Operationalizing Culture: Lessons from Hostelworld’s Innovative Performance Management

Operationalizing a new organizational culture is key to implementing a new strategic direction.  Hostelworld’s story provides a compelling example of driving the cultural transformation needed to shift their business.  Rethinking employee performance reviews is supporting the company’s evolution from a platform for finding hostels to one that promotes social connection.

Aligning Culture with Strategy

Hostelworld was started in 1999 as an online travel agent (OTA) focused on the hostel market.  But, coming out of the COVID pandemic and observing a new epidemic of loneliness emerge, Gary Morrison, CEO of the company, saw an opportunity to fill a larger, more important market need – social connection. So, last year Morrison and his team embarked on a new mission to create a platform for people who are looking to meet other people while traveling. 

But the company needed more than a new strategy—it also required a culture shift. Morrison recognized that to support the bold mission, his team had to become more agile, embrace risk, and work interdependently. Importantly, every employee had to actively contribute to making this desired culture a reality.

Making Culture Everyone’s Responsibility

Morrison led the adoption of an innovative approach to employee performance reviews, partnering with Incompass Labs. The AI-powered platform they’ve developed enables companies to conduct 360-degree reviews that are less biased and more accurate and timely.  Hostelworld uses it to promote alignment with and buy-in to its desired culture and reinforces how culture-building is everyone’s responsibility.

Change Performance Reviews to Change Culture

Hostelworld’s innovative approach to performance management is reshaping its culture by:

1. Removing bias.  Everyone at Hostelworld has the opportunity to review everyone else.

Traditional 360-degree employee review processes are flawed by selection bias and manipulation.  Because employees usually determine most of the people who are asked to rate them, they quite understandably choose colleagues who are likely to provide positive reviews, and reviewers often refrain from providing honest feedback if they believe their comments would prompt retribution.

Hostelworld tackled these challenges by making the process more objective. The Incompass Labs system allows employees to select the colleagues they want to review.  Hostelworld also requires that each employee be reviewed by at least one manager, one peer, and one direct report. Once all the feedback is submitted, the Incompass Labs algorithm calibrates each employee's feedback in the context of all the peer feedback that is gathered. The algorithm detects feedback that may be inaccurate, it weighs feedback by peer-determined expertise, and it helps account for the variability in feedback styles (e.g., the fact that some people-- or some cultures -- are hard graders while others are easy.)

This approach, Morrison explains, reduces the variability and biases in 360s and gives everyone more confidence in the fairness of the process.

2. Evaluating behaviors.  Hostelworld uses behavioral dimensions in employee assessments.  Morrison has found that measuring employees on concrete, observable behaviors -- such as data-driven decision-making and helping others grow -- makes performance reviews more accurate and actionable. Managers can engage in clearer, more productive conversations about employee performance, and employees have a clearer understanding of the new expectations.

3. Reducing time and effort.  Using AI to analyze and synthesize feedback has made the review process seamless and efficient, taking just a few days. This allows Hostelworld to conduct multiple review cycles per year, creating a more responsive and agile workforce. Timely feedback motivates and empowers employees to adapt quickly, and managers can administer bonus pools and recognize and reward high performers in other ways more efficiently.

Operationalizing Culture to Drive Change

Research from Gartner reveals that when leaders want to change the culture of their organizations, nearly all (83%) change what they say.  Far fewer (29%) change their own behavior so that they role model actions that are consistent with the desired culture.  And, very few (19%) change the operations of the company, even though these changes have the most impact on employees and organizational culture.   

Morrison and his team have changed a key operational process at Hostelworld – employee performance reviews – and in doing so, they demonstrate that culture-building isn’t just about words.  It’s about the processes and practices that change the way teams work every day.