#95: Performance management: The Revolut way

Speaker A: Andrei, welcome to the Stepseto podcast. Thank you for making the time.

Speaker B: Thank you very much for having me.

Speaker A: You lead the people product department at Revolut, which is a, uh, known organization in the financial technology sector. The way I understand it, and please correct me if I'm wrong, Revolut People is somehow the result of Revolut building their own internal human resource management system which is now on the market for other companies to leverage to use. And one of the distinguishing factors of Revolut People is this focus on performance. Performance. Can you tell me a little bit more about Revolut People and why is it so performance focused?

Speaker B: Yeah, we started our journey, uh, building Revolut People about seven years ago. I think it started as an initiative to create a more meritocratic environment inside Revolut. By that I mean an environment where people who work hard and have a high impact on the company get rewarded in an equivalent way. So it started with doing performance management because that's where we felt like the biggest value was in. So Revolut People in essence is a, uh, talent management solution focused on performance management. But we also do recruitment and HR as we feel like uh, performance management is an end to end exercise. So it doesn't only involve doing uh, 360 reviews once a year and that's it. It is more of a continuous process. So we started about six, seven years ago and since then we've built performance management, we've built end to end recruitment management, HR management, and we transformed the tool into an all in one, uh, talent management solution focused on performance. As I said earlier, I had a

Speaker A: good look at the, at the playbook and I found it fascinating. There is um, a very clear scientific approach to performance management. And in a way it looks like a very advanced and I would say fair take on performance management. Which leads me to one of the main questions maybe in these conversations that is, you touched on meritocracy, right? Which is a big, big pillar of uh, I guess the behind the scenes, so to speak, of building this tool. When um, evaluating performance, it is often common that uh, bias creeps in. And because of this scientific approach, I wonder, does this help you get rid of bias completely or is there a way to completely eliminate bias, you think?

Speaker B: Well that's a common question that we get. So we think that it's unlikely you will be able to remove bias 100%. Uh, it's in the human nature that there will be some maybe subjectivity in there. The idea is not to completely remove it. I um, think the biggest value is to reduce it substantially. I think that's where the biggest value is. I think the biggest impact on our side to removing subjectivity was making sure that people's goals are measured with hard data. So removing subjective decisions, like for example, is this like particular deliverable done or not? Or is, is it still in progress? Or is it, is it done well or is it not done well? So we try to remove the human decision from, um, you know, that, that part from the assessment, more or less. But you know, you cannot completely remove this, uh, this kind of things. So the human still takes the decision. There can still be bias, but we make sure that the data indicating performance, the hard data is always visible. So if someone deviates from the recommendation of the system, just to be clear, so the system does recommend an objective outcome based on the results. And then a human takes the decision. We never think that, we never think that we will be in a situation where the system will just take the decision. Without human input. That's never going to happen. In that situation, the human still decides. But there is hard data, uh, to back up the decision. Or if the human deviates from the decision, it can be reconciled at company level. So someone higher up can see the deviation and can ask, okay, what is going on here? Maybe there's some context I don't have. So that's kind of how it works. So rather than completely removing subjectivity, it's, uh, if you want, the system exposes the hard data necessary for taking the correct decision. So it makes things more transparent, more or less. And that, that helps a lot with, um, you know, just creating a more meritocratic environment.

Speaker A: There's one thing that I found particularly helpful and clear when looking at the playbook, and it's these, um, three core pillars of the performance framework. You have skills, you have deliverables, and you have culture. May I ask you, how did you come up with these three pillars? Or what was the thought process behind it? Why did you eventually narrow it down to skills with deliverables and culture?

Speaker B: Yeah, so, um, when we started, initially, the first version was much simpler. It was just based on values like how people behaved and what kind of things they did. But we realized that the most important thing for, um, a company is the percentage of strong performers that you have. Right? So the, it's called the talent density. The higher your talent densities, usually the better your company will, will be in terms of results. So we started with measuring values. But of course, the company results are numbers in general. They are like either revenue, number of users, and so on and so on. So the first thing was, okay, how do we make sure that we quantify who has had the most impact in terms of the goals? The company goals. So we decided very early on that to be a strong performer in the company, you need to have goals that are tied into the company goals, and you have achieved those goals and you had the m. Meaningful impact on the company. The goals pillar, pillar number one came from the idea of making sure that people work on meaningful stuff. Meaningful stuff for the company, like that has impact on the company results. They achieve them, and they are ambitious enough so they push the company forward. And if they do achieve them, they should be rewarded in an equivalent manner. The pillar number two came as a result of pillar number one in the sense of, once you know what goals need to be achieved, how do you know who should work on those goals? So that was what pillar number two answers, what kind of skills are required for achieving this goal? And which individuals working together can, uh, can achieve this goal? Pillar number two also answers the question of, you know, if someone should be promoted, if they are above their level or meeting the expectations or below in terms of the skills. And then pillar number three, as I mentioned, is about values. So pillar number three was actually the first one that. The first performance review that we did only had values. It's about behaviors. So in essence, you can have a situation where someone has the right skills, they work on the right goals, but they don't achieve the goals. So you have to answer, okay, you have to ask yourself, why could that be? I mean, it could be because you have a misalignment in terms of values. Maybe someone isn't working hard, is not dedicated, does not agree with the way things are done, and so on. So alignment in terms of behaviors, culture in general, is essential as well for a strong performer. Because if you work in a group of people where you don't fit, you don't feel like you're. You agree with how things are done and so on, you're naturally going to deviate from the group. So you're going to end up splitting the group. And that's kind of why it's essential. Because performance, like business in general, is a, is a team game. It's like football. So it's, uh, not about the individual. It's about the team working to achieve certain goals. So these three pillars, in essence quantify if someone is a strong, uh, performer or not. Based on this, usually we decide the outcomes. If someone gets bonus, if they, how much bonus they get, if they get promoted, ah and so on.

Speaker A: That makes a lot of sense. I'm curious about the skill section in the handbook. The head of performance is in a way also described as someone that doesn't fully delegate things. But it's in a way also hands on, understands in a way the operational part. Can I ask you, in your opinion, what you think is a fundamental skill to be a successful head of performance in an organization these days?

Speaker B: I think of course working with people is essential. So someone who has good empathy, good communication skills, good people skills in general, like they can understand how people feel, how they react to certain things and so on. I think that's essential because if you think about it, nobody likes to be tested, right? So it comes from school, you know, from life in general. People don't always react well to being tested. Of course some people love it, but most people don't. So in reality there needs to be some understanding of human nature in general. Otherwise you cannot be a good head of head of performance because if you uh, just fall into the trap of I'm just going to do what people say they want, you're going to end up with a bunch of happy but underperformant people. Right? So in essence there needs to be a balance. You can, you can go the other way as well and not listen to people and you need to be able to, to know which feedback to, to filter, which things to include in your philosophy, which things to basically like identify as. Hey, this is not really constructive stuff, it's just people being defensive. So in essence understanding like human, human nature is essential as the first skill. So people skills are essential, problem solving, very important. But others skills like system design. Because at the point depending of what level of performance manager is like if it's a performance manager for a startup or a big company at the point doing performance management manually is not going to be possible anymore. So it requires some sort of system building and so on. So I think these are some of the skills. Of course there are a lot of things um, we can include there. But yeah, understanding human nature in general is um, essential. So if you want someone who is parts, uh, has some uh, traits of a psychologist, uh, or something like that, psychology being ah, very, very important in this kind of things.

Speaker A: Interesting. Let me if that's okay, discuss the same topic but from a different angle. So I'm curious about the way you see the rest of the market and the market is a very broad concept. We could be talking about the Dach market, Europe or whatnot. Is it common to Adopt a similar or such a uh, scientific based approach to performance for many companies. Or do you think that the market in a way is still behind when it comes to evaluating performance?

Speaker B: I think the market is still behind the um, market approach. If we talk about, let's say the process part, so how do people do performance management? And then we talk about the um, software part, you know, like the tools that actually enable this. There are two aspects here. I think the most important one is the process obviously because that dictates kind of the software trends as well. So in essence what you see on the market, especially in Europe, is that people don't really take serious performance management. It's kind of a process that happens once a year and um, it's not always done in the right way. Again it's very subjective. So people just go on and they voice their opinions about someone kind of. That's the most common structure. There are some companies that don't do it, but realistically most companies do some form of uh, performance review, but it's very, very simplistic and is done usually once a year or twice a year. And this is kind of the most common trend. But what is happening is that uh, due to the increased competivity from the US and Chinese market and so on, I think Europe has started to move also towards a more aggressive performance management process where people are reviewed more often and um, outcomes are valued over opinions and so on. So we see a positive trend in that aspect. And there is a lot of interest in what we're doing, uh, when it comes to the philosophy, but also to the system that we're building. And I think the trends in the European market have been kind of reflected in the software part as well. So if you look at the software market when it comes to performance management systems, most of them are US based. So and it's not coincidental, it's just because the demand in Europe has been weak over the years. But uh, with Europe, um, kind of waking up, we're starting to see a trend there, but it's still difficult primarily due to the legislation in Europe as you, as you probably know. So the laws in Europe are very like protective for employees in general. So performance management is kind of seen as uh, being against those. Although we don't see it like that in ssr. We see performance management is an opportunity for people to actually showcase their work and get rewarded fairly, as we said. So you know, that's why we see a big salary gap as well between the US market and Europe is primarily because of this that being a more competitive market where employees are ah, are able to understand the value of their work much faster and move. It's a more dynamic market. While in Europe there is a tendency of valuing stability over performance, uh, and over financial rewards and so on. Although again as I said, the trends are shifting. So Europe is absorbing more and more from that uh, Silicon Valley if you want Playbook. Right. And that's kind of what we did. We combined let's say Silicon Valley mentality for the European market. And that's kind of where the trends are going on the process side and on the software side. Yes, there are more and more companies getting frustrated that the software is designed for storing data and not for enabling this kind of processes. But discussed about.

Speaker A: There's one specific part I want to maybe drill down a little bit more because I think it's super important. You mentioned that um, sometimes these conversations around performance are seen under a negative light. But uh, the way I understand it is that the uh, big part of what you do with revolut people is to remove this ambiguity in a way chaos related to performance management, offer more clarity and eventually we're, let's say closing the loop with what we were discussing at the beginning. Foster a more meritocratic, fair environment. What do you think it does to an organization to have a tool like this versus letting managers, leaders speak their own or let's say give too much weight to their own opinions when it comes to performance management. What kind of gap does that create and what does it do to the people eventually in the organization?

Speaker B: I can tell you as an example, like when we rolled the, this, this system out inside the company for the first time. Naturally you would expect managers to be excited about having a tool that shows them who are the, the strongest players and so on. But initially employees were felt like not great about the fact that they would be assessed. And it's going to be. Initially it was twice a year, now it's four times a year, so it's quarterly. And um, initially people felt like uh, okay, I don't want to be like under the microscope and people looking at what I do and so on. But then after we did the first performance review and we started having outcomes like okay, this person is underpaid for what they do, this person needs to be promoted, this person needs to be moved in a better place. And it kind of became like um, I don't know how to put it. People started loving it, you know, so the employees who initially took it as a threat, they um, they started Loving it. And they started engaging more because they felt like, oh, my work is seen. So. So of course there's always, there's always going to be someone who's going to feel exposed. Right. Oh, they caught me, I wasn't working on what I should have and so on. But the vast majority of employees like perceived this very positively and they loved it. And um, people leaving Revolut also say that they miss the um, the meritocratic aspect of the company. The fact that you knew what it would take to get promoted, you had full visibility in what X is doing and how they are achieving and how you're doing and what you should do better and so on. And having these cycles like faster also allows people to improve faster, basically. So people had faster growth trajectories in their career. So what we see with companies implementing this tool is the same thing, if you want. Yes. It's a system designed for management and for a CEO to build their dream team. Think about football manager, right? Like you put players together and you build the best team possible and it absolutely skyrockets the results in terms of your company's results. Right. So it's great for CEOs, for managers it's great. It achieves the job, it pushes the company forward. But it's great for employees as well, especially for the ones who are like productive and they do their job and. Yeah. So overall we see the same results when we implement it in other companies. Now of course again results are mixed. Depends on how close the culture is, how on board the management is with the philosophy and so on. Because if they don't implement the philosophy, the rest is fine. There is also the big kind of scary and controversial thing in the room that people don't usually talk about that much, which is exiting people. And I feel like these systems usually get a negative, kind of like a negative opinion because uh, okay, what if this system says I don't do well and then I end up getting fired and so on. That like doesn't really happen like that. Like exits don't happen that often. Like again, exits are a very, very small percentage of the, the total outcome of the over performance review. But yes, they are part of the process. Naturally you cannot build a dream team without having to exit some people. That's, that's normal. But rather than seeing it as an exit, what we see it as is um, a mismatch. And it can be a mismatch of values, a mismatch of skills or a mismatch of goals. So when someone doesn't Work on the right goals. It's easy. You give them the right goals, you move them in a place where they can work on the right goals. They don't have the right skills to work on a particular goal. Again, you put someone else, you put them in a team where they can find the complementary skills. Is there a mismatch of values? Well, that one is a bit harder to correct. So in essence, exit anyway is the last, like last resort and in essence how we see this thing. That's why I was telling you about the skills and the competencies and uh, so on. There is always something out there that is a perfect fit for someone, right? But the thing is, a company is limited, so you might not be in that company and that's okay, right? So even the exit process is more like, okay, the person will find the right thing for them, but somewhere else. So what we see is that it's actually, you know, and maybe you've heard this and it's a cliche and people think like, okay, it doesn't sound like that's the case. But what happens is sometimes you end up exiting people who are in their comfort zone, but they are stuck in a place or they are not doing well and they find a better job and they do 10 times better than they did before just because it was the wrong fit for them. So in essence, this is what I feel like should be a more honest discussion, especially in the European markets. Right? Uh, because we have some laws in some countries where this is seen as a should, uh, never happen, it should never exit people. But that's not how it works. Like people should be redistributed in the work market where they fit best. And this is in my opinion, the biggest. I wouldn't call it tragedy, but I'll call it the biggest, the biggest problem, right? The biggest issue in the European market when it comes to labor, uh, law. The fact that it's so difficult to go through this process, right? And people can get stuck in a, uh, in a position where they're not doing well when just across the room there could be something that could take their career 10x but they just don't. Because of how these processes are designed. It reduces the flexibility to, to move around. And uh, that's killing productivity for companies and it's killing people's careers by keeping them stuck in their comfort zone for too long in, in bad jobs.

Speaker A: Andre, I, I have to say I really appreciate you obviously shedding some light on what uh, Revolut people does, but also touching on, on a sensitive subject. I would have asked you about it, but, um, you. You anticipated me, and. And I appreciate you putting some thought and time and energy into this podcast. I hope we can get to do this soon again. But until then, thank you so much, and I'll see you around and hopefully soon on the podcast as well.

Speaker B: Thank you.