I was thinking about this question recently:
http://answers.onstartups.com/questions/4094/advice-resources-on-performance-reviews-for-employees
I also enjoy this article: http://www.newyorker.com/reporting/2009/05/11/090511fa_fact_gladwell?currentPage=all
I will also be referring a bit to Peter Senge's five disciplines: http://www.infed.org/thinkers/senge.htm
Basically, as startups we are David, and we should be preparing to fight against Goliath. If you are in a field that there is no Goliath I expect that that will be a warning sign, unless you are so cutting edge that others are all behind you.
So, my desire is to create my business as a learning organization, which is defined thusly:
…organizations where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to see the whole together.
But, I don't see how performance reviews would fit into this model, and that got me to thinking about how startups could break various rules that most companies follow, and see if there is a better way to function, even as the company grows larger. Performance is just one rule, that people should be measured in some way, just as a company is often evaluated based on it's stock price, or a startup by how much it's evaluation has increased in each round of funding.
So, what would be the negative impact if I ever decide to try for VC funding if my business structure is not a traditional one, but, based on the agile way of thinking (which I believe was heavily influenced by Deming) flexible to the needs of the business and all the stakeholders, as a learning organization should be, IMO.
To me this is the best way for David to win the battle, not by following the rules that were made by Goliath, and that favors the incumbents, but to change the rules, but VCs I expect expect the rules of Goliath to be the best approach, and may look down on someone that wants to challenge companies in the market as well as in how they are structured/ran.
I was thinking about this more, but when I asked the question here: http://answers.onstartups.com/questions/4241/challenging-the-traditional-business-rules-is-it-bad-if-planning-on-trying-for-v, I didn't want to try to explain some other foreign concepts.
There is a concept, Kaizen, http://www.valuebasedmanagement.net/methods_kaizen.html, that I have found interesting, and as part of being extremely agile this would be important.
For example, if there is a business opportunity that a startup is not seeing, then an employee should be able to suggest, and have it evaluated, as to improvements. In software development this is an important part to the agile methodology. If only the architects and managers can help change the process then agility is only being simulated.
So, the challenge is to design a company that can be very agile, and embodies the concepts of Deming, Senge, as Kaizen is just an implementation of some of their ideas, while not making it disfavorable to possible venture capitalists, or investors.
