A Deep Dive into Spotify's Employee Performance Reviews: How to Unlock High Performance and Growth

Have you watched ‘The Playlist’ — a documentary on how Spotify revolutionized the music industry? In one of the scenes, Petra Hansson (who was Spotify’s legal advisor for a decade) walks into the Spotify office for a future collaboration opportunity. At that point, she had been working at the leading Swedish law firm Mannheimer Swartling.

As she enters the office, Petra is surprised to see the casual and friendly work culture at Spotify, with people throwing paper balls at each other. One of the paper balls even hits her as she walks by one of the cubicles. This casual and people-friendly work culture has also influenced the performance review process at Spotify.

At Spotify, the performance review process focuses on helping employees grow with the company.

How does Spotify run performance reviews?

Spotify groups its employees into self-organizing and agile teams called squads.

Each squad is accountable for a unique aspect of the product. These squads are further grouped into tribes and further chapters. While squads are autonomous in their operations, they are still strongly aligned on the overall goals. The chapter leader is the manager who brings this alignment and clarity. Spotify follows the player-coach model, and the manager provides coaching and mentoring to all squad members.

Squads also regularly review their work, identifying highlights and areas for improvement. They also analyze failures to learn from mistakes. These squad reviews are separate from individual employee reviews.

Now, as the structure is clear, let’s get into how Spotify runs reviews. Here are the four elements of the employee performance development cycle:

1. Continuous planning & 1:1s

The 1:1 with the managers can also happen over a coffee. The employees discuss their performance, ambition, and any problems they face. There is no mandatory schedule or standard agenda. It’s all based on the employee and manager agreeing on a system and frequency of meetings.

A predefined checklist is made that supports managers in conducting these meetings with ease.

2. Development talks

Even if the employee and manager interact continuously, Spotify recommends two annual development talks focusing entirely on the employee’s growth and personal development.

These development talks aim to match the company’s needs with the employee’s long-term ambitions. Every employee owns and drives their development talks:

• They initiate the meetings
• They gather feedback from peers
• Their primary focus is on the future rather than the past

One can collect peer feedback from anyone in the company—manager, team members, or someone from any other department.

There are three success criteria when it comes to performance and development:

• Mastery-if one is a thought leader in a particular department
• Achievement-the degree to which an individual reached their goals
• Behavior-an individual’s fit with the company culture and company values Performance is about meeting expectations, reaching goals, and being a role model to other employees.

3. “Talent Snapshots”

Spotify believes in cultivating a growth mindset. It recognizes that individuals wish to grow with the company and that circumstances may change from week to week or quarter after quarter.

For this reason, Spotify has completely eliminated performance ratings, which it feared would foster a fixed mindset and box people into arbitrary “ratings” for extended periods. Instead, they built “talent snapshots.”

These talent snapshots help leaders to:

• Build development plan: Managers can discuss the personal development plans more carefully to ensure each employee is working towards their potential and personal aspirations
• Recognize good talent: Each employee brings unique strengths that add value to the wider team and the business. The snapshot should inspire leaders to acknowledge these contributions publicly

The talent snapshot at Spotify | Source: Spotify's HR blog

The HR team at Spotify conducts workshops to equip leaders with the skillsets to assess their team members accurately.

4. Compensation review

The compensation review is a separate process conducted yearly. Spotify’s performance development approach feeds the required information for the compensation review. However, it is kept as an independent process decoupled from regular performance conversations.

Key reasons behind Spotify’s current performance review system

As a relatively young company (compared to the likes of Cisco or Microsoft), Spotify’s performance review process hasn’t undergone significant changes since the company was born in 2006. However, they have introduced some new elements in favor of employee development.

Spotify restructured its performance management system to have separate employee compensation and performance reviews.

Before, managers considered peer feedback for salary reviews. However, this process led to people gathering as many positive reviews as possible. However, the feedback around actual areas of movement was missing.

To sum up, here are the three reasons why Spotify chose to upgrade their performance and compensation review process:

1. Squad reviews shouldn’t get mixed with individual reviews because the focus on the employee’s performance and development is crucial
2. Peer feedback should be used for development and not be considered for compensation to eliminate bias
3. Every employee should be made accountable for their growth

The key to Spotify’s performance management success

Let’s review the factors that make Spotify’s performance management system stand out.

Clear link between individual and business performance

At Spotify, employee performance is seen as a dynamic interplay between individual development and overall business success.

This perspective underscores that personal growth and company achievements are tightly interwoven. In practice, Spotify’s strategy ensures that as employees advance their skills and careers, they simultaneously propel the organization toward its strategic objectives. The result is a work environment where individual success directly fuels business performance, creating a mutually reinforcing cycle of growth and excellence.

People-first culture

Spotify believes that people are an organization’s greatest asset. As a result, each team has a lot of flexibility and a safe environment for all individuals to thrive. Their performance management system is designed for employee growth rather than evaluation. Employees are encouraged to grow and take up organizational projects to enhance their skill sets.

Continuous feedback

With regular one-on-ones, managers can regularly coach employees, provide constructive feedback, and keep them more invested. Continuous feedback keeps employees engaged and satisfied and promotes their growth.

Clear development plans

45% of US employees don’t know what is expected of them. At Spotify, managers help employees to set development plans to provide this clarity in advance.

Separate compensation reviews

Gallup recommends separating compensation discussions from performance feedback. Tying these two types of reviews together often creates a negative impression. Employees are more worried about potential pay rather than development feedback. Spotify handles this issue by decoupling these two types of reviews.

Constructive peer feedback

Spotify adds peer feedback into the performance review process to make the feedback more well-rounded. Peers are more involved in the day-to-day work and can provide unique insights into how an individual is approaching daily tasks. Peer feedback can help identify skill gaps and areas for growth.

How can you run a performance development process like Spotify?

Deel Engage helps you run a performance review process like Spotify. Here’s a step-by-step breakdown.

Conduct regular one-on-ones

Deel Engage allows managers to maintain regular check-ins with team members and provide feedback through the Slack plug-in 1:1 feature. The plug-in helps set recurring meetings, define agendas, and note discussion points. It simplifies setting up frequent coaching conversations between managers and their team members.

Collect peer reviews

Deel Engage’s performance management module simplifies setting up the peer review process. You can easily set up peer feedback reviews by:

• Establish clear peer nomination rules—i.e., how many reviewers per worker, who decides who nominates the peers, who approves the peers, deadlines for nomination and approval, etc.
• Set up your peer review questionnaire—include rating or open-ended questions, or a mix of both
• Decide if you want to link the review questions to specific competencies or goals for more targeted feedback
• Define the participants, be it a specific department, a specific location, or even the entire organization
• Finalize the timeline of the complete process and launch your feedback cycle

Define action items for development plans

Managers and team members can collaboratively create personalized development plans aligned with career paths, interests, and growth potential. These plans include concrete goals (e.g., courses, certifications, shadowing) and timelines.

HR teams can define specific templates for managers to use with their team members so they never start from a blank page.

Run compensation reviews

With Deel’s acquisition of compensation management software, Assemble, you’ll soon be able to run compensation reviews on one single platform. You’ll be able to link performance feedback with compensation outcomes and more.

Train your leaders to be coaches

Spotify is constantly pursuing development, not just for its employees but also for its leaders. This enables leaders at Spotify to better asses, spot, and develop future talent.

Use Deel Engage’s LMS module to develop leadership training courses and programs (just like Freeletics did too).

Enable high-performance teams with Deel Engage

Deel is not an isolated solution used for just feedback once in a while. We support your workforce in reaching the highest potential, from new hire onboarding to continuous learning and career growth.

Book a demo to see how our solutions will help you build a top-performing workforce.