How should performance management evolve as a startup grows?

Performance management should evolve alongside your startup’s growth, shifting from lightweight practices in the earliest days to structured, scalable processes as headcount and revenue increase.

At the pre-seed stage, it’s about defining values, feedback, and habits. By Series C, it becomes about scaling structured systems for expectations, reviews, and compensation.

In between, each funding stage brings new challenges and requires different performance practices to keep teams aligned, motivated, and performing at their best.

In fast-changing times, a company’s ability to grow depends on how well its people can adapt and stay aligned. Effective performance management helps teams respond to change by keeping goals, feedback, and priorities clear.

According to McKinsey, companies that invest in people-centered performance management achieve around 30% higher revenue growth and experience five percentage points lower attrition than their peers.

To help founders and people function leaders navigate decisions around performance management, we’ve built this framework from conversations with hundreds of founders and people leaders in European tech companies, combined with case examples from companies like Synthflow, Din Psykolog and Faculty.

How does performance management evolve across startup stages?

Performance management evolves from informal, culture-driven habits in the earliest stages to structured, scalable systems as the company grows.

At each funding stage, the focus shifts: from defining values and feedback rituals to building formal goals, reviews, and compensation frameworks that sustain performance at scale.

Pre-Seed (2–5 employees, no revenue)

At the earliest stage, performance management is all about setting the foundation for your culture.

The small founding team defines what “good performance” means through daily actions, communication, and shared decision-making.

Instead of structured systems, focus on clarity, trust, and early feedback habits that shape long-term alignment.

Challenges:

• Founders need to build culture intentionally from day one.
• Early hires define the company’s DNA.
• Everyone is stretched across multiple roles.

Performance practices:

• Define values and principles that guide decision-making.
• Normalize feedback early. Research shows employees who receive frequent feedback are three times more engaged than those who receive feedback only once a year.
• Hold regular 1-1 meetings to align expectations and build trust.

Insight: At this stage, performance culture is founder-led. It’s less about formal frameworks and more about how you work together and what you reward. Document values, encourage candor, and make 1-1s sacred.

Seed (3–15 employees, < €1M revenue)

As the first hires join, founders move from “doing everything” to defining structure and leadership norms.

This is where performance management begins to take shape through simple goals, frequent feedback, and a rhythm of communication that keeps everyone aligned as the company experiments toward product–market fit.

Challenges:

• CEO and CTO carry most of the leadership load.
• The culture is cemented by the first 10–15 hires.
• Focus on finding product–market fit.

Performance practices:

• Set company-level goals that reflect strategy.
• Introduce personal goals for the first time.
• Establish early rituals, such as regular feedback and consistent 1-1s.

Insight: This is the right time to start aligning daily work to company goals.
Performance management is still lightweight, but goal-setting introduces clarity that helps employees know where they’re headed.

Series A (10–50+ employees, €1–10M revenue)

When teams start forming and founders no longer manage everyone directly, performance management becomes essential for alignment.

Clear goals, feedback structures, and expectations help new managers lead effectively while keeping the company’s culture consistent through growth.

Challenges:

• You’re scaling the organization after product–market fit.
• Team leads are new to managing.
• Misalignment risks increase.

Performance practices:

• Adopt structured company goals like OKRs.
• Align personal goals systematically with company objectives.
• Introduce continuous feedback to avoid bottlenecks.
• Begin documenting performance expectations.
• Pilot lightweight performance reviews.

Insight: Series A is the inflection point. Without structure, small issues in clarity and alignment compound quickly. A clear expectations framework helps managers coach effectively.

Series B (25–150 employees, €10–50M revenue)

By Series B, leadership depth and cultural consistency determine how smoothly you scale.

You’ll likely have multiple teams, managers, and new layers of communication, making structured, fair, and repeatable processes for performance critical to sustaining momentum.

Challenges:

• Hiring accelerates, making culture harder to maintain.
• Leaders must manage larger teams.
• Pay fairness becomes more visible.

Performance practices:

• Implement OKRs and personal goals company-wide.
• Run systematic 1-1s and feedback loops.
• Define seniority levels and talent bars.
• Launch structured reviews (annual, bi-annual, or quarterly).
• Introduce calibration of reviews to ensure fairness.
• Start systematic compensation frameworks.

Insight: At Series B, performance management becomes about consistency and fairness. Calibration and compensation systems prevent bias and help maintain trust during rapid growth.

Series C (150–500+ employees, €50M+ revenue)

At this stage, performance management must operate at scale while preserving agility.

You’re now competing for top talent, expanding internationally, and managing multiple layers of leadership, all requiring transparency, fairness, and data-driven insights.

Challenges:

• Competing with larger players for talent.
• Sustaining culture across multiple layers of management.
• Integrating performance with compensation.

Performance practices:

• Mature OKR framework across the company.
• Performance reviews fully institutionalized.
• Calibration embedded across functions.
• Compensation tied to performance with clear transparency.

Insight: At Series C, performance management is no longer optional. It’s strategic, supporting talent density, competitiveness, and growth at scale.

How other companies have implemented performance management at different stages?

Looking at how other startups evolved their performance practices helps illustrate what “good” looks like in real-world contexts.

Here are three examples of companies that scaled performance management differently, depending on their growth stage and needs.

• Synthflow (70 people) doubled headcount rapidly but lacked structured processes. With Taito.ai, they built lightweight, AI-powered frameworks that scaled trust and performance without bureaucracy.
• Din Psykolog (20 people) used continuous feedback to grow a strong culture of learning, embedding performance practices into daily work, not just reviews.
• Faculty (400 people) replaced rigid annual cycles with a flexible, automated, year-round approach, making feedback part of workflows and reducing manager burden.

What to read next

• From performance management to performance enablement → A deep dive into why modern companies move from reviews to continuous growth models.
• Best performance management solutions for 20–100 employees → A comparison of leading tools for growing teams and scaling people processes effectively.

Frequently asked questions

1. When should startups introduce formal performance reviews?
Usually around Series A, once you have several teams and managers. Before that, focus on feedback, 1-1s, and goal clarity.

2. How do early-stage startups create a feedback culture?
Start by modeling it at the founder level. Ask for feedback publicly, give it consistently, and make it actionable rather than evaluative.

3. How do performance reviews change as the company scales?
They shift from informal feedback loops to structured cycles with clear rubrics, calibration, and links to compensation.

4. What’s the main difference between performance management and performance enablement?
Management focuses on evaluating the past, while performance enablement focuses on equipping employees with the tools, context, and feedback to succeed continuously.