Palo Alto-based startup Zugata Inc. has just landed $7 million in a Series A funding round as it bids to do away with hated annual performance reviews at large companies.

Venture capital firm Canaan Partners led the round, with participation from General Catalyst and Redpoint Ventures. Zugata says the plan is to use the cash to develop new products and build out its sales and marketing teams.

Zugata’s pitch is an intriguing one. The company has built software that constantly gathers feedback on company employees and then automates their performance reviews, but with a much higher degree of accuracy than traditional methods can, its founders say.

Zugata’s software as a service works by identifying the colleagues an employee works with the most, and then helping them to provide feedback about one another, without any interference or eavesdropping from senior managers or the human relations department. Companies can also set a policy so employees can actively share feedback about their co-workers, and this can be done either anonymously, or with employees’ names attached.

Each employee has a profile that lists a set of skills that person should have mastered in order to carry out their role at work. The employee’s coworkers can then rate the employee, anonymously or not, for each of the skills on the list, marking it as a “strength” or not.

The second aspect of Zugata’s platform is its recommendation engine, which delivers personal development resources to employees that they can study in order to build their skills and promote a culture of shared success, the company says. Finally, Zugata also packs analytics capabilities that allows HR departments to gain a clearer picture of employee’s team and organizational level skills, helping them to make better hiring decisions.

“Zugata is at the forefront of a paradigm shift in HR away from the inefficient ritual of annual reviews to continuous feedback and coaching, which is proven to be a much more effective way to impact employee performance and groom future talent,” said Canaan Partners General Partner Hrach Simonian. “The Zugata platform is the closest thing we’ve seen to automated performance management and employee development.”

Zugata isn’t the only one that believes the concept of annual performance reviews is outdated. Earlier this year, General Electric Corp. revealed that it too was abandoning annual and quarterly reviews in favor of a real-time feedback system, in an effort to make the feedback process more like how people give each other advice in the real world. Just as with Zugata, the thinking behind GE’s idea is that rather than dragging employees into the boss’s office once a year to give them an earful, they can provide them with continuous insights on a day to day basis that can actually help them to boost their performance.

“Cutting-edge organizations are shifting the focus of performance reviews to helping employees develop instead of looking back to rate their performance,” said Zugata cofounder and Chief Executive Srinivas Krishnamurti (above, far left). “Employees need to get continuous feedback throughout the year but it’s what they do with that feedback is critical to their development. We are uniquely positioned to tie feedback to development resources and track development progress over time.”

Krishnamurti appeared on SiliconANGLE’s TV show theCUBE earlier this year, where he shared more details about how the Zugata platform works, his company’s vision and goals:

Image credit: Zugata via Twitter