, getting a Goal based PM practice is at the heart of getting to high performance mode & culture.
• IC goals would be based on Effectiveness, Quality & Productivity. People Management roles can have addition of mNPS score
• Measuring metrics which set right behaviors in system is key, to driving intended outcomes & setting right culture. For example, in one of my earlier, for IC roles in Engineering, a key metric of performance was Number of lines coded. At face value, this might just sound right, but the ramifications it can have over long term is huge. To gamify this metric, Engineers would have lengthy codes (as against clean, elegant, modular codes) & inevitably, the system was unintendingly (& unwittingly) rewarding everything else, apart from value creation. To drive home the wisdom, choosing better metrics which would instill right behaviors is the key & nothing better than PM practice aligning directly to moving the needle & value creation
• Performance Evaluation is envisaged on Quarterly/Semi Annual freq., with Annual Appraisal cycle. Ratings thresholds are kept on higher side to ensure higher contributions. For example, on a 5 rating scale, 5:Performance >= 125%, 4: 125%>Performance>=105%, 3: 105%>Performance>=90%, 2: 90%>Performance>=75%, 1: 75%>P 
• Performance for Non - People management roles = Goals Accomplishment/Effectiveness (70%) + Critical Behaviors alignment (30%) + Contribution (Discretionary Efforts)
• Performance for People management roles = Performance (70%) + Critical Behaviors for Growth (30%) + Additional Initiatives
• Anatomy of entire PM practice: Goal Setting, 1 on 1’s, Performance Evaluation, Capability Development would help us understand across 2 buckets: Performance (High, Medium, Low), Potential (based on Critical behaviors). Goals Accomplishment review to happen between Manager & Employee (Self Review + Manager Review), Review Discussion, Critical Behaviors ratings would happen with 2+1 peers/any colleague (of 2 are decided by employee & 1 is decided by manager), along with self & manager ratings. 
• It is worth noting that all the metrics chosen for Performance management, would eventually get gamified by the teams. And while that happens, one should keep re-visiting the base measures to ensure that it is directly leading to value creation (basically the intended consequences) & also the unintended consequences of it. Quite a many times, the unintended consequences can set in, leading the cultural anomalies, which ideally should be weeded out asap
• With initial OKR deployment, it’s important to build a first few sprints with slightly realistic KRs, overcoming them & creating smaller wins on regular basis, then progressing to moonshots over a period of time

Few KPIs to look out for:

• % of High Performers, Medium Performers, Low Performers (Goal based); % of High Potential, Medium Potential (Critical Behaviors based)
• Movement across buckets (especially, Medium to High Potential, High Performance)
• % of critical roles aligned to career paths, % of development paths alignment & progress on monthly basis
• Talent pipeline for middle management & leadership + % of succession planning for all critical roles

Sample goals for Engineering: