When to Run Your First Performance Review Cycle

You’ve built a product, hired your first employees, and things are moving fast. Performance reviews feel like something bigger companies do. But at some point, you start wondering: when should we actually formalize this?

The answer isn’t as simple as a headcount threshold. It depends on your team structure, growth rate, and how feedback currently flows through your organization. Get the timing right, and reviews become a retention tool. Get it wrong, and you either lose good people to ambiguity or drown in unnecessary process.

Signs you’re ready for formal reviews

Most founders hold off on structured reviews with their first few employees. Being in constant communication with your 1-2 direct reports can make formal review processes feel redundant. But several signals indicate it’s time to formalize:

You have managers who aren’t founders. Once you promote or hire people to manage others, those managers need a framework for evaluating their teams. Without one, feedback becomes inconsistent across the organization.

You’ve hit 15-25 employees. At this size, founders can no longer have direct visibility into everyone’s work. Ben Horowitz has cited neglecting performance conversations at ~25 people as a classic example of management debt that compounds quickly.

You’ve raised Series A or beyond. According to Y Combinator, startups should bring in dedicated people operations around 20-30 employees or just after Series A to prevent cultural drift. Performance reviews are part of that infrastructure.

People are asking for feedback. When employees start requesting clarity on where they stand or how to grow, informal check-ins aren’t cutting it anymore.

You’ve lost someone you wanted to keep. Exit interviews often reveal that departing employees felt unclear about expectations or growth paths. This is a lagging indicator—ideally you act before this happens.

The cost of waiting too long

Many founders who now run larger teams wish they’d started earlier. The consequences of delaying compound over time:

Retention suffers. Employees who don’t receive structured feedback are more likely to leave. Research shows that nearly one-third of new hires quit within six months, often citing lack of clarity on performance expectations.

Compensation becomes arbitrary. Without documented performance discussions, raise and promotion decisions feel random to employees—even when they’re not. This breeds resentment and turnover.

Problems fester. Underperformance that goes unaddressed for months becomes much harder to correct. Early feedback conversations are uncomfortable. Late ones are painful.

Culture drifts. Your early employees understood expectations implicitly. Newer hires don’t have that context. Formal reviews codify what “good” looks like at your company.

The cost of starting too early

That said, premature formalization creates its own problems:

Bureaucracy kills speed. If you’re five people shipping fast, stopping for a formal review cycle adds overhead without proportional value. Your time is better spent on direct, real-time feedback.

Process without purpose. Reviews work when they inform decisions about compensation, promotions, and development. If you’re too early for those systems, reviews become theater.

False precision. Rating employees on a 5-point scale when you have eight people and no calibration process creates an illusion of rigor. Keep it simple until you have the infrastructure for complexity.

If your company is under 15 people and less than a year old, you probably don’t need a full review cycle yet. Focus instead on regular 1:1s, clear goals, and real-time feedback.

What to start with before full cycles

You don’t have to jump straight to comprehensive semi-annual reviews. Build the habits first:

Weekly or biweekly 1:1s. These are the foundation. No performance review should ever surprise someone who’s had regular 1:1s with their manager.

Documented goals. Whether you use OKRs, KPIs, or simple quarterly goals, write them down. This gives reviews something concrete to evaluate against.

Lightweight check-ins. Some startups run brief quarterly reflections—15 minutes where employees self-assess progress on goals and discuss blockers. This builds the muscle for more formal reviews later.

Continuous feedback culture. Encourage peers and managers to share feedback in real-time, not just during review season. Tools like Slack make this easier, and AI assistants can help capture and organize feedback throughout the year.

Choosing your review cadence

Once you’re ready, how often should you run cycles?

Annual reviews are too infrequent for most startups. A year is an eternity when your company doubles in size every six months. By the time you review someone, half their accomplishments are ancient history.

Quarterly reviews are usually overkill. Unless you’re running very short OKR sprints and have the HR capacity to support it, quarterly cycles create review fatigue. Too-frequent formal reviews can feel performative rather than meaningful.

Semi-annual (twice yearly) hits the sweet spot for most growing companies. It’s frequent enough to stay relevant, spaced enough to observe meaningful progress. Many founders find March and September work well—aligning with natural planning rhythms.

For startups specifically, consider a “heavy cycle and light cycle” approach: one comprehensive review with peer feedback and calibration, and one lighter check-in focused on goals and development.

Making reviews sustainable

The biggest reason startups abandon performance reviews is that they’re too time-consuming. A process that takes managers 3+ hours per direct report won’t survive contact with reality.

A few principles to keep reviews sustainable:

Keep forms short. Three to five questions are enough for most roles. Lengthy rubrics with dozens of competencies create busywork without better outcomes.

Time-box the process. Give the organization two weeks for self-reviews, two weeks for manager reviews, one week for calibration. Longer timelines just mean more procrastination.

Leverage technology. Modern tools can pull context from your existing systems—project management, code commits, sales data—so managers aren’t starting from a blank page. Windmill integrates with tools like GitHub, Jira, and Salesforce to surface contributions automatically, cutting review time significantly.

Separate development from compensation. Consider having growth-focused conversations separately from pay discussions. Employees engage more honestly when they’re not simultaneously negotiating their raise.

Key takeaways

1. Start when you have managers, not founders, leading teams—typically around 15-25 employees or post-Series A.
2. Don’t wait for a departure to realize you need structure. By then, you’ve already accumulated management debt.
3. Build habits first. Regular 1:1s and documented goals are prerequisites for effective reviews.
4. Semi-annual cycles work for most startups—frequent enough to matter, spaced enough to be meaningful.
5. Keep it lightweight. A sustainable process beats a comprehensive one that nobody follows.

The goal isn’t to replicate what large enterprises do. It’s to create just enough structure that your people understand expectations, receive feedback, and see a path for growth. Start there, and evolve the process as your company scales.