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Atlassian, a 10-year-old Australian company that makes project management tools for software developers, adopted a policy of transparency from the outset. One of its slogans is “Open company, no bullshit”. Customers are even encouraged to provide direct feedback on Atlassian products on the company’s website for anyone to see.
In addition, employees are encouraged to explore better ways of working at quarterly innovation days.
Atlassian has grown quickly and employs 600 people on three continents.
In software, the biggest challenge is finding and retaining the best people. As head of human resources, Joris Luijke’s task is to manage this process in a fluid, highly competitive labour market.
In 2010, it became clear to him that the company’s performance reviews were poor. Atlassian had adopted what was regarded as best practice in the industry: twice a year, employees reviewed themselves and their peers. Managers would review their teams and determine their final performance rating on a five-point scale that determined their bonus.
But Mr Luijke found the process increased anxiety, demotivated staff and did not help high performers to achieve better results.
He consulted peers at other high-tech software companies, including several in Silicon Valley. They agreed on the nature of the problem and that their own performance review systems were no better. If he was going to improve the model, he would have to create one himself.
What happened next
Mr Luijke shared his problem with the rest of the world. He posted a blog, saying that the company was undertaking a “thorough, public trial” of an alternative to the traditional performance review: “Let us be your guinea pig! We’ll blog the results of our new performance review model for everyone to see.” It was soon being discussed on social media and blogs.
After a six-month period of internal and external dialogue with a varied audience, including human resources professionals, the wider business community, management writers and journalists, Mr Luijke homed in on a solution. Now all he needed was the software to run it.
The new ideas had never been implemented, so he challenged the start-up software community to develop an application based on them.
Small-Improvements, based in Germany, eventually produced the best tool, which is now used by many other companies, including Opera Software, ModCloth and Quicksilver.
The key features
First, Atlassian replaced individual performance bonuses with a salary hike, stock options and an organisational bonus.
Second, it got rid of the ratings system – staff were constantly challenging “Why am I a four, not a five?” – and replaced it with a graphical plot on which one axis measures how often staff have achieved outstanding performance (never to always), while the other measures how often they have stretched themselves by the same gauge.
Finally, it moved to short monthly check-ins, each focusing on a different aspect of performance, rather than one big session every six months.
“Atlassian’s staff engagement ratings are [now] 87 per cent as measured by Hewitt HR Consulting and staff turnover is far below industry average,” Mr Luijke says.
The lessons. Atlassian’s performance review works much better but the deeper point is that opening up or crowdsourcing management processes for discussion really works.
Crowdsourcing has many benefits: it encourages fresh thinking, often from people you would not otherwise ask; it allows people to build on each other’s ideas; and it helps to encourage buy-in among staff to a proposed solution. On the last point, Mr Luijke was careful to ensure colleagues had their say. Even if a new system is not perfect, at least everyone knows they had a hand in designing it.
At the same time, however, there is an art to asking the right questions and it requires hard work to monitor the process and shape the outcomes.
The writer is a professor of strategy and entrepreneurship at London Business School
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