Why I Stopped Doing Performance Reviews on Calendar Quarter

What does a manager write in the seventh review of the same week? For four years we ran performance reviews on calendar quarter, four times a year, and every manager wrote every direct report's review in the same two-week window. Say the operations manager has 8 direct reports. The first two reviews were specific. By the sixth, the language had stiffened, the examples had thinned, and the rating drifted toward whatever she'd given that person last quarter. Week-one reviews were better than week-two reviews, and everyone could tell which was which.

In a small company, that drift decides pay. Say the company has 30 people, no HR team, and those 8 people average $55,000, so the manager's team costs $440,000 a year in salary, and the owner sets a 3% raise pool: $13,200. A rushed cycle hands everyone the same rating, and the same rating means the same raise: in that scenario, $1,650 each. The person carrying the team and the person missing deadlines get identical money. In that scenario, a careful review could have given the strong one 6%, or $3,300, and funded it by giving the one missing deadlines nothing, inside the same $13,200 pool. Instead the person the owner can least afford to lose gets $1,650 a year less than her work earned in that pool, and she's the one a competitor will call. The review that should have opened a performance plan for the second one says "solid quarter." Six months later, when the manager wants to act, there's nothing on paper to act on.

That's the outcome to watch for. When everyone passes, the review failed, and the compressed window is what makes everyone pass.

So we moved each person's review to the month they were hired. One review a year per person, in their anniversary month. The operations manager with 8 reports now writes, on average, two a quarter. The reviews got longer and more specific, and the conversation after each one went better, because she wasn't writing seven others that week.

Calendar reviews persist because they're tidy for whoever runs payroll. Small companies don't have an HR team running cycles. They have an owner who approves raises and a bookkeeper who enters them. One window means one batch of changes in Gusto and one look at the whole team's raises side by side. Staggering breaks both. Raises land in twelve different months, and the owner can lose track of how much of the pool is left.

The repair for that is one sheet and one decision, not a system. In January the owner sets the year's raise pool. Every employee goes in a Google Sheets tab with their anniversary month, current pay and the raise approved so far. Each month the manager brings that month's reviews, the owner approves each raise against what's left of the pool, and the bookkeeper enters it in payroll before the next run. The owner still sees everyone side by side. That's the job HR would do at a bigger company, done by the person who signs the payroll.

The switch year is awkward. Each person gets one shorter bridge review to move them onto their anniversary month, and for a while the team is on different schedules. By year two the cadence runs itself. Most small companies stay on the calendar because it already works on paper, and the cost of staying shows up a quarter at a time, in the raises decided by whichever reviews got written last.