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Jared Simon  |  April 9, 2014
Why a Little Bureaucracy Works–Even at a Startup

Part of what drives many entrepreneurs to create innovative new companies is a fanatical need to cut out red tape wherever it exists. At HotelTonight, we’re no different. Among other things, it’s what compelled us to cut the hotel booking process down to three taps and a swipe on a phone, compared to the hundreds of taps it can take on competitor apps.

Jared SimonRecognizing the outrageous challenge of taking on the titans of the online travel-booking world, we knew we needed to capitalize on the elements that differentiated us. Most fundamentally, that meant building a team of creative risk takers with no travel-industry baggage to weigh them down. And we needed to create an environment that didn’t impose the kind of bureaucratic barriers that we knew our large competitors imposed on their teams. Obviously we had to make innumerable decisions to accomplish these objectives, and fortunately we got many of them right. But there’s one in particular I wish we had gotten right much sooner: employee performance reviews.

Back in our early days, in the height of our anti-bureaucracy zeal, the traditional performance-review process stood out as a prime example of big company bloat: hours and hours of lost productivity completing long, mindless forms that were synthesized by some nameless, faceless group of people. And for a company whose prime advantage over competitors was speed, we felt that no matter how often a review process was repeated throughout the course of a year, it could never keep up with the action on the ground. This would relegate  reviews to be persistently stale documents that were completed mainly for the purpose of getting stored in someone’s “file.”

Rather than go that route, we resolved to be extremely diligent about providing direct, actionable and timely feedback to our growing team on a real-time basis. By enforcing that discipline from the start, we reasoned that we’d eliminate the need for a formal review process, and that we’d be able to make much more timely promotion, coaching, compensation and other HR decisions.

As the team grew, from five people at the end of 2010, to 30 in 2011, to 75 in 2012 and 110 in 2013, this system mostly held together, mainly because of the high caliber of people we were able to attract. But weaknesses in our approach also quickly became evident. Although employees were hearing generally positive, ad- hoc feedback here and there from their managers and peers, they seemed to always have a background concern that there might be some more negative feedback lurking around the corner. Simply put, despite everyone’s sincere desire to be communicative about feedback, people remained unsure about where they stood.

We surveyed employees and managers and found that these employee concerns were perhaps well-founded. Without the structure of a formalized review process to “shield” them, many managers felt that sharing difficult feedback in a direct way was often easier said than done. Additionally, day-to-day positive feedback tended to get lost in the rest of the minutiae of the day. The result was that although managers felt they were providing plenty of feedback, their positive comments didn’t always register, and their critiques were often too oblique to be fully understood.

So we had our work cut out for us. In order to create a more effective feedback process, we needed to add enough structure to compel these conversations to happen regularly and to contain direct, honest feedback. But at the same time, we needed to stay true to our core conviction that a review process (or any process) becomes counterproductive as soon as it becomes so complex that it becomes an end in itself, rather than a means to a larger end. So in true HotelTonight style, we needed to keep things extremely light and easy, and always results-oriented.

We’ve worked very hard to maintain a culture that not only encourages participation in decision-making among all employees, but actually requires it: Our product roadmap process starts with an open-idea submission phase, for example. Different groups inside the company alternate planning company events, and we even put our choice of office locations up for a vote. The performance-review process had to maintain that core value, so we knew there had to be a meaningful peer-review component. However, traditional peer review techniques tend to utilize a “360” structure in which pairs of employees review each other, setting up a reverse prisoner’s dilemma dynamic: Each person can feel compelled to sugarcoat their feedback in the hopes that the other will do the same.

Our key innovation was to make it a blind process, so that employees didn’t necessarily know by whom they were being evaluated, and if they’d be getting feedback from the same people they were reviewing. By breaking the 360 linkage, we were able to obtain much more honest, useful feedback, resulting in reviews that were exponentially more insightful and valuable to their recipients.

Our second key innovation was to tie the review structure to our three core team values of Build, Question and Respect. This decision had dual purposes. First, it obviously recommitted us to the values we had selected. Second, it had the benefit of keeping things simple, which of course was our concern about this process all along. Our review form literally contained only three questions – one for each value, which allowed us to credibly request that no one spend more than 15 minutes on each review.

The combination of non-sugarcoated peer reviews, management feedback, and a lightweight but comprehensive structure produced just the result we had been looking for: a complete snapshot of each employee’s contributions and areas needing more focus. Yet it was simple enough from a process perspective that it never felt overwhelming or slowed us down. Of course, given the caliber of our team and the importance we’ve placed on feedback, in our post-review surveys we’ve received plenty of suggestions for improving the process the next time.

But the general consensus has been a realization that a bit of bureaucracy (in moderation) can actually be a good thing for a fast-growing organization. Even a startup.

Jared Simon is the COO and co-founder of HotelTonight, the leading last-minute hotel booking app. 

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