It's review season again at Zillow Group -- a time when employees discuss performance with their managers and outline goals for the next year. While there's a trend in some circles toward doing away with annual reviews, I think they're incredibly important. They're a forcing function for honest conversations, and they can strengthen your company culture and values. Annual reviews, at their best, should empower employees and set them up for long-term success.

Our annual reviews are a little different than other companies'. At Zillow Group, half of an employee's review is based on her demonstration of our core values throughout the year. The strength of the process is that how employees do their jobs is just as important to their overall performance as the results they deliver.

This is incredibly important to our company culture for several reasons.

First, tying core values to performance reviews sends a strong signal to employees. As leaders, we measure and reward what's important, and quantifying how employees demonstrate our values shows that values matter. Core values shouldn't just exist on a wall or a slide during all-hands meetings -- they should drive everyday interactions and decisions. And when things are measured and tied to compensation, people tend to take them seriously.

Second, it reframes what a top performer looks like. A salesperson who crushes her numbers that quarter but doesn't do the right thing isn't a high performer at Zillow Group. In fact, there's no place for someone like that at our company. One employee's overachievement is never worth the broader impact that that person causes on the team. Plus, because top performers live our core values, they model for other employees that success isn't just about the individual. It's about how you lead and empower others.

Third, giving a score to core values is a great conversation starter between employees and managers. At Zillow Group, one of our core values is "ZG Is a Team Sport," which we define as, "People matter. Recognize that everyone has a role and together we are stronger and can accomplish more than we ever could as individuals." Because this core value is part of our reviews, there's a natural opportunity for managers to coach their directs on cross-team collaboration and empowering others.

But integrating core values into the review process is complicated. It's simple to evaluate whether someone met her quotas. It's much trickier to determine whether she acted in the spirit of "ZG Is a Team Sport." And evaluating one's adherence to more abstract core values like "Own It" can be even harder.

It starts with making sure your company core values are bespoke to your organization. You can't just Google "company core values," find ones you like and roll them out at your company. They have to be organic to your culture and your mission.

They also need to be regularly revisited as your company grows and scales. Core values are such an important part of how we guide employees that we regularly review them and make changes to ensure they represent our culture and our mission -- and where we're headed as a company. And before review season even starts, it's critical to screen candidates for core values, so there's never a surprise once they're in the door.

You also have to rely heavily on peer feedback and, if the employee is a people manager, feedback from their reports. Because many of our values relate to how employees interact with others, peer feedback is super important. My observations aren't enough; I need a 360-degree view of how they interact with others. You also need a clear rubric to help others -- and yourself -- differentiate between a 4 and a 5, for example, without letting bias creep in.

Lastly, the review process itself should reflect the values it measures. For example, antiquated processes like stack ranking force employees to rate their peers on a curve, with those at the bottom placed on performance improvement plans -- or worse. This puts employees at odds with each other and penalizes collaboration; it's the opposite of "ZG Is a Team Sport."

While I'd love to throw out something as bureaucratic, expensive and time consuming as annual reviews, these conversations just don't happen otherwise. It's a forcing function to discuss performance and values that should be done along with -- not in place of -- ongoing feedback loops.

Mission-driven companies whose employees embody their core values are set up for long-term success. When companies stray from their values, the consequences can be huge. But to cement the importance of core values in your organization, you have to tie them to something meaningful -- performance and compensation -- and provide ongoing feedback to help employees continue to grow.

Published on: Feb 19, 2019
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