Let's start with what organizational culture actually is and why it matters when you're building a performance review process in your company.

Edgar Schein, a professor at MIT Sloan School of Management, was one of the most influential researchers of organizational culture and organizational development. For years he combined academic work with consulting practice, watching how organizations really operate from the inside - not just at the level of strategy, structure, and official values, but above all through everyday behaviors, decisions, and unwritten rules.

That's exactly why his model is so useful when we talk about performance reviews. Schein showed that organizational culture doesn't end with what a company declares. Its most important part is often hidden deeper - in the beliefs people pick up based on what gets rewarded, tolerated, or punished in the company.

In his view, culture is made up of three levels:

LEVEL 1 - artifacts

In other words, what you can see from the outside: the office, dress code, tools, rituals, meetings, the way people communicate, onboarding, company presentations, values on the wall, benefits.

LEVEL 2 - espoused values

In other words, what the company says matters to it: collaboration, accountability, transparency, growth, feedback, the customer, quality.

LEVEL 3 - underlying assumptions

In other words, what people really believe and act on day to day, often without even realizing it.

The key element is level 3; the other levels should follow from it or be consistent with it.

For example, a company declares that one of its most important values is accountability. That's level 2 - a declared value.

At level 1 you can even see specific actions meant to support that accountability: there are status meetings, a task board, defined project roles, and a review form with a question about working independently and delivering on commitments.

But at level 3 - in everyday behavior - people have learned something completely different: that it's safer not to raise problems too early, not to take on difficult topics yourself, and to wait until the manager or the CEO makes the call. And then, during the performance review, the inconsistency comes out.

The manager says:
"I expect more accountability and more independence."

And the employee replies:
"But the last time I made a decision on my own, I was told I should have run it by someone first."

And that's exactly why culture matters so much in the performance review process.

On paper, the company promotes accountability. Its tools measure it, too. But in practice, people have learned that accountability is risky, because it can end in criticism or a decision being overruled.

From a business owner's perspective, that's very important information. Because the problem isn't "people lacking accountability" - it's the inconsistency between what the company declares and the behaviors it actually reinforces day to day.

And that's exactly why, in this lesson, we won't talk about organizational culture as an abstract concept. We'll focus on specific, everyday behaviors that give performance reviews a real chance to work.

Which elements of culture support the review process

Below we'll briefly go through the most important attitudes and cultural elements that can affect how well your performance review process works.

Clear expectations

Clear expectations are the foundation of the performance review process, because a review only makes sense when both sides know what they're referring to. An employee should know what they're responsible for, which goals matter most to the company, and how you'll both recognize that the work has been done well.

When that's missing, the review conversation quickly turns into an argument over interpretations. The manager says, "I expected more independence," and the employee replies, "Nobody told me earlier that this was the top priority now."

For people, clear expectations create a sense of safety and fairness. They know what to focus on, what to avoid, and how their work will be assessed. For the company, it means fewer misunderstandings, fewer revisions, and a better chance that the team's daily work actually supports the business goals.

In a culture of clear expectations, specific attitudes matter:

✔️ saying things directly, clarifying priorities,

✔️ defining who is responsible for what,

✔️ regularly revisiting goals and reacting quickly when expectations change.

As a result, the performance review isn't a surprise - it's a logical summary of what you agreed on earlier.

Accountability

The second element is accountability, because it's what makes people not only carry out tasks but genuinely want to deliver them, even when difficulties come up.

When accountability is blurry, the review conversation quickly turns into a round of excuses. The employee says, "I was waiting for a decision," and the manager replies, "I thought that was on your side."

For people, clear accountability creates a sense of influence and agency. They know what they're responsible for, where they have decision-making power, and when they should escalate an issue. For the company, it means less firefighting, less passing topics back and forth, and a better chance that problems get solved earlier - before they hit the customer, the results, or the mood in the team.

In a culture of accountability, specific attitudes matter:

✔️ flagging risks and problems on time,
✔️ looking for solutions instead of explaining why something couldn't be done,
✔️ closing topics out and coming back with an update on what was done, even if it means changing how you get to the goal.

As a result, the performance review isn't a conversation about "who's to blame" - it's a concrete summary of what worked, what didn't, and what needs to change in the next period.

Openness to feedback

The third element is openness to feedback, because it's what allows people to take in information about their work without treating it as an attack. Feedback then becomes a normal part of working together, rather than something that only shows up once a situation gets really difficult.

When openness to feedback is missing, the review conversation quickly triggers a defensive reaction. The manager says, "We need a change in this area," and the employee replies, "But nobody said earlier that this was a problem." Instead of a conversation about takeaways, you get excuses, tension, or someone shutting down for the rest of the meeting.

For people, openness to feedback creates a greater sense of safety and predictability. Employees know that feedback isn't a punishment - it's a way to improve the work and the collaboration. For the company, it means faster course-correcting, fewer recurring problems, and a better chance that difficult topics get discussed as they come up, before they affect the customer, the results, or the mood in the team.

In a culture of openness to feedback, specific attitudes matter:

✔️ hearing the feedback out to the end, without interrupting, making excuses, or immediately reaching for counterarguments,

✔️ asking clarifying questions, e.g. "In what situation was this most visible?", "What specifically should I do differently?", "What effect did my behavior have on the team or the project?",

✔️ separating the feedback from your sense of self-worth - treating it as information about a specific behavior, decision, or way of working, rather than a message that says "I'm not good enough,"

✔️ checking what's within your sphere of influence - honestly naming what you can affect, what you don't control, and what you can realistically change in the next period.

As a result, the performance review isn't a conversation the employee has to defend themselves against. It becomes a calm summary of what's working, what needs to change, and which specific behaviors are worth reinforcing in the next period.

Readiness to learn and change

The next element is readiness to learn and change, because a performance review only makes sense when something can actually change after the conversation - both on the employee's side and on the company's side.

The employee should be ready to take in feedback, draw conclusions, and change how they work where it's needed. The company, in turn, should be ready to look at whether it isn't itself creating conditions that make good work harder: unclear priorities, overload, decision-making chaos, or a lack of support from the manager.

When that readiness is missing, the process quickly loses credibility. The employee hears, "You need to manage your priorities better," but day to day the priorities shift every few days and nobody sorts them out. Or the employee says, "I don't know who makes the decisions in this project," the manager writes it down in a note, but after the conversation nothing changes.

For people, readiness to learn and change creates a sense that the conversation is worthwhile. They see that the review isn't just a one-sided reckoning, but a real conversation about what they themselves can improve and what the company should fix to make the work more effective. For the company, it means a greater ability to draw conclusions, faster process improvements, and a lower risk of repeating the same mistakes month after month.

In a culture of learning and change, specific attitudes matter:

✔️ testing new ways of working - even if they require changing existing habits, e.g. flagging risks more often, asking for a decision earlier, or handing part of the responsibility over to the team,

✔️ revisiting agreements later on - checking after a few weeks whether the change is working, or whether it needs to be clarified or adjusted,

✔️ the company's readiness to change its own rules, not just its expectations of the employee - e.g. sorting out priorities, shortening the decision-making path, or improving communication between teams.

As a result, the organization has a chance to grow faster and in line with its intended plan and strategy.

What in a company's culture can sabotage performance reviews

The biggest saboteur of performance reviews isn't a bad form. It's the inconsistency between what the company declares and how it operates day to day.

If you say reviews are about growth, but nothing changes after the conversations - people will remember that.

If you say accountability matters, but difficult topics get swept under the rug - people will see it.

If you say decisions are fair, but no one understands where they come from - people will start filling in their own stories.

And then even the best-designed review process won't work.

How to tell that culture is starting to support the review process

A culture that supports performance reviews doesn't mean there are no difficult conversations, tensions, or disagreements in the company. Those will still come up.

The difference is that the company knows how to work with them as they happen, instead of waiting until everything blows up during the review conversation.

How will you know? I've put together a ready-made list of attitudes to make this easier for you - download the checklist.

To wrap up

Performance reviews won't fix the work culture in your company. But if its most important element - the everyday attitudes and behaviors of your people - doesn't support the process, the odds of it working will be slim.

So keep this in mind: once you've designed a good review process, make sure your organizational culture doesn't sabotage it.