The importance of annual founder performance reviews

One of the best ways to set up a founder, and startup for growth and success is to provide him/her with annual performance reviews that detail how they are doing their job. In a fast-paced, young startup, this responsibility falls upon the board or key investors.

A review well conducted offers significant value to the founder. It can help highlight the strengths of the founder providing them validation, and the weaknesses that they should be working on providing them course correction opportunities. At the end of the day, good performance is doing more of what you do well, and doing less of what you don’t do well – and this exercise is exactly meant to reinforce the same.

Why is the annual founder performance review essential?

a) Alignment of interest

Periodic resetting of strategy, and reviewing it helps the founders and investors agree on the short & long term strategy of the company. At the end of the day, founders and investors need to be on the same page, if they want to grow the business

b) Better communication

Both founders and investors are left unsatisfied and frustrated at times due to lack of communication or effort from the other party. By coming together periodically, improving the quality of communication, you can set yourself up for better outcomes

c) Founder development

Validating the positives, and outlining the negatives helps a founder understand their own performance. This helps them focus on bettering themselves

What should these performance reviews focus on?

a) Strategy of the company

b) Ability to build the team & lead the company

c) Financial performance

What is our ideal performance review process?

a) At the end of the year, the founder states objectives achieved during the year, does a self evaluation, and summarizes key learnings during the year

b) The founder asks other founders, investors, and direct reports to review the document, and share feedback, agreements & disagreements

c) The founder sets up a 60 min call with other founders, investors and direct reports to get a detailed opinion, agree/disagree on the self evaluation, feedback. This call should be conducted by lead investor or chair of the board

d) Post the call, the founder should recreate the document taking in all the feedback from the board, co-founders, direct reports, and share call notes along with the revised document

e) Have a one-on-one conversation with lead investor to go over the evaluation process, and report. This is the time to voice opinions, seek inputs on key points discussed

f) Finally, the founder should present the results to the entire board at the end of year board meeting

Closing comments

Now you may ask, does an early stage company need founder performance reviews? The question is why not? All founders irrespective of stage of the company, benefit from constructive and actionable feedback. Yes, for early stage companies, you can skip the formality of the process and make it more informal – but setting up processes early on doesn’t hurt. It reinforces the systems and values of the company. Do not skip important processes just because a company is young!

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