Some of the biggest names in technology and finance are not just making headlines for innovative advancement in their industries. Believe it or not, these companies also have unique approaches to performance management leading the way. Systems created by them for discovering great managers are becoming a trend and technology developed for their employee review purposes are grabbing everyone’s attention. Thriving in their performance management goals, one thing these three companies have in common is they saw a need for modification, and set out to reinvent the way they manage employee performance. The results have kept their employees happy while saving their businesses time and money.
Google is an American multinational technology company that specializes in Internet-related services and products. They have what some might say is the world’s most progressive human resource organization. Google calls it “People Operations Practice” and they focus on three main purposes:
- Select and hire only the best fit candidates
- Build a merit based reward/incentive system
- Developing employees to their fullest potential, through coaching, outside training, and through a 360-degree crowdsourced feedback program
Taking a further dive into the way they implement these purposes, we find out that Google has a combination of some traditional HR practices with a new twist. This summary breaks down the performance management process Google is well known for:
- Annual performance review with a mid-year checkpoint
- Monthly performance check-ins that address career development, coaching, personal issues, etc.
- “Googlegeist engagement survey” (measures a vast expandment of topics)
- Annual “Upward Feedback Survey”, similar to 360-degree review where only supervisors are reviewed by their direct reports
- A mildly different form of Management-by-Objectives called OKRs (objectives and key-results)
- “Meritocracy”: compensating people unequally through bonuses, equity stock option grants, and prizes.
Betterment is an online investment company known for using technology to yield returns. They do not get paid for certain funds or have any of their own, which gives them their customer centric style. Through the years, Betterment’s HR approach has emphasized a performance management philosophy of constant iteration. Jon Stein, Betterment’s CEO and founder, says the best system is one that changes easily just as your company grows and changes also. What he has learned from several trial and errors can be summed up into a final version of Betterment’s Performance Management System including:
- Betterment added key performance indicators:
- This move was meant for overall business performance rather than singular, distinct targets. An example they’ve mentioned is tracking referrals as a key performance indicator to make sure they're headed in the right direction, instead of setting a quota that had to be met.
- They developed a new tier of leadership to facilitate more cross-team partnerships:
- This is a great example of a fast-growing company revising its performance management to cope, as well as communicate the need for organizational change.
- They called this new management level "pillar leads" that work on cross-functional projects as a unified group.
- They made reporting simpler and more visible for all:
- While every team has a “dashboard”, it is rare for them to instinctively collaborate or deviate from their own personal objectives. The need for more push metrics arose but Betterment wanted to broadcast in a way that was clear, allowing teams to see each other’s progress toward company goals. For instance, they send and email regularly to everyone highlighting current numbers and team metrics as well as posting them up on walls for public viewing. This has also created a common impression that “all hands on deck” to get fellow employees where they need to go.
IBM is an American multinational information technology company, that recently changed it’s 10 year old performance review system for a brand new approach that shifts employee goals throughout the year and involves much more feedback. This change came about because IBM’s chief HR officer noted employees were already doing work differently. The former system, quite similar to many traditional annual reviews, asked employees to set their goals for the year in January. After a mid-year check-in with management, they’d receive a final assessment and a single performance score in December of that same year. According to Diane Gherson, employees entered a variety of situations throughout the year, which meant oftentimes they weren’t even working towards those original objectives. So managers ended up in “irrelevant discussion” during the annual evaluation trying to determine whether the 11 month old goals were fulfilled. What they ended up with was an effort of crowdsourcing ideas from 380,000 employees across 170 countries.
They eliminated some unexpected ideas:
- Self-assessments; the majority of employees didn’t feel it was helpful
- Relative performance rankings; managers would no longer meet with each other to compare employees, rather, the employees wanted more frequent, direct feedback.
The result was an app-based performance review system, they named “Checkpoint”. With Checkpoint, IBM employees will have a performance management program that addresses several key objectives:
- Setting shorter-term goals
- Management feedback on employee progress every quarter (or less)
- Employees will be judged across five criteria in which managers will assess whether they’ve “exceeded” or “achieved expectations” in these dimensions (or if improvement is needed): 1. business results, 2. impact on client success, 3. innovation, 4. personal responsibility to others, 5. skills.
Kudos to IBM for creating an app! There is now no single measure of an employee’s performance like in the old system. Before there was only one score but now there are five. This makes for a much more dynamic and balanced discussion.
Google, Betterment, and IBM remained flexible in their approach to HR practices. As a result, their creativity led them to redesign performance management systems that just weren’t effective anymore. In all likelihood, these practical examples of companies managing performance in their own way prove one size doesn’t fit all but there are certainly great models to glean from.
These organizations are not the only ones going their own way. These days most great organizations are thinking critically about performance management and coming up with innovative new solutions. Here are a few more examples to help inspire your own strategy.
And if you're ready to take the next step, check out our guide to creating your own modern performance management process.