If you’re only measuring employees by numbers, you’re missing half the equation. Good performance is defined by how work gets done, not just blindly hitting targets. The best organizations know that culture drives performance, not the other way around. That’s why values-based performance reviews are taking the spotlight.
Instead of just tracking sales, projects, or revenue, companies are now assessing whether employees align with core values like integrity, teamwork, and innovation. Why? Because skills can be trained, but character and cultural fit determine long-term success.
Data backs this up. A Gallup study found that employees who feel their company shares their values are 3.7 times more likely to be engaged at work. It directly impacts productivity, innovation, and retention. Yet despite this, only 21% of U.S. employees say they feel connected to their company culture. That’s a massive gap.
If your organization isn’t assessing values, you risk building a workforce that might perform well today but won’t drive sustainable success tomorrow. Culture alignment makes sure every hire and every promotion strengthens the company’s foundation.
The impact on employee engagement and retention
The biggest problem with traditional performance reviews? They’re detached from what actually makes people stay. You can throw bonuses, promotions, or even stock options at employees, but if they don’t believe in what your company stands for, they’ll leave.
People want to work for companies that reflect their values. When employees feel their company genuinely cares about things like teamwork, innovation, or sustainability, they’re more likely to go the extra mile. They stay longer, contribute more, and build stronger teams.
The Dexian Work Futures study backs this up: companies that prioritize values-driven cultures see higher retention and stronger morale. That’s not a coincidence. People want to work where they feel they belong. When performance reviews reinforce values, employees see a clear link between their contributions and the company’s mission.
“High performers are looking for purpose. If your company clearly stands for something, the best people will want in. And those who don’t align? They’ll filter themselves out before you ever hire them. That’s a win-win.”
Why does defining core values matter?
Values-based reviews only work if your company actually has values—real ones. Not vague, overused buzzwords like “excellence” or “integrity” with no clear meaning.
Strong organizations define their core values based on what actually drives their success. This isn’t a branding exercise. It will shape decision-making at every level—from hiring to leadership development.
How do you define values that actually matter?
- Leadership workshops – Your executive team needs to define what’s essential. What behaviors make the company thrive? What kind of people do you want leading in five years?
- Employee surveys – If your values don’t resonate with employees, they won’t stick. Get input from across the company to ensure authenticity.
- Stakeholder input – Your values should align with how customers, investors, and partners see you. If you claim to be “customer-obsessed” but don’t act like it, the market will call you out.
Mike White, Founder of Secchi.io, puts it simply: “If you’re only evaluating employees by their output, you’re missing the bigger picture.” He’s right. Values shape culture, and culture determines whether you attract and retain the right people.
“When done right, values guide hiring, promotions, and business strategy. That’s when they start making a real impact.”
Making values measurable is the key to fair assessments
A core challenge here is that values are abstract, but performance reviews need to be concrete. The solution? Tie each value to specific, measurable behaviors. That’s how you make values actionable.
Take collaboration, for example. Saying an employee “works well with others” is vague. But tracking how often they participate in cross-functional projects, mediate conflicts, or share knowledge? That’s measurable.
Marie Unger, CEO of Emergenetics International, highlights a common problem: too many companies say they value culture, but then only reward short-term performance. If you want a strong culture, values-based behaviors must carry as much weight as traditional metrics.
Here’s how to do it right:
- Use 360-degree feedback – Input from peers, managers, and direct reports paint the full picture.
- Create rating scales – Define what great, good, and poor alignment with each value looks like.
- Track real examples – Did an employee take ownership of a mistake? Did they champion innovation? Make behaviors visible.
When values are measurable, they become part of everyday business. And that’s when they start driving real results.
Train managers to evaluate values-based performance
It’s easy to say, “We evaluate based on values.” It’s much harder to do it well. The biggest challenge? Subjectivity.
Managers aren’t always trained to assess values-driven behaviors objectively. They might rely too much on gut feeling, personal bias, or favoritism. This creates inconsistencies—where some employees are rewarded for embodying company values, while others doing the same are overlooked. That kills trust and makes performance reviews feel arbitrary.
The solution? Train managers to evaluate behaviors, not personalities. This means:
- Defining observable behaviors – Instead of vague feedback like “You’re a team player,” managers should assess how often employees contribute to cross-team projects or help resolve conflicts.
- Standardizing evaluation methods – Use consistent rating scales so reviews don’t depend on individual managerial style.
- Holding calibration meetings – Bring leaders together to compare assessments and align expectations across teams.
Unconscious bias is another issue. Research shows that people tend to rate those who are similar to them more favorably, whether in background, personality, or work style. That’s why structured training is key as it reduces bias and makes values-based assessments fairer.
“Managers need tools, training, and a clear framework to assess values-driven performance effectively. Otherwise, it’s just another subjective process that employees won’t take seriously.”
Balance values and traditional performance metrics
Values matter. But so do results. The key is balance.
A company can’t thrive if it only hires “nice” people who align with culture but don’t perform. At the same time, high-performers who undermine the team or disregard ethics are a long-term liability. A strong performance review system accounts for both.
Let’s say you have a top salesperson who crushes revenue goals but refuses to collaborate. If you only measure performance by sales numbers, you’ll keep promoting them—sending a message that teamwork doesn’t matter. The result? Toxic culture, high turnover, and a short-term mindset.
On the flip side, an employee who’s a great cultural fit but consistently misses targets isn’t delivering business value. Companies that over-prioritize values without measuring actual results risk becoming slow and ineffective.
The right approach evaluates both how work gets done and what gets done.
- Performance metrics measure impact—sales closed, projects completed, revenue generated.
- Values-based metrics measure behavior—collaboration, integrity, leadership, innovation.
Both should factor into promotions, raises, and leadership decisions. When you get this balance right, you create a workforce that’s both high-performing and culturally aligned. That’s where the foundations for long-term success are built.
How leading companies integrate values into performance reviews
Some of the most successful companies build their values into their business model. Here’s how three industry leaders are doing it:
Patagonia: Sustainability as a performance metric
Patagonia doesn’t tie employee performance to sustainability. Employees are evaluated on how they contribute to reducing waste, using ethical sourcing, and supporting environmental initiatives. The company rewards those who actively help Patagonia fulfill its broader mission, ensuring sustainability is actually a key part of its culture, and not a glorified marketing slogan.
Google: Innovation in performance reviews
At Google, innovation is measured. Employees are assessed on how they generate new ideas, take smart risks, and solve problems creatively. Metrics include the number of new product ideas proposed, successful implementation of new processes, and contributions to cutting-edge solutions. The result? A culture where pushing boundaries is both encouraged and even expected.
Zappos: Customer service as a core value
Zappos is famous for its customer-first mindset, and its performance reviews reflect that. Employees are evaluated both on productivity and on how they make customers feel. Reviews factor in customer feedback, problem-solving creativity, and the ability to exceed expectations. Employees who go above and beyond for customers are publicly recognized and rewarded, reinforcing a service-driven culture.
Key takeaways from these companies:
- Values can and should be measured. Employees know exactly how their behaviors impact their reviews.
- There’s clear alignment between values and business goals. Google’s innovation focus drives new product development, Patagonia’s sustainability efforts strengthen its brand, and Zappos’ customer-first approach fuels loyalty.
- Recognition and rewards reinforce the right behaviors. Employees who live out company values are promoted.
If you want values-based reviews to work, you can’t simply list values on a company website. You need to embed them into hiring, promotions, and leadership decisions.
Make values-based performance feedback actionable
Values-driven feedback isn’t saying “good job” or “you need to improve.” It should be direct, specific, and actionable.
What great values-based feedback looks like:
- Specific – Clearly describes what the employee did.
- Impact-driven – Shows why it matters.
- Actionable – Provides guidance on what to keep doing or change.
Here’s how it works in practice:
✅ Integrity – Positive feedback
“You consistently handle confidential client information with discretion, ensuring compliance with our security policies. This strengthens client trust and protects the company from legal risks.”
❌ Integrity – Constructive feedback
“There were instances where project updates weren’t fully transparent. Moving forward, ensure key stakeholders are informed earlier to avoid last-minute issues.”
✅ Collaboration – Positive feedback
“During the quarterly planning meeting, you encouraged input from every team member, ensuring all voices were heard. This led to stronger alignment and a more effective strategy.”
❌ Collaboration – Constructive feedback
“Your contributions within your direct team are strong, but engagement in cross-functional projects has been limited. Actively participating in company-wide initiatives will strengthen collaboration and visibility.”
✅ Innovation – Positive feedback
“Your suggestion to integrate a new CRM tool streamlined our workflow, cutting administrative time by 20%. Your willingness to test and adopt new solutions improves team efficiency.”
❌ Innovation – Constructive feedback
“Your execution of tasks is solid, but we encourage you to take more initiative in proposing new solutions. Experimenting with process improvements could elevate team performance.”
This kind of feedback isn’t vague or generic as it links values directly to business outcomes. When employees understand exactly what’s expected and how they can improve, values-based reviews become a growth tool.
Final thoughts
Values-based performance reviews shape company culture, influence hiring decisions, and determine who leads the organization in the future.
Companies that do this well—like Patagonia, Google, and Zappos—don’t claim to value integrity, innovation, or customer service, but they measure it, reward it, and embed it into their business strategy.
The ultimate result is a workforce that meets goals and builds something greater. You’ll have an organization where success is built by focusing on the people and principles that drive long-term impact.
