A practical look at building and implementing your perfect performance management process.
We've all heard the epic stories of game-changers like Jack Welch who seemingly pull off the impossible by getting 250,000 employees to "pull in the same direction" and reach record-breaking levels of success in their business. We've seen the stats. We've read the headlines. We get it.
Performance management matters.
For many of us, the question isn't whether or not to use a performance management process, it's: Where the heck do you start?
(Check out our getting started guide too!)
For most of us, what performance management is clear. We do reviews, encourage feedback, and set goals. But beyond these activities, what's the point of doing it all? Why does your organization do performance management?
Taking a hard look at the purpose of your processes is REALLY important. As great as performance management can be, it can also go horribly wrong.
When we talk about performance management gone wrong, there's always one underlying theme uniting these cautionary tales: Businesses veer off-track because they've lost sight of the why.
From launching a new service to enabling human life on Mars, every awe-inspiring mission starts with a compelling goal — or, "north star" — to keep its supporters firmly on track.
In fact, a study by Korn Ferry titled, “People on a mission" found that consumer companies that focused their employees on the organization’s purpose boasted annual growth rates that were nearly triple the annual rate in their sector.
If you want to prevent your performance management process from becoming just another blip in a miles-long HR paper trail, you need a clear goal to keep it on track.
But if you're like most businesses, you probably have multiple goals, objectives and values guiding your business. Which one should be the focus of your performance management process? It's a tough call. And the answer will always depend on the unique culture of your organization and the industry you're in.
From classic innovators to the new and "unusual", here are 9 examples of companies with a clear goal for their performance management processes. Hopefully, these examples will inspire you to create the one that's right for you.
In 2015, Deloitte radically revamped their performance management system from the traditional annual review system which, like so many others, had a north star of "accountability" based on past performance.
The big four consulting company now uses a quarterly review system with the overriding goal of coaching and developing its employees. In shifting their focus from past to current and future performance, Deloitte shed a floodlight on one of the biggest intrinsic challenges in employee reviews, striking a balance between development and accountability. In the words of one Deloitte manager, "The conversations are more holistic. They’re about goals and strengths, not just about past performance."
Like Deloitte, GE is another major name in performance management. Jack Welch's famed "Rank and Yank" approach to performance management has become synonymous with competitive 1980s business culture. But in recent decades, the company has shifted its PM process from one of ruthless evaluation to goal-setting and aspirational guidance (drivers which some would argue were always there.)
Though the rank and yank model was effective in improving performance and encouraging candor between managers and employees, it fueled an element of competition that proved counterproductive to the collaborative way in which most businesses must now operate. In perhaps one of the most extreme examples of a performance-management-180, GE now uses a continuous feedback approach. Managers and employees use a performance-tracking mobile app (called PD@GE) that allows managers and employees to make text or audio notes, attach documents and upload handwritten notes which they can later discuss in their next check-in.
Like Deloitte, Accenture is a giant in the consulting world. The management advisory firm is also a regular on Fortune's best companies to work for rankings. And like Deloitte, Accenture moved away from a rigid performance management system, shifting from evaluation to development. It was again, a massive undertaking, “Imagine, for a company of 330,000 people, changing the performance management process — it's huge,” said Pierre Nanterme, CEO of Accenture in a 2015 interview with The Washington Post. “We're going to get rid of probably 90% of what we did in the past.”
While Accenture's approach looks very similar to that of Deloitte and others, the company's PM strategy has one clear differentiator — employees work with managers to set goals for themselves. At first glance, it can be tempting to view this as just another thinly veiled approach to rank and yank, but for Accenture, this focus on individuality is fundamental to coaching employees to "know thyself" and encourages a greater sense of passion and dedication at work.
It's one thing when a millennial-run tech startup bucks an ongoing HR trend — it's a whole other thing completely when a giant like Microsoft does it. In 2013, the software giant was under increasing heat from former employees to eliminate its cutthroat stack ranking system, prompting Microsoft to become one of the first big-name brands to ditch employee ranking. Instead of sticking to forced timelines and rating curves, Microsoft created a performance management process called “Connects”. Similar to PD@GE, Microsoft optimizes their workflows to accommodate for timely feedback based on the rhythm of each part of their business — rather than following one timeline for the entire company.
While there is definitely an element of collaboration and development in Microsoft's new system, the real goal is to eliminate the many silos that exist in a company their size and foster a better sense of teamwork in order to act more quickly on changes in the market and avoid becoming the proverbial business Titanic. "The changes we are making are important and necessary as we work to deliver innovation and value to customers through more connected engagement across the company," said former EVP of HR, Lisa Brummel.
If it weren't for Adobe's fearless approach to performance management, companies like Microsoft and GE might still be stuck in a rigid ratings-based system. The company is credited "killing annual performance reviews," in keeping with the famous “Agile Manifesto” and the idea that annual targets are actually pretty irrelevant to the reality of day-to-day business operations.
In 2012, they introduced the concept of "Regular Performance Check-Ins", an informal system of ongoing, real-time feedback. Under their game-changing system, there are no deadlines and no forms to fill out and submit to HR. Managers decide how and when to set goals and give feedback. In removing the red tape from the performance appraisal process, Adobe allows teams to act more independently and more quickly in response to changes in the business and market. Since implementing their agile approach, the company has seen a 30% decrease in voluntary turnover and a 50% increase in involuntary departures.
Ok, enough with the Fortune 500 examples. The best inspiration doesn't always come from the biggest names. Take The Stanley Clark School for example. This independent, private school serving children from preschool to eighth grade in South Bend, Indiana shows how a clear performance goal can help you punch above your weight. Schools across the US are plagued with toxic working environments, which undoubtedly has a negative impact on students. In her guest post for Gibson, Melissa Grubb, Head of School at The Stanley Clark School explains how they set their unique goal for a performance system and culture to rise above.
"First, a word about the assumption made as we embarked on creating a new process. We assumed each employee is competent and that the process should support our expectation of continuous improvement. Our interview process lasts for days in most cases and, if we make a hiring mistake, we correct it as soon as possible regardless of the evaluation cycle. We assume the process is designed for the employees we wish to keep, not the occasional bad fit."
Because they removed the accountability factor from the process completely, Melissa and her team can firmly focus on developing the employee within the context of the school's unique cultural values. Employees are given 6 questions and 30 positive statements to review before each performance-related meeting in order to help spark a productive conversation about their performance and how it fits into the greater whole.
In case you haven't heard of Valve, they're the billion-dollar company behind some of the world's most popular video games. With no hierarchy, no set performance metrics and no seating chart, Valve's unique company culture (referred to as "Flatland") is designed to get maximum creativity out of its employees. So what purpose does its performance management process serve?
For a company so "out there", Valve uses performance appraisals in surprisingly traditional sense. The company creates a team of employees who then conducts performance interviews with each individual in the company, asking them who they worked with and what their experiences were working with that person. They then anonymize the feedback and present it to employees in what is a fairly typical 360 review system. When performance issues arise, they work with the individual to try to find a solution. If firing is the consensus, they make an attractive severance offer and attempt to part on amicable terms. For Valve, using their PM process to enforce accountability at the group level is a great way to loosen the reins in the day-to-day.
Gap is another company considered an early innovator in the world of performance appraisals. The company has a firm commitment around maintaining a growth mindset — the belief that everyone can be learn from their success and failures. While traditional performance management almost always begins with a lofty, passionately-worded goal, the high street retailer focuses on short-term quarterly goals supported by real time feedback, regular check-in and annual “GPS” (Grow, Perform, Succeed) meetings.
At Gap, there's no annual review and no ratings. By coupling short-term goals with individual accountability, the retailer puts growth front and center in their performance management strategy.
Tech startup Asana doubles down on the idea of aligning values with performance expectations in their famous AOR (Areas of Responsibility) framework. Instead of a traditional hierarchy, managers (a.k.a. "AOR-holders") trust their people to make the best decisions for the business.
And their performance management system is a clear reflection of their culture. Instead of annual or quarterly reviews, Asana gives face-to-face feedback often, and with zero paper trail. The company has a self-review at the end of each year, in addition to a biannual review of the company’s general direction where teams take weeks out of the office to discuss goals and performance-related issues and hold regular feedback sessions with peers and managers in a closed retreat-like setting (not unlike Microsoft's famous Think Weeks).
The focus on autonomy and objectivity are upheld through regular one-on-ones where AOR-holders and leaders ask personal development questions like, "What are you feeling?" and "What are your long-term human aspirations?". It may sound a little woo woo for those of us who have been in the game since the pre-Facebook days, but with over 20K+ paying customers and plans to go global, the company seems to be onto something.
Performance management is considered a distraction. We can change this by designing our performance management processes for our employees.
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