Why does a company’s informal performance management process break when the headcount scales?

At 20 people, you, the founder, are the performance management system.

Because you're everywhere. You're in the hiring decision, the product review, the client call, the Friday all-hands. Your team knows what good looks like because they've watched you react to it. They know what you care about because you've said it, repeatedly, in rooms they were all in.

Standards don't need to be written down when the person who holds them is always present.

So you don't write them down.

The leaders arrive

At some point the company works well enough that you hire leaders. People you know, people you've worked alongside before, people who understand the mission because you've explained it to them over coffee, not in a document.

They're good hires. They carry the standard you set. For a while, they're the measuring stick in the rooms you've left. It holds.

What happens to the standard

Your head of engineering has her own definition of what a strong engineer looks like. Your head of product has his. Both definitions are reasonable. Both come from years of experience. Neither is identical to yours, and neither is identical to each other.

A new engineer joins under her. Gets calibrated to her standard. A product manager joins under him. Gets calibrated to his. Two more hires join under each of them, calibrated to their managers' standards, which are one step further from yours.

By the time the company is 60 people, your original standard (the thing your first 10 people absorbed by being in the room with you) is 3 or 4 interpretations away from the person doing the work.

Everyone is operating against whoever hired them, not against a shared definition of good.

The drift that arrives quietly

This doesn't announce itself. The resignation that eventually comes doesn't explain it. The missed target doesn't name it.

Just a growing sense that things are slightly off. Your head of engineering and head of product seem to be solving for different things. Two people in similar roles are being managed very differently. A new hire asks what success looks like in their role and gets an answer that would surprise you.

The calibration is off. And fixing it gets harder every month you wait.

At 20 people, a performance process is a 2-hour conversation. What are we optimising for this year? What does good look like in each role? How do we give feedback against that standard, not against gut feel?

At 60, the same conversation is a 2-month exercise. People have been doing it their way for 3 years. Managers have built their own frameworks. Teams have internalised their leader's definition of performance. Installing a shared standard now means asking everyone to unlearn something first.

At 100, it's a re-organisation.

The founders who build a process early do it because they understand one thing: human standards don't scale. Written ones do.

What the process actually needs to do

Three things, in order.

First, write it down. What does good look like in each role this year? What is the company optimising for? These answers exist in the founder's head at 20 people. At 60, they need to exist somewhere everyone can read them. A conversation at the start of each cycle, documented, shared. That's it.

Second, keep the conversation going. A single annual review is too little surface area to give someone a clear sense of where they stand. At least one check-in mid-cycle: are we still pointed at the same thing, what's working, what needs to change? Thirty minutes. Against the standard you wrote down at the start. Nothing more elaborate than that.

Third, separate the two conversations. The development discussion and the pay discussion are different conversations, and conflating them breaks both. When an employee knows the salary number is coming in the same meeting as the feedback, they stop listening to the feedback. Schedule them a week apart. Tell the employee upfront. The quality of the development conversation changes immediately.

Companies under 100 typically skip the first one. Then spend years wondering why the second and third feel broken.

The question worth sitting with

You hired good leaders. They carry the mission. You trust them.

But the standard you held in your head, the definition of good you carried into every room you were in: did you ever write it down?

When you're no longer in the room, what are your people optimising for?

greytHR's Performance Management follows what the research points to and is designed for simplicity. An HR admin runs a cycle without a manual, and an employee sees where they stand without decoding anything. It helps growing teams answer that question early, before the cost of not answering it compounds.

greytHR's Performance Management is built to help growing teams answer that question early, before the cost of not answering it compounds → link

References: Deloitte Global Human Capital Trends 2017. Gallup State of the Global Workplace 2025