For many startups and small businesses, talent management can sometimes be deprioritized from the everyday chaos and operations. As they begin to grow, they start to recognize that using a spreadsheet or using memory to keep track of employee performance just doesn’t work. If your company is evolving, your performance management strategy should be evolving alongside it. Establishing a performance management strategy and a feedback culture early on, even with 1-2 employees, will improve employees’ performance, ultimately contributing to the overall companies’ success.   

In this article, we outline the challenges that startups can face when managing their employee performance, as well as solutions to get their employees on the right track.

1. Unclear objectives & tasks 

In startups, it is common that employees wear several different hats. Multiple employees work on multiple tasks with multiple teams, which can cause a lot of overlap and leave employees confused about what they are supposed to be completing. The lack of clarity on tasks and responsibilities for employees not only causes confusion but also harms productivity. Moreover, because startups often adapt and change their strategies and objectives rapidly, aligning on them becomes that much more crucial. 


Objectives should always be clearly defined. They should also be visible to employees — whether it be through a shared workbook, project management tool, or performance management tool. Having visible and clearly communicated objectives help align employees and ensure they are rowing in the same direction. OKRs and KPIs are common frameworks to set goals. 

Managers should also over-communicate, particularly with new hires. Follow-up emails are not always a bad thing. In fact, the research found that managers who were deliberately redundant moved their projects forward faster and more smoothly. Over-communication can be important in driving projects and making sure that employees understand expectations and objectives

2. Company values are not defined or communicated 

Startups tend to focus on the product or service first and may not prioritize creating their values until a later date. However, startups have to realize that company values are the core beliefs. Values define the company culture and contribute to the overall employee strategy — from attracting to retaining talent. 

Even if startups have values, they may not communicate these values to the employees. This is a problem in many organizations — only 27% of employees strongly believe in their company’s values, and less than half strongly agree that they know what their organization stands for.


Startups and small businesses should establish their core values early on so they can help shape the team’s behaviors and help make business decisions that best align with the values. The earlier a startup can create its foundation of values, the earlier it can be relayed to employees so that they can incorporate them into their performance. In fact, an employee who knows and understands their corporate values are 51 times more likely to be fully engaged at work

Startups can integrate values into their employee performance management process by incorporating them into their feedback and recognition practices. Remember that company values shape the workplace culture, make sure to establish them early on and clearly communicate them.

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3. Undefined career development and progression strategies

Career development and career progression are big drivers of employee retention. This is particularly an interesting and complicated topic for startups. One of the biggest perceived benefits of joining a startup for employees is the potential to progress quickly and succeed as the company succeeds. Hence, career progression can be a tricky topic to approach.

Compensation is also challenging in startups as they are generally running on a tight budget.


Clearly define the compensation and career development strategies. Once defined, leaders must make sure that these strategies are clearly relayed to employees. For compensation, it is important to remember that an employee’s salary will be contingent on their previous experience, the company’s stage, and the role. Startups can utilize industry salary ranges found on Glassdoor or Angel Co. Creating a clear salary band structure early on is critical, so that startups can avoid problems as the company begins to scale. 

While competitive pay will always be a driving factor in retention, remember other elements like great company culture, bonuses, gifts, flexible work, promotions, paid leave, and career development and training are also important. In fact, one survey found that 63% of employees would rather get a promotion with no salary increase than a salary increase with no promotion. Consider giving employees more autonomy on projects and allowing them an opportunity to mentor others, which can be rewarding for many employees. 

4. Lack of feedback systems

Whether it is a startup or a company with years of experience, feedback is essential to excel employee’s performance. In startups, feedback between team members is incredibly important because employees are usually doing an array of different tasks. However, startups may not have a strong feedback culture in place which can leave managers afraid to give any type of constructive feedback and employees being scared to receive feedback. 


A healthy feedback culture should be established early on. Managers have to lead by example – they need to ask for feedback from their direct reports and give feedback frequently. 43% of highly engaged employees want weekly feedback. Feedback can be a strong motivator for employees. Managers working in startups must also realize that feedback is a double-edged sword — poorly given feedback can be worse than no feedback at all. 

Feedback needs to be effective in order to correct behaviors. Having education and training on what effective feedback looks like and how to share effectively is important. Moreover, feedback should be documented in one place. Whether it is through a pen-and-paper approach, Google sheet, or a feedback tool, documenting feedback helps managers and employees view past feedback and track progression. 

Create employee performance management processes early on

For early-stage companies, hiring the right people and then managing them can be difficult. Setting and clearly communicating objectives, showcasing and integrating company values into performance management processes, and establishing the right feedback rituals to build a feedback culture can help startups effectively manage their employees and drive successful business outcomes.

AvatarRiley Steinbach

Riley Steinbach is the lead of marketing at Pavestep, a performance management software company. With a passion for helping companies with their performance management, she has written an array of pieces spanning from topics such as employee engagement, to why resiliency is critical.