Talent Talks
7
min read
10 second summary
- OKRs are an effective goal setting practice to build an effective performance management system
- A performance management system should focus on uncovering strengths as well as weaknesses
- Written feedback constitutes an important part of performance management, which the leaders must guide the managers to undertake
- An effective goal management system should focus on clearly communicating the top priorities
- Having a contribution-driven rating scale over expectation-driven rating scale is important
- It is important to de-link compensation and review conversations
Continuing our focus on performance management, we recently had a discussion with the Chargebee team to learn what performance management practices they followed to build a $3Bn SaaS unicorn. In our 3rd episode of The Talent Talks, we were thrilled to be joined by Rajaraman Santhanam, Co-Founder & COO and Lavanya Gopinath, Director, Ops, Chargebee.
For those of you who aren’t aware of Chargebee’s name, it’s a financial services company that rose to unicorn status in record time. With 1300 employees and despite having a steady emphasis on high performance, Chargebee is known for its employee-centric people management practices.
Let’s get into the details of how Chargebee creates a high performance culture all year round and see what we can adopt to scale faster.
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Performance management system at Chargebee
What was the context when you designed your performance management system?
When we started in 2011, there were not a lot of startups and the biggest source of revenue was from Europe. Sitting in Chennai, India, the only way to acquire knowledge about selling to customers in Europe was by talking to people and learning. Thus, learning continuously and building a network to learn from became important, which overtime evolved into a culture of continuous learning. After 4-5 years, we decided to build the core values or tenets for Chargeebee, by gathering a lot of team members together and brainstorming on what values do they identify with Chargbee. Four core values came to the forefront, Curiosity, Customer Centricity, Empathy and Bias for Action.
Four core values at Chargebee — Curiosity, Customer Centricity, Empathy and Bias for Action
Eventually, these have become the basis for how we operate across all verticals, including our performance management system.
What are the constituents of the performance management system at Chargebee?
With performance being at the center of the performance management system, we look at it from a team and an individual perspective.
Components of team performance management system
- Adopted the OKR framework about 2 years ago, which became the big rock for team performance within the performance management system
- Each team has specific KPIs which add to their performance management
Components of individual performance management system
- Created our own evolution of the OKR framework, which we call Individual OKRs or IOKRs, which is still evolving
- IOKRs also bring in learning and development into setting goals at the individual level.
Process of our performance management system
- Annual performance rating, review conversations and a rating cycle
- Quarterly review conversations aligned to the quarterly goal setting cycle
- Bi-weekly one-on-one conversations, also focusing on review and feedback
Thus, formal performance review as a part of our performance management system is annual in nature, but is supported organically by continuous interventions.
Also Read: How to successfully run weekly, quarterly and annual OKR reviews
Philosophy of the performance management
- Focus on uncovering strengths to value team members for what they bring to the table and delegate work accordingly
- Focus on weaknesses to understand the gaps and facilitate hiring for the skills gap
- Strengths and weaknesses are uncovered by review and self reflection from team members on areas of non-clarity, knowledge sharing, etc.
Recognition for performance at Chargebee
- Focus on a culture of recognizing each other. Rolled out a program called Rewards by Bonusly which allows team members to celebrate those who help them become successful or achieve an accomplishment, i.e. celebrating help by others
- Decentralized recognition efforts with flexibility for teams to decide which are the best and the right practices for effective recognition that they are most convinced about
- Supported by other efforts like spot bonuses in the form of cash, eSOPs, etc.
Chargebee has decentralized recognition efforts with flexibility for teams to decide which are the best and the right practices for effective recognition that they are most convinced about
Also Read: How manager can help employees write a great self assessment
How can organizations drive a strengths based performance management culture?
We started by creating a culture of written feedback to identify strengths. Our focus towards strengths based performance management involves:
- Giving feedback in writing, be it bi-weekly, quarterly or annually which becomes a frame of reference and the next feedback comes on top of that which enables everyone to reflect on their progress every now and then
- Capturing 360 degree feedback in writing to identify behavioral patterns and to highlight strengths and areas of improvement
- Adopting the right communication frameworks to share the feedback so others are able to receive it openly
- Encouraging our team members to share feedback directly
- Being specific in feedback that others can relate to and absorb and form action items
- Getting in the habit of sharing feedback 1-o-1 and in real time
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Goal management with OKRs at Chargebee
What is the context behind the goal management system chosen by Chargebee?
We adopted the OKR framework as our goal management system about two years back. Our goal management system is based on the philosophy that we need to:
- Focus on fewer things, but go deep into the focus items
- Clearly communicate the top priorities for the organization
- Reinforce the top priorities among team members
For instance, last year we acquired a few companies and our goal for this year is to unleash the multi-product motion by learning as much as possible about those companies to increase revenue from direct selling, cross selling and upselling. For Chargebee, the goal management system is essentially about clearly communicating the goals.
How did you introduce and roll out OKRs at Chargebee?
Before adopting OKRs, teams used to set their own goals, which were not visible on a single dashboard and leaders used share goals, which was often conversational. However, in the growth phase, making the goals visible became really important to enable people to align and prioritize. Thus, we built the habit of setting goals quarterly and making them visible for everyone. This led to what we called the ‘Quarterly Commits’ and the idea was to keep them focused and visible to everybody.
In the growth phase, making the goals visible became really important to enable people to align and prioritize. Thus, we built the habit of setting goals quarterly and making them visible for everyone
We put these Quarterly Commits on sheets, which facilitated visibility, gentle nudges, checking other’s commits, getting an understanding of what others are doing and how one can add value to prioritize one's own commits. This set the stage for OKRs because they were simple, focused on big rocks with measurable outcomes. We started it as a pilot project for a few teams for a quarter and then finally rolled it out for the entire organization.
How do you apply OKRs for goal setting and performance management system?
Today, the OKRs exist at three levels and focus on setting and reviewing.
Setting OKRs
- Between october-november, there are a lot of conversations at the executive levels, focused on questions to craft the company OKRs. This is an annual exercise which is reviewed every quarter to ensure relevance. They are made visible to everyone by mid-december.
- This gives the directional impetus to create quarterly priorities and OKRs at the functional level. The focus is also on alignment between functions to facilitate cross collaborations. Thus, there is a sharing of functional OKRs at a quarterly level.
Reviewing OKRs
- Organizational level reviews to gauge OKR progress happens on a monthly basis.
- Within teams, it might be even more rigorous, which has been left for the teams to decide, depending upon what their key results are. Sometimes it makes sense to do it on a weekly basis, sometimes bi-weekly and sometimes monthly.
Furthermore, on a quarterly basis, the CEO goes and shares progress, thoughts on where we are, as well as what we need to correct and what can be done better with an open presentation with the entire organization. Using a specific OKR tool provided a hierarchical view to help us understand what maps to what.
On a quarterly basis, the CEO goes and shares progress, thoughts on where we are, as well as what we need to correct and what can be done better with an open presentation with the entire organization
How do organizational and team goals translate to individual goals at Chargebee?
It's a collaborative process. This also happens at the quarterly level.
- Once the team OKRs are set, the manager is able to give some level of visibility into the priority for the team. This enables the individuals to set their own development goals and their specific contribution goals to a team OKR.
- There is a specific conversation on the goal setting itself which works in tandem with the quarterly review and expectation setting cycle.
- There are inputs from the manager, but there is also an input from the individual which are captured in the IOKRs.
- Focus is on asking a lot of questions in order to take a key result and make it really quantifiable to augment clarity.
- We emphasize on the importance of building the habit. While creating a goal setting system is not an easy task, we focus on building perseverance to adhere to it and breaking out of the inertia to build this as a habit and organization.
- We have evolved into the place where people have started thinking about clearly articulated outcomes as OKRs.
- To avoid the confusion of KPIs or KRAs, we decided to evolve with IOKRs.
Without building a habit and knowledge about the OKRs, any efforts towards OKRs will not work out really well. Thus, it is important to invest time in the beginning to bring the knowledge level of OKRs up and build the habit for the first 2-3 quarters to break the inertia, post which stabilization and perseverance begins
Thus, OKRs start from the CEO and stop at the team level, while IOKRs are for all team members, individually. Building a habit and knowledge about the OKRs are extremely important and without handling these two, any efforts towards OKRs will not work out really well. Thus, it is important to invest time in the beginning to bring the knowledge level of OKRs up and build the habit for the first 2-3 quarters, post which stabilization begins.
Performance review and assessment at Chargebee
What is the frequency of performance assessment for the performance management system?
- At an organizational level, performance assessment as a part of the performance management system is a quarterly practice to capture performance reviews and notes into the HRMS system
- Some teams capture notes monthly which feed into the quarterly conversation, to make the process simpler
- The annual level conversation partly focuses on the performance that went by, but also is an opportunity to frame the opportunities for an individual in the upcoming year, along with goals
- The annual performance assessment is a two-part conversation where we also share the rating of how the individual has contributed to the organization
Also Read: How often should you conduct a performance review
How did you decide on the right rating scale?
We looked at the three-point scale, the five-point scale and questioned if we needed a point scale. Furthermore, there were questions whether ratings mattered at all. Then, we decided to apply them to our context and see what would be meaningful.
We transitioned performance rating from an understanding of meeting expectations to reflecting the contributions of an individual, vis-à-vis reflecting the expectations of the manager or the team.
That was the pivot, a contribution based rating:
- It is a four-point scale
- The two middle options are solid contributors who are really good at their job in the middle and strong contributors who probably take it up a notch and go beyond the contributions of that role. You can see their contributions visibly in other parts of the organization and other teams
- The outlier on one end of the spectrum are the exceptional contributors
- The other end of the spectrum has limited contributors who are newer and are trying to get their feet wet and trying to figure out how they can grow into a solid contributor
- The frame is to show people where they are now and maybe where they can feel help in order to perhaps contribute better
Where is this rating scale used?
Most rating scales focus on performance of the past, however, as a part of our performance management system, we believe that any appraisal or promotion is for what they will do in the future. Thus, our performance rating scale seeks to capture the philosophy of focusing on the future.
For instance, if someone has a bad performance in a quarter and if you're still excited about that person because they have continuously performed well, and believe that they are a strong contributor, you need to give them a rating that reflects that. Our rating scale brings this change into the conversation between the manager and the team member. For us, every performance review is a hiring decision.
For us, every performance review is a hiring decision
We also request the manager and team member to mutually align on the rating for the performance management system. We expect there is no ambiguity on the rating and the areas of improvement as part of the performance review.
Finally, the contributor rating plays an important role in awarding the compensation revision. The onus of this performance review for performance management system is put on the individuals instead of the managers so that the individuals take ownership of blocking a time, writing it down and ensuring that their manager also writes it down and then owns its own outcome for that.
Also read: 100+ self review comments and phrases for performance assessment
How do you de-link compensation and ratings for team members?
Compensation is a function of the market as well. Thus, if someone who is a solid contributor has some issues with compensation, we review it on a case to case basis. Furthermore, these two conversations, compensation and recency, happen at least with a gap of thirty days, to ensure there is no recency bias. The compensation is driven by a strong recommendation from the HR around the range and each team also has a budget which they can allocate as they see fit.
What principles should organizations follow while designing their performance management system?
Try and understand what sort of an organization you want to build i.e. what are you really looking for in your people or what is that thing that needs to be in your DNA
At Chargebee, the hunger to learn and grow is something that you can see is what we look for, and that is probably an identifiable trait that you can notice.
- Write down the traits you are looking for
- Keep your performance management system simple
- Articulate the why and share it with the team
- Keep iterating as you scale
Is there a bell curve which you follow?
No, there is not really a bell curve that we follow at Chargebee, yet. We personally don't believe in the bell curve but we need to see as we scale through our own journey and how it evolves in the next one or two years.
How do you train managers to deliver feedback effectively?
- Showing managers how to write feedback is an important exercise that organizations have to go through from the top
- Adopting the coaching methodology and then demand from managers to do it for their 1-o-1 team members
- Running and a lot of office hours leading up to the final date of the closing the performance review conversation, having the managers come to the HR team to walk them through some of the samples written down and how they could use the framework
- Rolling out a proper manager program focused only on effectively giving written feedback
Wrapping up
To conclude, it is clear that effective goal setting with OKRs, performance review and written feedback collectively contribute to a robust performance management program. It is important to have a clear vision in mind when designing a performance management system, both on what you seek to achieve and the DNA of the organization you're trying to build. Finally, it is important to keep iterating on the go, to adapt to new realities and dynamic priorities
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