Performance management software costs between $4 and $12 per employee per month based on the number of employees. If you have under a few hundred employees expect to be on the higher end. Minimum annual contract sizes range from $4,000 to $15,000.
It is important to consider the full cost of implementing a performance management system. Some vendors will add additional charges for set-up, training, customer support and add-on modules.
There is no free standalone performance appraisal software currently available.
PerformYard offers straightforward and transparent pricing of $4-8 per month. Every feature is included, and every customer gets a dedicated customer success manager for implementation, training and support.
Connect with our team to get an exact quote for your organization.
Almost all performance management software is sold as a license to use the software for a given time. This way, your organization can start using performance management software at a relatively low price and still get the benefits of continuous updates and support from the vendor. The price is based on the number of employees using the software. This price is often referred to as the “per-employee-per-month” price or PEMP. In order to calculate the annual price you will pay for the software multiply Employees x PEPM Cost x 12.
The PEPM price will vary depending on the number of employees your organization will be purchasing seats for. Usually larger organizations will pay less per employee as the overall size of the contract is larger. Every vendor will be different in terms of what they charge and how the price varies based on seat count.
Another thing to consider is whether the vendor has a minimum contract size. Minimum prices can vary greatly. Some software vendors will only work with organizations that have hundreds of employees and pay tens of thousands of dollars per year.
At PerformYard, we charge between $4 and $8 per employee per month. Organizations with more than a few hundred employees will be in the lower half of the range, and organizations with fewer will be in the upper half. To get an exact quote for your number of employees, connect with our team here.
PerformYard does not have any additional charges. We believe in giving customers everything they need to succeed, including every feature and unlimited support from our team. However, some vendors do have additional charges that you should be aware of.
PerformYard’s one simple price always includes implementation, support and trainings.
Some vendors will charge an up-front fee to help your organization start using their software. This fee, sometimes referred to as a “setup fee” or “implementation fee,” can range from $2,000 to $10,000 depending on the vendor.
What is included in the implementation fee is often a set of services that are defined in your agreement. If you go beyond the agreed upon services, you may be subject to even more fees. For example, you could get two employee trainings as part of the fee but be on the hook for even more charges if you need to do additional trainings.
For small and midsize organizations, implementation fees can be a red flag that signal the software is very difficult to set up and use.
PerformYard’s support is always included and unlimited. For as long as you’re a customer you’ll work with a dedicated team member who knows your account.
Some vendors put limits on the type and amount of support they offer as part of the license agreement. For example, maybe you will be able to read support documents and submit “tickets” to unknown support staff, but you won’t be allowed to speak with anyone on the phone or collaborate in real time with someone who knows your account. Usually these vendors will offer higher-quality support, but it will come with an additional fee. Other vendors will only offer quality support to their largest customer, and leave small customers to figure things out on their own.
High-quality support with someone who understands your organization is very important for performance management software. Performance management initiatives impact every person in the organization, including executives and leadership. When you are about to launch a cycle across the organization, it’s important to have the confidence that everything is going to work perfectly and as expected.
The return on investing in performance management software is usually quite high. The cost of the software is less than 0.1% of an organization’s total human capital costs, and the benefits can be large and meaningful.
Reducing the administrative burden on employees
HR teams can spend a lot of time administering review cycles by distributing and collecting review forms, chasing incomplete forms, signing off on reviews, recording appraisal data and compiling data for analysis, despite the fact that all these tasks should be easily automated.
Employees and managers also spend a lot of time on reviews, chasing down the appropriate forms, going back and forth with HR on exactly what is expected or searching for lost data.
For a typical organization, saving just 1-2 hours per employee per year will pay for the price of the software. And this is just one of many benefits.
Reducing employee turnover
The average hard costs of employee turnover are 21% of the position’s salary. This number can balloon to 213% for highly specialized and senior positions.
With an effective performance management strategy, your organization can get in front of turnover by better recognizing your highest performing employees or even just having more frequent conversations with employees about their professional goals and aspirations.
For a typical organization, stopping just one or two employees from leaving per year will pay for the price of the software. That is only counting hard costs. The opportunity cost of losing a great employee is far far greater than the hard costs.
Improving organizational alignment
Organizations often struggle to align employees around organizational goals. Without frequent feedback and goal discussions, it can be easy for employees to head off in the wrong direction.
If your performance management approach can correct just 0.1% of misaligned employee time, that will also pay for the price of the software.
Improving workforce optimization
Human capital costs are often the largest single line item for an organization, and yet most organizations under-invest in their people. Making small investments in developing employees, driving engagement or aligning work can have huge returns.
Stanford professors O'Reilly and Pfeffer found that a change of one standard deviation in an index of human resource management practices produced increases of $20,000 to $40,000 in stock market value per employee.
At PerformYard we like to keep things simple. Every feature is included in one low price, and every customer gets a dedicated customer success manager for implementation, training and support at no additional cost.
90-day reviews of new employees have several benefits including increased productivity, stronger employee-manager relationships, and the opportunity for quick feedback. Employee turnover in the first year is high and 90-day reviews ensure employees get the information they need to correct issues and double down on successes.
Additionally, 90 days is a realistic timeframe to measure a new employee’s performance and give them ample time to formulate their own questions. Successful 90-day reviews also complete the transition from new employee to valuable contributor.
90-day reviews should make the onboarding processes for hires and managers easier and begin a formal review cycle that continues during the employee’s time at the company.
A 90-day review also lets employees ask questions and share feedback with the company about their experience so far. In return, the managers share their feedback, set clear expectations for the future, and build their relationship with the new hire
There are several ways to manage the 90-day performance review process including email, online survey tools, and online performance management systems.
The easiest way to manage 90-day performance review with online performance management systems like PerformYard. These flexible systems have benefits like automating the process, recording the employee’s performance history in one place, and using comparison tools to review an employee’s 90-day performance with future performance check-ins.
More cumbersome is using email to manage 90-day reviews. HR directors can send review forms to managers and employees for them to fill out the review. Completed forms are then saved manually to an employee’s file.
Another option is to use an online survey tool like Survey Monkey or Google Sheets. Survey programs have the option to export results to a spreadsheet which are transferred manually to the employee’s file.
If you're interested in streamlining your performance management process (including 90-day reviews), click here to learn more about the PerformYard platform.
When should new employee performance reviews happen?
While some organizations check-in with employees after 30 or 60 days to evaluate the onboarding process, the first true performance review is commonly done at 90 days.
90 days is a good timeframe for employees to understand the organization and their responsibilities. Since performing at a new job is stressful, managers should not postpone these reviews unnecessarily.
What questions should I ask in a 90-day review?
Along with performance questions you would ask of any employee, there are specific questions to ask new hires. These include “How does your new role compare to the expectations you had coming in?” Download our template for more questions.
How should a 90-day review be structured?
90-day reviews should include a self review, manager review and a performance conversation. Employees should have the opportunity to ask their own questions and offer feedback for the manager and company.
There is nothing more fundamental to the success of an organization than employee performance. Maybe that’s why there is a seemingly endless number of performance appraisal processes for evaluating, measuring, driving, and developing employee performance.
In this article we review 14 of the most common performance evaluation methods, everything from traditional methods of appraisals like competency assessments to more extreme appraisal techniques like human resource accounting.
For every approach we’ll also share when it is most effective and appropriate to use. Choosing the right performance appraisal approach isn’t about picking favorites, it’s about serving the unique needs of your employees and your organization.
When building out a complete performance management system organizations will often choose to combine a few of the following appraisals.
Performance check-ins are often confused with other types of performance reviews, but they’re not the same. Performance check-ins happen more often, they are more informal and they give managers the opportunity to build rapport and find out what employees are working on between cycles.
Check-ins can have set agendas or be completely open-ended. Most often employees and managers will discuss progress towards company goals, overall performance since the last check-in and the employee’s aspirations.
The primary role of check-ins is to create a consistent time and space for discussions of long-term performance. In the bustle of the day-to-day it can be hard for managers and employees to ever sit down and take a long-term view of performance.
When to use check-ins
Check-ins can be used effectively at most companies. They are most often deployed between more intensive appraisal processes to spread out performance discussions throughout the year without overburdening employees and the organization. Check-ins are also important if your employees are setting long term goals, for example career goals. More frequent check-ins help to ground long-term goals to shorter term actions.
As its name suggests, the narrative performance appraisal is created when a manager writes a freeform essay about the employee’s performance over the review period. Essay appraisals allow reviewers to discuss anything they feel is pertinent to the employee without being locked in to certain questions.
In a perfect world this approach allows managers to focus on exactly what an employee needs to hear and provide the most relevant feedback. However in the real world managers don’t alway express themselves clearly and essay appraisals can leave employees feeling confused on where they stand.
The narrative appraisal is customized to each employee which makes it very hard, to impossible, to make comparisons across employees.
When to use essay/narrative appraisals
Essay appraisals are best for employees with loosely defined jobs or who are doing very individualized creative work. When it is hard to quantify the inputs of and outputs of employees’ work or you feel like every employee would need their own custom appraisal questions in order to get relevant feedback, then the narrative appraisal could be right for you.
Narrative appraisals are also a way for great managers to shine. If your managers are willing to write clear thoughtful feedback to each of their reports, it is worth formalizing that process.
360 feedback involves getting broad feedback from an employee’s coworkers. This can mean peer reviews, self-reviews, manager-reviews, secondary manager reviews, or upward reviews. The idea is to increase the sources of feedback in order to get a more accurate and holistic view of employee performance. Often 360 feedback will be open-ended or thematic with the employee’s manager reviewing and aggregating the feedback into a single more cohesive picture of performance.
When to use 360 feedback
360 feedback is a great option for when employees regularly work collaboratively on different teams. When an employee’s primary role is working with others outside of the view of their manager 360 reviews can bring to light feedback that might not otherwise be raised. Peers are often hesitant to give negative feedback outside of a formal context, 360 reviews provide that context.
One key to successful 360 reviews is to train everyone in the organization on delivering effective feedback. Sometimes non-managers are less experienced giving feedback and what they share can be more destructive than constructive.
Competency assessments measure an employee’s capabilities against their critical job skills. These assessments show the gaps between where an employee needs to be and where they are now.
Competency assessments often flow naturally into a concrete learning plan focused on the competencies with gaps. This type of appraisal can be conducted in a variety of ways including through observation, interview, or form. The key is to choose the right competencies for every role at your organization.
When to use competency assessments
Competency assessments are great for jobs where success is dependent on well understood skills. It usually helps to have many employees in a similar role, so that you can begin to understand the competencies that matter through experience.
Focusing on a specific set of competencies can lead you down the road of only recognizing employees who succeed in one specific type of way. Employees who drive great outcomes, but do so in unexpected ways may find it difficult to progress when they are evaluated on competencies rather than outcomes.
In a grading/rating performance appraisal, managers use a numerical (1-5) or descriptive scale to record an employee’s performance in specific areas of their job. Companies such as Amazon and Deloitte use forms of rating scales. Because they are easy to fill out and create quantitative data rating appraisals are very popular.
But anything worth doing is hard, right? One of the keys to rating appraisals is making sure managers aren’t just mailing them in, doing the minimum and getting them done without having the difficult and important conversations that need to accompany these types of appraisals. Ratings send a very clear message of where an employee stands, but they do a very poor job of telling an employee where they need to go.
When to use grading/rating appraisals
Rating scales work well at organizations that need to create more accountability. It’s impossible to spin a low rating. Just remember that if you want employees to up their game, you’ll need to do more than just tell them they are underperforming.
Stack rankings and forced distributions are a controversial method of performance appraisals that rely on ranking employees against each other. Sometimes this is a top to bottom list and sometimes it’s into buckets of high-performing, low-performing and the middle with quotas for each. Rankings force managers to differentiate between employees to find out which ones actually have the highest performance. It also makes it very clear where employees stand in relation to their peers.
When to use ranking appraisals
Ranking appraisals can work great for competitive environments like up-or-out consulting firms. In these situations everyone knows they need to be a top performer to stay with the firm, so it’s healthier to make this process transparent and open.
Forced distributions can also be a useful approach in the short-term for organizations that have become stagnant and are being dragged down by low performers. Sometimes letting employees who have checked-out move on to a new job and brining in fresh talent is the best decision for everyone.
Rankings are not great for companies that are focused on innovation or creativity. Moments of creativity can be uneven and unpredictable. Pushing employees out after one underperforming year probably doesn’t make sense in that context. Ratings also aren’t great for organizations that need to be extremely collaborative, as it creates a tension and competitiveness between employees.
Project-based reviews are unique in that they focus on the most recent work an employee has completed. Project-based reviews have questions that are directly related to an employee’s contribution to a project. Feedback cycles can also be quicker for this appraisal type as projects often cycle more frequently than traditional review cycles.
When to use project-based reviews
Project-based reviews are best for companies that work on distinct projects one at a time (or almost one at a time). It’s best when these projects last from a few weeks to a few months. Typical examples are accounting audit teams, consulting teams, and some types of law firms. Project-based reviews are especially useful when organizations are bringing together new groups of employees for each project.
External and client appraisals involve bringing in third parties from outside the company to help with performance reviews. For employees that primarily engage with customers or clients this can be the most important source of feedback. Gig-economy companies like Uber rely exclusively on client appraisals to manage their contract workforce.
When to use external/client appraisals
Client appraisals are great for service roles where an employees primary job is to interact with customers. External appraisals are also a good option for employees that work as closely with a client as they do with their coworker, like a consultant on site with a client for an extended period.
In checklist appraisals, managers are asked to answer “yes” or “no” to a series of questions or statements about an employee. These appraisals tend to be easy to complete and can help an employee know where they stand across a broad set of domains. Google famously uses this approach to review their managers. Employees answer yes or no for a long list of actions Google believes good managers should be taking with their reports. Read more about Google’s upward reviews in our article here.
When to use checklist appraisals
Checklist appraisals are binary and therefore best for traits where levels of gray don’t matter. Checklist are also great when you want to provide a lot of feedback in a lot of areas, and you need to keep the the appraisal easy to complete. Upward feedback is a good example of this.
Management by objectives measures employee performance by how they achieve specific objectives. These objectives are decided on with equal input from both employees and managers. The objectives should align with organizational goals, and there should be effective communication on both the employee’s and manager’s part to ensure the objectives are met.
When to use MBO
MBO can be applicable to many organizations. The most difficult part is the communication needed between employees and managers. If your staff is already communicating well, it should not add much of a workload or cost. Some criticize MBO for being too focused on goals at any cost and missing more human elements of work, but effective communication through the process will make sure that employees’ more personal needs are met alongside the organizational goals.
Behaviorally Anchored Rating Scales, also known as BARS, is a type of performance management scale that uses behavior “statements” as a reference point for rankings. BARS measures employee performance against specific examples of behavior that are given a number ranking.
For example, a pizza place could use a Level 1 ranking to describe an employee who “is often late, receives regular customer complaints, and takes >10 minutes to make a pizza” while a Level 5 ranking would describe an employee who “is never late, receives multiple stellar customer reviews, and makes a pizza in under 5 minutes.”
BARS is helpful because it combines qualitative and quantitative assessments. The behavioral definitions can also aid in eliminating ranking bias.
When to use BARS
Because of the time-consuming nature of coming up with behavioral statements for every position, BARS is best for larger companies with the resources to create an excellent scale. It’s also best if a company has groups of employees with very similar jobs that can use the same rating scale.
For critical incident appraisals, managers keep a log of specific examples of both negative and positive behavior exhibited by employees. The standard for behavior can be based on company values or an employee’s job description. A continuous log makes sure that performance reviews focus equally on performance across the year and focus on concrete moments rather and general sentiments. It’s important that the descriptions of these incidents are made as they occur.
When to use critical incident appraisals
Critical incident appraisals are simply descriptions of events and that can make it hard to compare employees or make decisions based on them. They can also be overwhelming and hard to interpret as a whole if they aren’t paired with some analysis.
Also called cost accounting, human resource accounting analyzes an employee’s performance through the monetary gains they bring to the organization vs their costs. Assuming you could have perfect measurement this could be the ideal appraisal approach. Unfortunately it can be very hard to perfectly understand all the costs and benefits an employee has on an organization.
When to use Human Resource Accounting
Human resource accounting is most useful when employee contributions and costs are measurable. This can happen in situations where executives are judged on their P&L or for positions like sales where the ultimate measure of success is revenue generated.
Psychological appraisals are unique in that they look forward to an employee’s future performance rather than focusing on their past. In this appraisal, psychologists look at the employee’s internal traits and qualities that could affect their performance in the future. The psychologists can look at specific scenarios when performing their tests to discover how an employee is likely to perform in similar scenarios in the future.
When to use psychological appraisals
While useful, psychological appraisals can be time-consuming and costly, especially for small organizations. They can be used in specific scenarios such as determining which employees should be pushed toward leadership roles or managing reorganizations of the org chart.
The best performance appraisal is the one that serves your organization’s needs. If you’re just getting started, consider a narrative appraisal with a few simple ratings questions that focus on overall performance.
Checklist appraisals can provide a broad array of feedback quickly, however for the best overall feedback it is hard to beat a well-written narrative review. Unfortunately not all managers will take the time to write comprehensive and thoughtful narrative reviews.
If you’re looking to generate useful quantitative data on employee performance, consider using ratings appraisals that ask simple questions managers likely already have conviction around. Good questions include, “Is this employee ready for promotion?” and “How hard would you fight to keep this employee at our organization?”
One thing to include in every performance evaluation is space for context and ways for the employee to improve their performance going forward. It’s important that employees have enough information to understand their feedback and know what to do with it.
Formal check-ins, narrative appraisals and competency assessments are the three most common appraisal methods used today.
Organizations that employ modern performance management approaches often rely on modern online software. Why is that?
In this article, we’ll explore the reasons dedicated software is important to the success of your performance management strategy.
Modern performance management has evolved in three ways:
These changes have been positive, but they’ve also created new challenges for HR. How do you administer up to 20 times more points of feedback? How do you push updates to your process in real-time and keep everyone on the same page? How do you aggregate and analyze performance data to root out bias?
One of the biggest shifts in modern performance management has been the increase in feedback. Whether it’s quarterly check-ins, project-based reviews, formal 1-on-1s, or continuous feedback, most modern strategies involve an increase in the points of feedback an employee receives. According to MIT Sloan, 68% of 1,800 global leaders agreed that ongoing feedback conversations have a positive impact on individual performance.
GE recently made the switch to annual “summary conversations.” However for these conversations to be effective, managers and employees needed to be having feedback conversations throughout the year and saving them to review at the end of the year.
Encouraging the feedback was one challenge, but GE realized they had a whole other challenge as well. With feedback happening in so many different ways around the organization, the data was never making it to one centralized place. That’s why they turned to software. Their new feedback app allows managers to store moments of feedback wherever they happen.
Thank you notes, customer emails, thoughts about a presentation — all of it ended up in one place. This created a rich dataset for managers to pull from at the end of the year.
While having a more frequent feedback cycle may sound like a great fit for your organization, creating a more complex system without help can be daunting.
A software system can streamline away all the challenges of administering more feedback. Everything from distributing the right forms to the right people, to managing due dates and reminders, to collecting and storing performance data in useful ways can be done through software now.
Importantly, software also makes things easier for managers and employees. If the process of giving/receiving feedback is easier, you’re much more likely to get buy-in to your new performance management approach.
One of the greatest failings of traditional performance reviews is that they were forgotten and neglected at many organizations. The questions asked often became stale or even irrelevant.
Modern performance management strategies aim to drive real outcomes for the organization, and to do that they need to keep up with the pace of change. As an organization or its goals shift the performance management strategy must adapt to stay relevant and valuable.
In 2020 when the global pandemic forced many organizations to transition to remote work, it upended performance management strategies.
There was a shift in which skills or competencies are more important. Many of the moments of feedback that organizations had just counted on happening because everyone was rubbing shoulders now needed to be formalized and scheduled.
How many organizations continued to ask employees questions that were irrelevant in a WFH world?
Your performance management strategy has to keep up with the changes happening at the rest of your organization.
What you’re asking of your managers and employees should always feels relevant and valuable to them, both today and in five years. A flexible digital platform allows HR to regularly update the process and seamlessly push those updates out to the entire organization.
While the process can change, a digital platform stays the same. Employees don’t need to learn a new set of steps each time there is an update. The platform will alert them as always to the next thing they need to know.
These automatic updates make it much easier to experiment with things like different review cycles, goal-setting cadences, or feedback strategies.
Because of the influx of data in the workplace, modern performance management has also become more fair and transparent. Employees already know that better work is rewarded, but using data to provide transparency behind reward and recognition decisions has led to more employee satisfaction and buy-in.
In looking at the future of performance management, MIT Sloan says that the reliance on subjective manager opinion is being replaced by a reliance on data. The credibility of modern performance management systems relies heavily on transparency with this data. And the easiest way to collect and categorize all this data that’s coming in much more frequently? A digital system.
General Motors noticed their employees had become frustrated with what they perceived as unfair employee recognition programs. There were dozens of different programs throughout the company with recognition being given sometimes publicly and sometimes behind closed doors.
GM revamped their system to create a uniform set of guidelines and a “social media” for feedback to be shared with anyone at any time. The key to the program’s success, according to MIT Sloan, was its transparency and consistent philosophy.
A fair performance management system will help alleviate employee frustration and encourage buy-in to your program from all levels. The key to achieving this is an open and transparent system with data that can be reviewed.
When the process is opaque or conducted at the whim of individuals it breeds distrust. Openness and visibility also encourages good behavior from everyone involved.
The key to accomplishing this is a single platform that is pushed across the organization with controls to ensure both compliance with the system and reviews of the data generated.
Software enables performance management strategies that are more complex, adaptable and open. This kind of flexible system is key to succeeding with modern performance management approaches, and it’s why we see most leading organizations adopting a digital platform to manage their process.
Purchasing performance management software is a big commitment for your organization. We think the best options include features in three categories flexibility, ease to use, and great support. Companies that excel in all three will be a great fit for your managers and employees.
Good performance management software accommodates a wide range of performance management strategies like annual reviews, quarterly goals, or continuous feedback and the best software adapts when your company’s needs change.
Valuable performance management software is easy for everyone to use, including employees and managers. The key to high participation rates is enabling employees to focus on feedback, not bells and whistles.
The best performance management companies assign a dedicated success manager to your organization. Everyone from the CEO to the newest hire is involved in the performance management, so the stakes are too high to rely on help pages or support tickets that go unanswered. The best support teams will:
When your performance management vendor is outsourced or offshoring the support teams it can be a sign that the organization is interested in cutting costs more than ensuring your success.
Connect with performance management vendors to discuss your performance management approach and process. It is important to understand what it will be like for HR to manage everything in the software and what it will be like for employees to participate.
To learn more about PerformYard and schedule a product demonstration visit PerformYard.com. In our first 30 minute call we’ll take 5 minutes to learn about your process and then spend the rest of the time showing you what it would be like to manage your process in PerformYard.
Ready to make the switch to a more modern performance management approach?
Organizations that update their process have a lot to gain. In this article we cover 7 great reasons to modernize your own performance management process.
Modern performance management strategies increase the frequency of the feedback employees receive. Whether it’s quarterly check-ins, project-based reviews, continuous feedback or frequent goal setting; when managers and employees are meeting more often good things happen.
Frequent feedback means that employee performance becomes a year-round conversation rather than just for the month before and after an annual review. It also keeps feedback relevant to the moment. It probably doesn’t make sense for employees to be guided for 12 months by one conversation?
Most organizations are faster and more agile than they ever have before. It’s important that performance management keeps up.
Modern approaches don’t just increase the frequency of feedback, they also increase the sources of feedback.
Downward, self, upward, peer and external feedback all help to clarify the picture of employee performance. Employees are more to your organization than a relationship with one other person.
Also, relying too heavily on a single point of feedback can make it hard to identify biased data.
Modern performance management is about results, not just completed forms in a filing cabinet.
That’s why approaches like Deloitte’s project-based reviews or Adobe’s quarterly check-ins do more than just promote long-term discussions of performance. They also encourage goals for setting intentions and continuous feedback for translating intentions into actions.
When you update your performance management approach, the discussion between a manager and an employee about performance becomes just the first step. Ultimately the goal is to be driving meaningful outcomes for your organization.
When HR builds a modern performance management strategy, they cater it to the needs of their own organization. Some focus on accountability, others on employee development or organizational alignment.
It’s no longer something you pull off the shelf for vague reasons like compliance. This means that the outcomes are relevant to the goals of the organization. If a fast-moving organization with a flat hierarchy implements an organizational alignment strategy they’re doing so because it solves a meaningful problem.
A classic complaint employees have about annual reviews is that “half the questions don’t even apply to me!”
When managers and employees realize the new performance management approach has been built for them they’re far more likely to embrace it. Modern approaches also emphasize streamlined systems so that employees spend more time discussing feedback and less time administering clunky systems.
Modern strategies also focus on better questions that generate better data. The idea is to ask people questions they know the answers to.
Questions like “Is this employee ready for a promotion?” or “Would you want to work with this employee again?”
Modern approaches also rely more on qualitative data in addition to quantitative data in order to capture the nuances inherent to human performance.
Centralizing and standardizing performance management helps keep conversations about employee performance open and fair.
If your organizations is driving how performance is evaluated or recognized your less likely to have situations arise where managers are running their own systems that are incompatible with the your values.
If you’re looking to switch to modern performance management, the next step is to choose the approach that’s right for your organization.
Check out our guide here.
There has been a shift in how organizations think about performance management. You can see it in headlines like these…
That said, progress has not been linear and you may also have seen headlines like these…
So where does that leave us? What is Modern Performance Management?
In the early stages it looked as if modern performance management would coalesce around a set of best practices, like quarterly conversations, weekly 1-on-1s, or continuous feedback frameworks. But this didn’t happen.
Organizations went in many different directions and most of the bold claims about the end of rankings, ratings, annual reviews and other elements of “traditional” performance management haven’t come to fruition.
Today, years into the performance management revolution we find ourselves in a middle ground. Organizations continue to improve their processes, but they are doing so with a mix of new and old practices.
It turns out there is no performance management panacea. What defines performance management as “modern” is not your process, but your approach.
1. Modern performance management is about starting with your organization’s needs and the needs of your workforce, then building a custom strategy that serves those needs.
That means no more over-stuffed annual reviews that are a big waste of time, but it also means you shouldn’t necessarily take Adobe’s strategy off the shelf and apply it to your organization.
2. Modern performance management is about creating a strategic business operation rather than fulfilling a year-end compliance requirement.
If you are analyzing the needs of your organization and then building up a strategy that drives results for your organization, that’s modern performance management.
Ok, that is a little abstract, so we’ve also compiled a list of themes that help define modern performance management.
Here are some of the changes we often see when organizations transition to modern performance management. These aren’t all requirements, even pursuing one or two of these changes is sufficient.
Digital tools are enabling the transformation. More feedback, more data, more transparency are only possible because they can be achieved with a light tough through technology. Before adding complexity to their processes, organizations are streamlining them through technology. Ultimately performance management needs to be layered on top of the real work of the organization, so it can’t be cumbersome or time consuming.
Traditional strategies focused primarily on rewarding top performers and eliminating under-performers. While that is still a part of modern systems, the focus has shifted to include development. We wrote about this idea here - Accountability vs Growth: Choose a side (or don't).
You can’t talk about modern performance management without talking about increased frequency of feedback. Whether it’s quarterly check-ins, weekly one-on-ones, or continuous feedback, more feedback is what it’s all about.
Traditional performance management tended to give everyone individual ratings which did not always incentivize teamwork. Today organizations want to know not only how well you work alone, but how you build up a team.
We live in a more dynamic world and organizations want to reward employees who have the flexibility to adapt and perform as an organization evolves. Modern strategies reward both tactical performance and adaptive performance. Read more about that here - Tactical Performance vs. Adaptive Performance: Why You Need Both.
Unfortunately traditional performance management is filled with bias. Modern performance management seeks to even the playing field and get to a better understanding of actual performance. It’s no longer just about your manager’s opinion of you for one week a year. Read - The Biases You Must Remove from Your Performance Reviews.
Finally, modern performance management still embraces data. Even after an initial rejection of ratings and rankings, many organizations are looking for smarter ways to bring data back into their process in order to inform career planning, hiring, and other business decisions. Data gets smarter with better questions, like how Deloitte reframed their review questions to focus on things a manager is a better judge off.
If you’re ready to embrace a modern performance management strategy, don’t be intimidated by all your options. The right strategy is simply what’s right for your organization right now.
For many organizations the best first step is to streamline their existing process. A well run process that doesn’t waste employee’s time will go a long way as you continue to build out the rest of your strategy. If you’re interested in learning more about how PerformYard software streamlines modern performance management get a demo here.
If you want to learn more about creating your own modern performance management strategy, read our guide
Modern performance management is overwhelming. There are more options than ever before and the hardest part can be knowing where to start.
Should you do OKRs like Google? Or maybe quarterly check-ins like Adobe? Or does Deloitte have it right with project-based reviews?
At PerformYard we’ve helped hundreds of organizations create custom performance strategies that are just right for their needs. In this guide we combine our approach to designing a new process with all our favorite resources from around the internet.
Here’s what you’ll learn:
Performance management has changed, and you’ve probably seen the headlines...
But maybe you’ve also seen headlines like these…
So what’s going on? Is there a new “right” way to do performance management? And what is it?
Modern performance management is more about your perspective, your focus and how you execute your process than it is about specific tactics. There are high profile tactics out there like continuous feedback, weekly 1-on-1s, OKRs, and quarterly check-ins that have become synonymous with modern performance management, but you shouldn’t just take these things off the shelf and apply them to your organization. You’re not Adobe or Google.
Modern performance management is about starting with your organization’s needs and the needs of your modern workforce, then building a custom strategy that serves those needs.
It’s about creating a strategic business operation rather than fulfilling a year-end compliance requirement.
That’s a little abstract, so here are some more concrete ways that performance management has changed. (We also included a long list of examples from real organizations at the bottom of the page.)
Digital First: Digital tools are enabling this transformation. More feedback, more data, more transparency are only possible because they can be achieved with a light tough through technology. Before adding complexity to their processes, organizations are streamlining them through technology.
Development Focused: Traditional strategies focused primarily on rewarding top performers and eliminating underperformers. While that is still a part of modern systems, the focus has shifted to include development with accountability. We wrote about that very topic here - Accountability vs Growth: Choose a side (or don't).
More Frequent: You can’t talk about modern performance management without talking about increased frequency of feedback. Whether it’s quarterly check-ins, weekly one-on-ones, or continuous feedback, more and more frequent feedback is what it’s all about.
Rewards Collaboration: Traditional performance management tended to give everyone individual ratings which did not always incentivize teamwork. Today organizations want to know not only how well you work alone, but how you build up a team.
More Agile: We live in a more dynamic world and organizations want to reward employees with the flexibility to adapt and perform as an organization evolves. Modern strategies reward both tactical performance and adaptive performance. Read more about that here - Tactical Performance vs. Adaptive Performance: Why You Need Both.
More Fair: Unfortunately traditional performance management is filled with bias. Modern performance management seeks to even the playing field and get to a better understanding of actual performance. It’s no longer just about your manager’s opinion of you for one week a year. Read - The Biases You Must Remove from Your Performance Reviews.
Smarter Data: Finally, modern performance management still embraces data. Even after an initial rejection of ratings and rankings, many organizations are looking for smarter ways to bring data back into their process in order to inform career planning, hiring, and other business decisions.
Here are some of our favorite articles on Modern Performance Management:
Modern performance management has a business purpose. So if you are designing a new strategy you need to start with its purpose.
The challenge is that not every organization will have the same purpose and you really should choose just one or two to start. So how do you choose?
Choose a purpose for your modern performance management strategy by understanding the needs of your organization and your workforce.
For helping to decode the type of organization you have and it’s performance needs we love the “Organizational DNA” framework from PWC-
Once you understand what your organization needs, choose the primary purpose of your new system. Every organization may be a little different, but here are the 5 most common types of strategies we see.
This is the most traditional approach, but it still makes sense in the context of modern performance management. Systems that focus on accountability evaluate employees against standards. The most common examples would be a sales quota or a competency based system.
These systems can work very well when employees know what is expected of them and are highly motivated to achieve the standard. This tends to be organizations with well-defined roles, many people in those roles and measurable results. It also helps to have a large pool of qualified candidates to fill vacancies.
Development focused performance management is having it’s day! Popular tactics like weekly 1-on-1s, continuous feedback and engagement surveys fall squarely in a development focused performance management strategy.
A development focus works well for knowledge workers, team based work, or employees with a lot of self-direction. If your employees see their job as “just a paycheck” you’ll either need to change their mindset before using a development focus.
One of the most common complaints about informal continuous feedback strategies is that employees don’t know where they stand. That’s why many companies embrace recognition. Your most driven employees likely embrace some level of competition and have aggressive personal goals.
Recognition is best for organizations with highly motivated employees with opportunities to promote from within and room for some variable compensation.
Alignment embraces the idea that you don’t need to manage people’s performance, you need to get out of their way. If you can clearly articulate what needs to get done, your employees will get after it and make it happen.
This approach is best for flat organizations with highly distributed decision making and information flows. Hierarchical organizations are just naturally better at alignment and don’t need as much help. Flat organizations need a way to get everyone moving in the same direction.
This focus brings the organization’s values off the wall, and into conversations between employees. The goal is to increase self-awareness within the context of the values, with the hope that when employees embrace the values the results will trickle down to every element of performance.
Best for organizations that see toxic cultures as the cause of many of their performance issues. Sometimes public sector organizations can find themselves in this category.
For further reading on the purpose of performance management check these articles:
Once you have a vision for your modern performance management strategy it is time to turn it into a process.
This can be daunting but we find it’s easier if you break things down to the building blocks. There are many specific tactics you can consider (like these 5 Modern Alternatives to Annual Performance Reviews) but in the end all of them are just variations or combinations of three things… Reviews, Goals, and Feedback.
It doesn’t matter what you call it, what we find is that even the most forward thinking processes still include some structured meeting or form that takes the long view and happens at regular intervals. This could be a quarterly check-in, semi-annual performance discussions or even annual reviews (yes there is still room for annual reviews in modern performance management).
Why do many companies still do this?
We’ve written much more about this idea here - In Defense of Performance Reviews.
Goals can be found across the different types of performance management strategies. The difference will be what the goals are for, their terms, how often they are checked in on and the form they take.
Accountability Goals - Goals will often be role based, like standards of performance for that role. A sales quota is an example.
Development Goals - Here goals often take the form of professional development and tend to be a little looser. They are more about agreeing on a direction than reaching a specific degree.
Alignment Goals - Goals are at the heart of an alignment strategy. They may even make up the bulk of your process. Goals should have some way of cascading across the organization and should be dynamic enough to shift with the needs of the organization.
Feedback is all about putting into action the ideas and intentions from reviews and goals.
Feedback can take many forms. You could instill a culture of continuous feedback that exists without strict systems, or you can formalize a process of feedback with required weekly one-on-ones.
You can also encourage regular recognition or require a few moments of recognition from each employee every month.
How you bring all this together will depend on your goals and your organization. We asked four HR leaders how they think about balancing an effective strategy with both structured and unstructured options:
Whatever you decide, remember to keep it simple, lightweight and focused on a clear purpose.
Read more about the fundamental elements of performance management here:
Once you have a purpose and layed out a process it can feel like you’re almost done. BUT, the most important step still remains, you MUST make everything easy for your employees.
Read more about 5 relevant product design principles to keep in mind when designing your process:
Every step should be scrutinized, every task you assign an employee should be questioned. Modern performance management is more complex and more frequent, the only reason it works is because it is digital first.
Performance management software streamlines and automates the large administrative burden of pulling off a modern strategy. If you ask your employees to do that work they will rightfully decline.
Software allows employees to focus only on the value creating activities, like self-reflection, conversations with managers, and planning.
To learn more about the importance of keeping things easy, read:
Lastly, plan to continue to work on your process. Improve it, expand on it, evolve.
Just please don’t throw it all away and start again whenever a new trend comes along.
We have a lot to say about this topic, but honestly no one explains it better than Jon Stein in his article for First Round’s blog - Betterment Tested Three Performance Management Systems So You Don't Have To.
For additional insight check out:
So what are the world’s leading companies doing? Here is a long list of examples from big name brands and several smaller organizations that you may have more in common with.
Semi-annual reviews, monthly feedback, and additionally custom cycles for departments, roles and new employees.
Quarterly check-ins with broad 360 reviews that are qualitatively coded around the company’s six core values.
Quarterly conversations with annual goal-setting and a year end review to summarize performance.
Four types of goals with weekly check-ins make sure everyone’s work is aligned and that they’re living the company mantra of “never settle for the status-quo.”
A quarterly conversations process with annual goal-setting, a simple year end review, and lots of flexibility.
We geek out over performance management process. For us, and many other HR professionals, it is what we get paid to think about. But! that is not the case for most (almost all) employees at your organization.
For most employees performance management is a distraction. And worse it doesn’t do anything for them. Employees are paid to do their job, and HR asks them to stop doing their job for this other thing they feel has no value.
There’s no use arguing it, this is the reality every HR department faces when they try to introduce new performance management initiatives. Most employee’s first thought will be, “how big of a waste of time is this going to be?”
It is our job, HR’s job, to change this narrative, to prove people wrong, to justify our initiatives. We can’t lean on the fact that we’ve been given authority, we should be winning over employees, not forcing things on them.
The first step is taking on a new mindset. We should be designing our performance management processes for our employees. We should start thinking of them as customers we want to win over, and start thinking of ourselves like product designers.
The product designer framework is helpful because there is a tremendous amount of existing research into product design, customer experience, and service design that we can lean on. Even if it isn’t a perfect analogy we think it’s a valuable one and we think it’s always a good idea to learn new lessons from experts in other fields.
It’s amazing how many organizations have only a vague understanding of why they’re running a performance management process. Start by understanding the needs of the organization and the needs of your employees.
Print them out, put them on the wall, read them out at the start of each meeting. If you stay true to these needs it will bring great clarity to the design process.
Focus your efforts on one thing. It is better to do one thing really well than to do many things poorly. Even if your ultimate goal is the most far-reaching performance management process in history, start small.
HR needs to build up trust and buy in from the organization, and you do that by knocking each new thing out of the park. Impress your employees with the first thing you introduce and they’ll be ready to jump on board with the next thing.
Have you ever heard this in a meeting? - “oh they’ll be able to figure it out…”
Expecting someone to “figure it out,” is a huge taboo in product design, but it is extremely common everywhere else. Yes, it’s true that employees will mostly be able to figure out how to navigate that cumbersome process. The problem is that they’ll be frustrated, uncertain, tired and just “over it” by the time they get there.
Making it easy matters.
The process should almost disappear. Employees should spend all their time on the value creating aspects of the initiative, and none of their time on the administrative/process aspects.
One classic example of this is when review forms contain a section where the employee just copies down their personal information, like name, ID number, job title etc. The organization already has this information! Why are they wasting the employee’s time to copy it down again?
Details matter. Getting this right is about more than the questions on your forms, choosing quarterly vs annual check-ins, or deciding the number of peer reviews to include. A great performance management system is about all the little details.
How clear and concise are your emails? When and how will you remind employees to complete reviews? Where will employees see what is expected of them/left to do? How do you encourage managers to leave more feedback? How do employees know what an effective goal looks like?
Changing the narrative around performance management, and getting buy-in from employees should be HR’s responsibility.
We can’t rely on our authority we need to win employees over with great design. Let’s learn something from the product design community and start wowing our employees.
If you’re interested in further reading, here are two fun product and experience design books to get you started:
The Design of Everyday Things by Dan Norman
Performance Management is a big idea. We’re talking about improving the performance of every employee at your organization.
How do you even begin to tackle something like that? At PerformYard we believe the first step should be defining your purpose.
If you are developing a new performance management strategy you’ll find yourself pulled in many directions. Someone on your team will push for OKRs, another person will tell you about the weekly 1-on-1 process they read about, and still another will recite the adobe quarterly check-in case study.
The best way to evaluate all the ideas that will be thrown your way is to start with a clear sense of why you’re developing a new strategy and what you’re trying to achieve.
We’ll get to the five purposes quickly, but it is important to mention this first. You can’t do all five!
Maybe you can if you’re already crushing 3 or 4 of them and you want to layer on a new initiative, but most of us aren’t there.
It is very important to focus with a new initiative, and so you should choose one or two from the following list. Kick those out of the park first, then layer in others.
So how do you choose?
One purpose will tend to be better fit and have a bigger impact depending on the type of organization you manage. So think about your organization along the following lines, and then map your needs to the best purpose for you.
Decision Rights - How and by whom are decisions made?
Information - How does knowledge move around your organization?
Motivators - What drives your people to perform?
Structure - What are the lines and boxes that connect people?
This framework comes from a great little book called Results: Keep What's Good, Fix What's Wrong, and Unlock Great Performance, check it out if you’d like to go deeper on diagnosing the performance needs of your organization.
Ok let’s get to why you’re here. But don’t forget that you should be thinking about choosing the right purpose for you, not how you can do all five!
This is the old standard, and while it has fallen out of favor in recent years, it absolutely still has a place.
Performance management systems that focus on accountability evaluate employees against standards. A classic example would be the sales quota.
These systems can work very well because employees know what is expected of them and are highly motivated to achieve the standard.
What the standard is and how it is established is very important. It helps to have many people at your organization performing the same well-defined role. For example with 15 sales professionals doing the same job you can begin to standardize what level of performance is and is not acceptable.
Beyond setting the level of performance it is also important to determine how you will measure performance. Unfortunately, there is rarely a straightforward way to measure high-performance, so we rely on metrics that are just indicators. We must choose these indicators carefully to prevent people from gaming our system.
There are many examples of accountability standards gone wrong.
Public school teachers “teaching to the test” is one. Some school districts are heavily incentivizing teachers based on their students test results and so teachers focus more on the test than on the thing the test is designed to measure.
Another example is the Wells Fargo fake accounts scandal. Bank employees were so fearful of getting fired for not opening up enough new accounts that they began to open fraudulent accounts to keep their jobs.
With the right system and the right employees we believe there is still a place for accountability focused performance management.
Organizations with well-defined roles, many people in those roles and measurable results. It also helps to have a large pool of qualified candidates to fill vacancies.
Employees could be tempted to game the system as we see with “teaching to the test” and the Wells Fargo scandal.
Development focused performance management is having it’s day! Popular tactics like weekly 1-on-1s, continuous feedback and engagement surveys fall squarely in a development focused performance management strategy. The idea behind a development focus is that employees don’t need to be forced to perform, they want to perform well and just need to be developed.
The increasing need for agility, creativity, teamwork, self-direction and other totems of the modern workplace have all made it difficult to effectively apply accountability standards. Which has increased the organizations taking on a development focus. Additionally, a tight labor market for many roles has led organizations to eliminate any sources of employee dissatisfaction. Being rated and ranked is not something most of us enjoy so moving away from accountability is a way to appease employees.
However, while development focused performance management is spreading, it has always been an important part of the professional services industry. For these firms, turning college students into high-paid advisors is part of the business model. Structured training and regular development conversations are the status quo.
It is important to note that just because development focused performance management is popular, does not mean it’s for everyone. It tends to work best for employees who have a lot of intrinsic motivation to improve their performance. This could be due to competition for career advancements like in professional services, it could be due to a desire to develop skills like in tech or creative work, some combination, or something else entirely.
If your employees don’t live for their work, and think of their job as just a paycheck you’ll either need to change their mindset or not use a development focus.
One more note on development. It is not the same thing as learning management. You don’t need to have very structured training to run a development focused strategy. Google famously gave employees “flex-time” to pursue their interests at work. This is a development focused tactic that had no top-down direction at all.
Knowledge workers, team based work, or employees with a lot of self-direction.
Employees need to be intrinsically motivated to improve their performance. We often see tech companies struggle to build sales teams because sales lends itself to an accountability/recognition focus, while many tech companies embrace a development focus with their engineering teams.
One of the most common complaints about informal continuous feedback strategies is that employees don’t know where they stand. CEB conducted research on organizations that had dropped ratings and rankings. One employee in the study shared the following:
“I have these great conversations where I thought they were providing feedback, but it was like me reading my horoscope. I only found out the truth about my performance when I didn’t get a raise. If I had gotten a score I would’ve had more clarity.”
Your most driven employees likely embrace some level of competition with their peers and also have aggressive personal goals. These employees want to know if they’re on the right track, they want to know if they are achieving their goals.
Deloitte recognized this in their performance management redesign. In the HBR article about their new performance management strategy they say,
“We began by stating as clearly as we could what performance management is actually for, at least as far as Deloitte is concerned. We articulated three objectives for our new system. The first was clear: It would allow us to recognize performance, particularly through variable compensation.”
The result for Deloitte was a short four question manager review, with three of the questions designed to recognize top performers, and one designed to call out low performance. In short they were:
Deloitte did other things with their performance management strategy as well, but their primary focus was to recognize, compensate and promote their highest performing employees.
Recognition for high performance can backfire, especially if it involves extreme compensation. You could find yourself rewarding the most unscrupulous of your employee's, which is a big part of what took down Enron. If you don’t set guide rails, extremely driven employees might do whatever it takes to win, even if that means committing fraud. This usually happens when the rewards start to become extreme.
Recognition can also fail if the act of recognition feels empty. If you’re putting up an employee-of-the-month plaque, and your employees don’t respect or care about the honor, then your recognition efforts will fail.
The form of recognition needs to let employees know they are achieving their personal goals. For some organizations, employees personal goals and work goals are just harder to align.
Organizations with highly motivated and driven employees, opportunities to promote from within, and room to give some variable compensation.
Extreme recognition can lead to extreme, and maybe even fraudulent, behavior from your most driven and unscrupulous employees. Empty recognition or recognition for things your employees just don’t care about won’t have much of an effect.
Alignment embraces the idea that you don’t need to manage people’s performance, you need to get out of their way. If you can clearly articulate what needs to get done, your employees will get after it and make it happen. This is the realm of goals and OKRs.
Jon Stein of Betterment, wrote a fantastic post for First Round Review on how he thinks about performance management. First he says you must “start with the why.” You already know we love that. Then he lays out his three goals for an effective system:
There is nothing in these three objectives about holding people accountable, developing employees or recognizing achievement. Jon Stein is laser focused on alignment through clearly articulating goals and expectations. (to be fair I’m sure Betterment does many of the other things on this list, but with this initiative they were focused on alignment.)
Stein eventually arrived at a very effective system, but it took some trial and error to get there. One of the greatest challenges was setting goals in an uncertain and dynamic environment. How do you both 1) tell employees what they should be doing but 2) don’t micromanage or overprescribe, leaving them room to run and adapt.
This is one of the most common downfalls of systems that focus on alignment. It is very hard to set great goals. When alignment systems are done poorly, they don’t give everyone room to run in the right direction, they strangle action and encourage odd behavior.
One example from the Betterment case study was what happened when they introduced team goals. The teams became aggressively siloed and even competitive with each other because everyone was focused not on company success, but on team success.
Flat organizations with highly distributed decision making and information flows. Hierarchical organizations are just naturally better at alignment and don’t need as much help. Flat organizations need a way to get everyone moving in the same direction.
Whatever you measure will improve, but it can be hard to know what to measure. There is no simple measure for high performance.
So what if your employees are all naturally accountable, pursue their own development, are happy with their level of recognition, and know exactly what to do… is there any performance management to do?
At the Stanley Clark School, a K-8 institution in South Bend, Indiana, the Head of School Melissa Grubb went with another approach. Her focus was on instilling a set of values in every employee. She wrote about her process for Gibson’s blog.
The idea is to bring the organization’s values off the wall, and into conversations between employees. At Stanley Clark teachers reflect on 6 questions and 30 statements before having a regular conversation with their manager. The goal is to increase self-awareness within the context of the school’s culture.
The values/expectations are well articulated, and target issues that Melissa has recognized as vitally important to a great school culture. The hope is that if employees embrace these values the results will trickle down to every element of performance.
To get this right it’s so important that your values are well articulated. This means more than short ambiguous slogans. Values should be turned into practical expectations that everyone can understand.
Some examples of Stanley Clark’s 30 statements are:
Additionally, your process should focus on self-reflection and conversation with others. Cultural values can’t be reinforced just by checking boxes on a form.
Finally, be sure your values are being informed by the actual values of your organization. If values are established top-down and employees don’t buy in, you will have just built a big waste of time.
Organizations that struggle with toxic cultures. Some public sector organizations fall into this category.
It’s hard to know what cultural values to emphasize. If you get it wrong employees will resent the process and consider it a useless exercise.
Once you’ve decided what matters, it’s time to build your process. Evaluate every performance management tactic with the lens of “does this advance our purpose?”
Don’t let your process become bloated. If you keep it simple and focused you will have much more success getting employees to adopt it.
Netflix's no-holds-barred approach to HR has gained the attention of many, both good and bad. This is because they’ve succeeded not only in retaining prime talent, but also in achieving a high-performance culture.
The methods Netflix applies could be called radical, but they address challenges that all organizations face. Here are four common performance management challenges and how Netflix overcame them.
According to Netflix, leaders and managers need to live and breathe company values into everything they do. Your mission statement and company values are not supposed to just sound nice, they’re supposed to be displayed throughout the work of your employees.
Posted on Netflix’s famous culture deck, is a stark comparison between a list of Enron’s company values and photos of their leaders in handcuffs. They go on to state that Enron’s values weren’t truly what was valued there. Netflix wants to strictly reward and promote employees that demonstrate their values and let go of those who don’t. It’s that simple, but it’s a big deal.
Several years ago, Netflix revamped their performance management by completely doing away with annual performance evaluations. Annual reviews were irrelevant one year later, consequentially meaningless, and they felt like a waste of time.
Instead, Netflix opts for a 360 degree review procedure. The reviews are regular but informal. In this new procedure, employees are advised by their colleagues on what they should stop, start, or continue. The reviews began anonymously at first to avoid awkwardness, but since then, they shifted to signed feedback and later face-to-face 360 reviews. Opting for full transparency, Netflix believes people can handle anything, as long as they’re told the truth.
Despite ditching formal evaluations for the 360 degree review process being bold enough, Netflix makes the reviews public. In fact, employees are encouraged to give one another blunt feedback with the purpose to provide ongoing opportunities for improvement. Their belief is that in order to build a dream team, an organization must “ foster collaboration, embrace a diversity of viewpoints, support information sharing, and discourage politics.” This can’t be done without hiring well.
The desire is for one entire dream team versus a few small groups spread out throughout the company. Managers use what they call a “keeper test” to build their team. Essentially, they’re asked to question “Would you fight for that employee?” The end goal is to give ownership of building great teams back to managers.
Netflix wants their employees to think independently and be able to make decisions on their own. The leader’s main job at every level is to provide clear and complete context to create autonomous thinkers. With the right information, employees are given the confidence to make great decisions.
Former Chief Talent Officer and co-author of Netflix’s culture doc Patty McCord says “The best managers figure out how to get great outcomes by settling the appropriate context, rather than by trying to control their people.” It’s important that managers at Netflix don’t try to control their staff, rather provide the framework to get the best results out of them.
It seems that getting fired is never really far from your mind, if you work at Netflix. The keeper test in itself is not always a source of comfort for employees. Managers also say it makes them feel pressured to fire people or “risk looking soft.” According to Glassdoor, the culture of fear is actually one of the most frequent cons. Many employee reviews mention the highly competitive environment makes work-life balance difficult to achieve. Other cons focus mostly on the transparency of the 360 review process; learning the details about why someone was let go or watching the politics carried out after uncomfortable feedback is made public.
So how is it that they maintain a seemingly average score? What are the pros that make working at Netflix a positive experience? Most reviewers seem happy about the perks; free lunch, free coffee, flexible schedules. However, the most resounding pros listed repeatedly are compensation, freedom, and responsibility. Netflix’s theory of responsible people thriving on freedom really works here and the employees seem to love it.
At Netflix they hold strong to the belief that if you talk simply and honestly about performance on a regular basis, you can get good results. Opting for full transparency is certainly not for everyone. Employees chime in on the company’s path, price increases, logos, literally everything. But can this work for any organization? McCord’s own advice would tell managers to think like business people and ask “what’s good for the company?” Then, implement those strategies, because when a company is at the top of its game, the people and their morale are also.
Netflix is not the only organization going its 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.
You’ve used the service or at least heard of it. Uber is everywhere. They’ve made many newsworthy moves over the past decade, not just by shaking up the taxi industry, but also by how they’ve handled internal matters such as performance management and employee relations.
One unique aspect of Uber’s business is their relationship to drivers. Drivers can sign on to work or sign out at will. The Uber platform manages the workforce algorithmically, using incentives like surge pricing, ratings, and extensive online training content.
After every Uber ride, the rider rates the driver and vice versa. These regular performance ratings have a real impact on both the driver’s and the rider’s ability to continue to use the platform.
It’s simple, but this regular measurement has a major effect. It’s often called the “observer effect.” Our behaviors change when we know we are being observed.
Uber has created an automated performance management system. It’s like a robot manager. Here’s what that looks like in more detail.
First, they set goals and clear expectations. How so? When a new driver registers with Uber, they are provided with extensive rules on how they’re expected to perform. This includes very specific ways your account can become deactivated (aka you get fired).
Second, the continuous feedback process at the end of each Uber service takes care of monitoring performance and measuring key performance indicators. While ratings have their issues, very frequent ratings from many different people will balance out any biases that might exist in a smaller sample. Although there are some types of biases that can’t be eliminated.
Third, there is at type of performance appraisal. Most companies do this once per year but this looks different for Uber contract drivers. If your driver rating ever drops below 4.6, you’ll be dismissed, whereas if you have consistent high ratings, you get a VIP status with additional benefits. This sounds a bit like a continuous rank and yank. Eliminate the worst drivers and reward the top performers.
Uber’s former performance management system relied heavily on a standard ranks and ratings process but after some of the recent scandals they’ve done away with it.
Uber has a new strategy they call the “T3 B3 process.”
T3 B3 stands for “top three bottom three”, and it asks employees to list their top three qualities or strengths and bottom three areas that need improving. Goals are then derived from these answers and entered into a system which can be accessed by everyone; employees, managers, top executives, etc.
Uber prefers this collaborative review process over the old one because it focuses on development rather than past behavior.
Feedback is given formally and frequently and it gets categorized into positive reinforcement or constructive advice.
Although they believe that positive reinforcement is the key to improvement, constructive advice is necessary for making adjustments. Managers check their feedback ratios on a weekly basis and try to keep them balanced.
In addition to the individual goals around job performance, Uber also has employees set citizenship goals. Employees can create goals for doing good for someone else inside or outside the company.
The “doing good” could be anything from pro bono work, or helping out your fellow co-workers, Uber drivers, or Uber customers.
Uber’s traditional performance review focused too much on employees' past behavior rather than future capabilities, and having gone through many changes over the past few years, it was time for a brighter outlook.
Employees complained that the old process was subjective and lacked communication which enabled managers to get away with their biases. With minimal feedback, it felt like they were simply being told “this is what you’re good at, this is what you’re bad at, and here’s a score.”
Leadership at Uber claim that their current performance management system promotes a celebration of people, but what do employees say?
Some have noted that “the culture at Uber is excellent” with a “fast paced environment and very low stress levels.” They also believe that “colleagues are what make this place great; very friendly coworkers who are intellectual and hard working.”
Their biggest complaints were over navigating the constant change of leadership and priorities.
Online reviews also show that employees love all the perks like free lunches and flexible time off, but almost everyone complains about the challenge of growing within the company, something that seems to have made a large impact from the previous culture.
So what about the contract drivers? what do they think? They love the independence and freedom the Uber platform affords them, but would like to see better benefits, something that is challenging to provide when you’re set up as a contract worker instead of full time staff. Driver comments online also show the frustration of wearing down their vehicles, and the unexpected costs they incur.
Uber has done a lot of interesting things to manage performance, is there anything that might work at your organization?
Management by objectives is a system for improving employee performance where management and employees jointly create objectives.
According to the theory, having employees offer input on goals and action plans is a way to encourage higher performance and commitment. The idea was first outlined by Peter Drucker in his 1954 book, The Practice of Management. Drucker pointed out that employees often lose sight of their objectives because of an “activity trap”. When we get too involved in our current activities, we forget the original purpose. With MBO we jointly agree on common identified goals, which helps to eliminate the activity trap and keep us focused and aligned to our goals.
MBO is a results-driven strategic approach to goal setting. The process begins by defining specific objectives through shared discussion, then collaboratively deciding on how to achieve them in sequence. This would allow managers to pace work accordingly and create a more productive environment. As a result, employees see their own accomplishments as they complete each objective reinforcing a sense of achievement. Ideally, employees will fulfill their responsibilities because they have personally been involved with the goal-setting process as well as brainstorming with management on how to reach them. Meeting objectives is later graded with group input and often incentivized.
MBO’s success can be attributed to several important features. The first one is the equal participation of both managers and subordinates. This model cannot function properly unless both parties are aware of their roles and participation. Secondly, MBO emphasizes a joint goal-setting and joint decision-making feature. Superiors bring their knowledge and experience to the table, while subordinates help determine the speed and capacity in which goals can be reached. Lastly, the MBO model ranks high on support levels. Because of its dynamic, managers and employees are forced into effective communication resulting in stronger relationships and positive work environments.
There are several steps to the MBO process:
Management by Objectives has a variety of benefits. The most obvious one is the amount of employee participation and engagement. Increased participation creates a positive work environment as employees feel the direct impact of their mutual work effort. This leads to more motivated employees and a higher level of job satisfaction. Another benefit of MBO is it develops stronger communication skills. The model requires a substantial amount of input and feedback which helps everyone to improve their exchange of ideas. Better communication equals better relationships and clearer direction. Lastly, and probably the best pro to consider, MBO is easily applicable to any organization at all. It is not difficult to implement, no matter the type of industry or size. It can truly suit the needs of most organizations without incurring major costs.
Criticisms however do exist. The most criticized issue of Management by Objectives is its short-sightedness. Some believe MBO has the tendency to consume an entire organization’s resources solely towards achieving goals, overlooking other important needs. This produces the mentality of achieving goals “at all costs” where employees are tempted to focus only on the finish line without considering the quality of their work. If the employee is a manager, this stifles leadership as well. Efforts become polarized as employees begin to focus only on their own set of objectives instead of the bigger picture. Another criticism is the joint approach doesn’t work well when challenges concerning incompatible needs arise. Some would say it is too time consuming and difficult to sustain over time. The most interesting criticism might be that MBO misses the human point. Because it is organization-centric, questions regarding the managers’ personal objectives, needs, and relevance are many times left unanswered.
Management by Objectives is now a popular and widely used management theory. I believe its appeal to conduct business in a positive, productive work environment would catch anyone’s attention. Decisions don’t feel top-down and each member of the organization contributes equally. The synergetic approach does not lack in benefits and implementing this system is straightforward and clear. Ultimately, keep in mind that MBO leaves behind a demand to meet both organizational and individual purposes, which can easily become problematic without proper leadership.
Modern performance management is about designing a process that is unique to your organization and its culture. Even with outside role models and inspiration, the most successful organizations are being driven more by what they see inside their company than what they learn elsewhere.
For example, Adobe, Deloitte, and GE each designed a unique performance management strategy, and despite three very different approaches, each was a perfect fit for their organization.
Sensational headlines would suggest traditional performance reviews are a thing of the past. And yet the leaders of the performance management revolution have all continued to use aspects of traditional reviews in some form.
Adobe still uses end-of-year reviews that summarize performance and allow for discussions about compensation. They chose to reduce the length of these reviews and add quarterly check-ins to create a more ongoing dialog around performance.
Deloitte transitioned to a short four-question review system administered at the end of every project or quarter—whichever comes first. They use these more frequent reviews to create employee rankings, which drive promotion and compensation at the end of the year.
GE introduced a real time feedback app, but they also continue to do annual reviews, which they now call Summary Conversations. Instead of bringing up new ideas, the end of year discussions summarize feedback.
Modern performance management can be intimidating, but it’s actually quite simple. There isn’t some new “right” way to do things. It’s all about taking the old tools and bringing them together in a way that best serves your organization.
We’ve taken what we've learned from working with hundreds of customers and put together a plan for any organization to create their own modern performance management process.
We've expanded on this post with a full guide here:
Be sure you begin the process with a clear understanding of your own organization in the context of performance management. PwC provides a good place to start—they identify four building blocks for diagnosing the needs of your organization and determining your Organizational DNA.
The performance management strategy that works for you will be different from what works for other organizations because other organizations will differ on these factors. For example, the right strategy for a flat video game development company will be very different from a 50 year old insurance organization with lots of hierarchy.
Performance management can serve several purposes, and it is important to identify which is right for your organization. Here are a few of the most common-
The military has historically focused their performance management strategies on accountability and recognition. In organizations with strict hierarchies and well-defined roles this makes a lot of sense.
In many creative organizations, like Betterment, the focus in on alignment. Flat organizations with many ill defined roles can struggle to together in one direction.
With a clear purpose, you’re now ready to develop a clear process. At PerformYard, we’ve found nearly every performance management strategy can be built with just three parts:
As HR leaders we care deeply about these topics. It is our job. However, it is important to remember that it is not the job of most people at our organizations. Some employees might even see our performance management processes as a distraction.
That is why it is so important to put on our product designer hats and think of our employees as customers of our product. Customers don’t want confusing and time-consuming products that don’t provide them clear value.
If you’re current system is bulky and disliked internally, the first thing to do is fix that.
You won’t have any buy-in to build on your existing performance management process until you make it easy and useful.
At PerformYard we streamline any performance management process you want to run. By design we do not force anything on our customers. Whether you want to do annual manager reviews or are going to try weekly 360s it can all be managed simply in PerformYard.
Once you’ve streamlined your existing process, then it’s time to start iterating.
If your company has more than 1 employee there is already some type of performance management in place whether its formal or informal. And one of the great benefits of accepting that there is no magical right way to do performance management is that you can embrace your existing process and start improving it year after year.
Rather than make wholesale changes to your process every year, keep what’s working and drop what isn’t. For example, maybe this year you add 4 quarterly conversation, and remove a third of the questions from your annual review. See how that works, then next year adjust again.
Modern performance management is about doing what’s right for your organization. While a big clunky annual review may no longer be right for you, that doesn’t mean you need to make a jump to continuous feedback and OKRs. You already have the building blocks, so simplify your process and start iterating. Before you know it you’ll have your own modern performance management process.
The business world is becoming faster, more efficient and more innovative. In coordination with these changes, many HR professionals are evaluating classic annual reviews to see if there is a better way to do things. Let’s take a closer look at some of the modern performance management alternatives that are often discussed.
One-on-ones are an informal opportunity for managers and employees to regularly meet face to face.
As the name suggests, these mini-performance evaluations happen with an employee four times a year. These can be formal or informal meetings to discuss performance from the last quarter.
Project-based reviews are distinct from other types of reviews because they focus on the last project an employee completed. Project-based reviews combine feedback from project managers and others from different teams who also worked on the project.
These meetings focus the discussion on creating and measuring performance and progress of an employee’s SMART goals. It typically doesn't involve a formal analysis but could be documented.
In a nutshell, continuous feedback includes any assessment that happens on a regular basis. These can be formal or informal meetings.
Organizations have many performance management options. The best process for your organization may actually bring together elements of several of the processes described above. The bottom line is that any employee performance review process needs to accurately reflect performance and ultimately be effective.
Ready to learn more about creating a modern performance management system? Check out our guide.
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:
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:
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:
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:
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:
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.
Project based work is more popular than ever. With the rise of outsourcing there are more agencies and firms engaging with companies on discrete projects. So how does Human Resources keep track of employee performance when the conventional annual or quarterly check-ins don’t match the natural cycle of an employee’s work?
Enter the project based review. A natural mix of performance management and project management.
Project based reviews are distinct from other types of reviews because they focus on just the last project an employee completed. This allows the questions to be more directly relevant to the work, and it also allows the employee and the whole team to be judged against the objective goals set out for the project.
So in addition to more typical questions like how well the employee works with her teammates, you can also ask questions like did the employee deliver her part of the project on budget and on time.
Here are some more benefits to using project based reviews-
Some companies are unmistakably project based such as management consulting firms or branding agencies, but many companies have elements of project based work in addition to ongoing work. In those cases it could make sense to layer a light project based review process on top of a more standard quarterly, semi-annual or annual process.
At PerformYard, we believe that your performance management process should be as unique as your organization. We also know that building and implementing a custom, flexible performance management strategy can be challenging, especially one that works with your company. That’s why we’ve collected all the pieces of modern performance management and laid them out below.
Creating the right strategy is about bringing together these elements in a way that will best serve your employees and your organization.
The core of performance management lies in employee appraisals. These could be called check-ins or calibrations or something else entirely, but despite the backlash most all organizations still use structured meetings and review forms as part of their process.
There are many different ways to customize your appraisals, from frequency to the questions asked. Although the objectives of performance appraisals varies from company to company, there are a few key elements to be aware of as you construct your reviews to be as effective as possible for your company.
Traditionally, performance appraisals have been conducted in a top-down approach where the manager is the sole evaluator of the employee. In a contemporary setting, however, reviews can take on a 360-degree approach that allows employee evaluation from all directions, including management, colleagues, customers, and partners, as well as self-reviews.
Another important element to consider in your performance evaluation is the kind of questions you ask. Between two fundamental types of questions, open-ended and closed-ended questions, your appraisal form should consist of a variety of pointed questions that give managers a comprehensive understanding of an employee’s performance, and give employees the sense that they were heard and evaluated fairly.
Open-ended questions have no predetermined answers, which can be great for performance reviews; and in the meantime, closed-ended questions (yes/no, strongly agree/strongly disagree) can collect actionable data.
One of the most important components of a performance management process is determining when and how often reviews should occur. The classic model of performance reviews holds appraisals annually, at the end of the year. This allows management to draw data from at least 12 months of employee’s performance, which can help to inform raises and promotions.
However, reviews can be done at any increment of time -- from quarterly to semiannually, and even project-based. Whether you choose to conduct them every three, six, or twelve months, a variety of surveys have shown that the majority of employees prefer more frequent conversations with managers.
In the past, traditional performance appraisals took on a format that had a more rating-oriented approach in evaluating work results, with methods including appraisal templates, grading scales, ranking, checklists, critical incidents, essay evaluations, and more. Modern performance reviews tend to focus more on an employee’s development, in order to not just review the year but plan for the future.
Format can include giving employees a score based on numerous areas of job performance, as well as qualitative input, and comments directed to employees that communicate how they can best succeed.
The best way to initiate an effective performance management process is to set forth clear goals and expectations. Involving your employees in the planning process allows them to envision how their personal goals will fit into the overall goals of the company, and gives them a clear understanding of what is expected of them and what to work towards.
Setting goals also helps managers to develop an understanding of the ongoing training needed for employees, and ensures that both are on the same page as progress is made. Goals that are given meaning, and are challenging (but attainable) can drive performance more than any other element in your performance management strategy.
Personal goals are the goals set forth by each individual employee. These goals are 100% about the employee, and are usually great for engaging employees with their work and determining where an employee shines in an organization.
Corporate goals have more to do with the success of the organization, and therefore the success of individual employees. These goals seek to align each team member’s individual goals with the overall goals of the company, bringing about a sense of unity between company and team priorities.
In traditional performance management methods, companies communicated top-down goals that were paired with annual performance reviews. Originating from senior management, these goals are identified and communicated to team members, cascading from the top of the company to lower-level employees.
Collaborative goals, or bottom-up goals, are created by team members that understand the company’s strategy for achieving goals, as well as the individual role they play in the company. A manager will compile a set of company goals based on each team member’s individual goals, ensuring that each employee is a key player in executing the company’s strategy and objectives.
While effective performance management has a great deal to do with documentation and meetings, it has even more to do with continuous dialogue. Ongoing feedback between managers and employees helps to more quickly recognize achievement, document individual performance, and ultimately help employees succeed.
Customers can be considered the most important source of feedback as they can provide input for individuals, teams, groups, and management performance. Using surveys, customer visits, complaint systems, and focus groups, customers can provide a unique perspective in the feedback process.
Supervisors, managers, and team leaders are generally the most experienced in giving feedback, and tend to have specialized knowledge of their employees and team members. When given adequate training, these sources can be an integral part of acquiring data for feedback purposes.
Feedback can also be provided by an employee’s peers. This feedback tends to be the most actionable, as an employee’s coworkers deal most directly in examining their performance in the workplace. Subordinates can also provide upward feedback that can improve a manager’s style and performance, and can also motivate low- to moderate-performing employees.
Constructive feedback, praise, and criticism all fall under the category of feedback in the workplace. While praise and criticism are fairly self-explanatory, constructive feedback is generally the most potent in providing specific information that is based on observation, and is issue-focused.
Constructive feedback is helpful because it contains both positive and negative feedback. Positive feedback affirms past behavior, and focuses on actions that were successful and should be continued. Adversely, negative feedback critiques past behavior and emphasizes the actions that should not be repeated.
Both of these types of feedback can also inform future performance, as employees can get an understanding of what behavior to avoid or improve in the future.
When a fast-paced, growing company signs-on with a new Performance Management software, they have high expectations for the value it will add to their corporate framework; streamlined communication, greater accountability, more frequent check-ins, more robust reporting features, to name a few features. Their expectations are high, as they should be, and their intentions are noble, as they always are. But before they begin compiling a portfolio of flowcharts, modules, performance tables, and spreadsheets, those tasked with the implementation should consider the following:
The benefit of having a clear and concise performance management process is apparent, but sometimes not so easy to execute in practice. Sound like your organization? Here a few ideas to get you on the right track:
Set your priorities based on the immediate value added
Chances are, when you began sending RFP’s for a new performance management software, you probably had 1-2 features that were ‘must haves’. Keep those features front and center of your implementation, even if there were other ‘bells and whistles’ you may have been interested in during your sales demos. You can also enhance or supplement your process later.
Was your priority to automate your pre-existing review process? Great. Focus on transitioning your forms into your software and setting up a system that mimics what you’d done in the past.
Was your top priority to increase engagement? Rather than attempting to use multiple features for this one purpose, focus on the type of engagement you are looking to enhance, and instead work exclusively in feature that will best get you to your desired outcome. In doing so, you’ll be able to establish a standardized process and promote more consistent product usage across your organization
If your objective is better accountability, perhaps start exclusively within a goal setting feature so that your employees can get in the habit of using of setting and tracking their goal progress and develop a cadence around how they monitor their progress. In doing so, employees will feel that they are setup for success as they become more adept as using they continue to use the system successfully.
Be intentional with your reporting features
When it comes to analyzing your data, sometimes less is more. While the reporting structure may be designed to be robust to accommodate different organization’s needs, it doesn’t mean necessarily mean that their needs are your needs, or that you should adopt every conceivable report type to stay relevant. Hone down on the type of information you are looking to extract from your company’s reports and create a process that will bring you specifically to those reports. Overquantifying your employees can lead to disengagement, and may not come with tangible benefits to your organization’s compensation model. Even companies like General Electric and Microsoft have conceded that complex processes don’t lead to reliable data. And that doesn’t address the degree of subjectivity that can be associated with performance management driven reports.
In short, reporting features, when used strategically and specifically, can undoubtedly be a great resources when identifying your workforce’s strengths and weaknesses. But over-usage or making an attempt to over quantify your workforce, when simpler, more qualitative methods can be adopted can be counterproductive to its initial purpose.
Re-evaluate and make adjustments as needed
There’s no shame in looking back at the end of a year or few years and deciding what’s working and what needs to be tweaked. Companies like Regeneron and Deliotte, both examined the efficacy of their performance management processes. In doing so, they made strategic changes their previous processes, and their newly created system was adopted with high levels of success across the board.
The readjustment phase for your company can be more subtle. If you noticed that employees were quick to go in and set their goals at the beginning of Q1 but haven’t been so diligent about going in to update their goals in Q2 and Q3? Maybe it’s time to think about implementing a check-in. Conversely, if you noticed that review form responses become more spare and less detailed throughout the year? Maybe it’s time to reduce the frequency of your check-ins and/or switch up your question types to elicit more detailed responses. The benefit of starting simple and re-evaluating subsequently is it gives you will not only have the bandwidth to zero-in on your existing process, but also the clarity and experience to identify strengths and/or opportunities to make adjustments.
When it comes to discussing performance management, it’s impossible to skip Jack Welch’s “rank-and-yank” review tactics back in the 1980s. During a time when the economic reality at GE demanded efficiency and operational excellence, the company became well-known for its hard-charging and intense approach to performance reviews.
The company has since undergone much change in their style and performance management process. Today they conduct a more evenly distributed and ongoing review process. The focus is less on rating and ranking and more on developing, connecting, and inspiring employees.
Here is what performance management looks like at GE today.
GE rolled out its new performance management strategy at the end of 2016, replacing its legendary Employee Management System that was implemented in 1976 and widely emulated by other companies. The change took place largely due to a program launched in 2013 called FastWorks, which introduced skills and processes to make GE a more lean, agile, and customer-centered organization.
Under the new direction of CEO Jeff Immelt, GE began to shift from annual performance reviews to a system that accommodated the lean and innovative methodology of Fastworks. The organization developed a simple, contemporary smartphone app, designed with the sole purpose of facilitating more frequent communication and meaningful conversations between managers and employees.
The app, called PD@GE, exchanges voice and text input, attached documents, and even handwritten notes between employees, managers, and teams across the company. The organization’s goal was to shift their employee review focus onto continuous dialogue and shared accountability. The app facilitates a constant exchange of feedback year-round; participants can receive suggestions from anyone in their network, including upper management and members of other teams.
In order to continue in the vein of customer-centered growth, GE’s IT team developed the app so that managers can hold regular “touchpoints” with employees in order to set goals and update priorities based on customer needs. At its core, the app serves as a platform to define goals for employees and to enable constant improvement for all users.
While many of the headlines and articles detailing the legendary company’s migration from annual cycles and stack rankings may lead people to believe it’s been a neat and succinct transition, the question begs to be asked: Has GE really gotten rid of annual rankings entirely?
As stated previously, one of GE’s main aims in their performance review strategy is to facilitate recurring, meaningful conversations between managers and employees. Along with continuous feedback through the PD@GE app, the company also mandates yearly summary conversations where employees and managers finalize and submit a summary document together.
During the meeting, employees and managers reflect upon goals met and impact achieved, while casting vision for future goals to be met. These meetings act as an existing piece of the old EMS structure, and operate just as they did before -- with managers basing compensation, promotion, and development decisions on the input provided.
However, with the introduction of the new performance-development approach, these year-end conversations exist as more of an ongoing dialogue rather than a one-time meeting that is loaded with expectations. This allows the conversations to be more meaningful and future-focused, and informed by more specific data of an employee’s contributions and achievements throughout the year.
In a Harvard Business Review article, GE executives Leonardo Baldassarre and Brian Finken describe GE’s new performance-development approach as an attempt to shift the company’s focus from “command and control” to “empower and inspire.” Judging by the company’s latest increase in productivity and significant benefit yield for customers, it’s working.
But how do their employees feel about the change? Let’s take a look at some anonymous Glassdoor reviews to get a glimpse of how GE’s work culture has shifted along with their performance review strategy.
“Great company to work for even while being one of the largest corporations in the world. Never have to worry about not having a job. They seem to care about the ‘little’ guy as much as possible.”
“Best company I have ever worked for. The company knows how to motivate employees and get ahead of competition. Even through rough times they are still competitive in areas. Leaders are trained unlike other companies where managers and leaders are terrible and untrained.”
“World-class training programs and people development. Very smart leadership, great to learn from. Strong organization around the business cycle, you know what to expect. Work/life balance is good, if you make it a priority.”
“Work culture is too good, people around are very professional. Company is very secure for female employees. Offers good work life balance as flexible work hours are allowed. No punch in/punch out needed as GE believes in their employees. Lateral/vertical movement is appreciated after every 3 years.”
“Very big company so it makes you feel unconnected to some of the things that go on. Many times it is difficult to get a straight answer when important, company-wide news comes out. Progressively changing a huge company takes time, don’t expect culture to change overnight.”
“Management can be clueless. Culture has been rough the past few years with layoffs and reduction in force. HR controls a lot of the decisions, with little line of sight to what’s actually happening. And too many buzzwords.”
“Back in the day when Jack Welch was at the helm, GE was run like a well oiled machine. The stock split, GE was good. GE was diversified and the pension was funded. Things changed when Jeff Immelt came and took charge and totally screwed up GE, he did not do what was best for the company, nor did the board of directors. They kept the problem going on for over 16 years. Replacing Immelt and not giving John Flannery enough time to fix a 16 year mess was wrong. After 39 years, this is not the GE I started with. I was embarrassed at the end to say I worked for this company.”
So, has GE’s management served to “empower and inspire” its employees as they set out to do when they shifted their performance management approach?
It may be that time will tell. However, it’s safe to say that many positive changes have occurred during the company’s transitional phase that have impacted many individual pockets of the organization -- and perhaps the most significant is the culture.
Leader of cultural transformation at GE, Janice Semper, set out to change the company’s operations and solutions for its customers by first looking inwardly at the mindsets and behaviors of its employees. The organization has made many strides to change the language and the way that many processes are done in order to promote a sustainable, collaborative, and empowered employee environment.
At the end of the day, GE’s performance management strategy focuses on people and dialogue -- meaning that intensive conversations and enormous chunks of time are dedicated to ensure that each employee is exhaustively evaluated both on what they’ve accomplished and how they lead. Attention is given to each individual appraisal, and manager’s assessments can be questioned or given feedback to ensure that the quality of each appraisal is honest and comprehensive.
And clearly, it’s working -- one of the most repetitive “pros” found in GE’s anonymous Glassdoor reviews is the company’s culture.
So, while it’s hard to say whether or not GE has abandoned its old system for good, it is certain that there have been benefits to both of the company’s major performance review systems. The company would not be what it is today without its Six Sigma, rank-and-yank of the Welch era, and is experiencing continued growth and profound success as they continue to adapt their appraisal process to the needs of their organization in an ever-changing business environment.
GE is not the only organization going its 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.
The differences between focal point reviews and anniversary date reviews are significant, and many HR professionals struggle to decide which method is ultimately better for handling employee evaluations. The truth is that there is not necessarily an objectively better method -- each company’s needs are unique, and both approaches have merits and challenges that are likely to shape your organization in different ways.
While focal point reviews have managed to eclipse anniversary date reviews in popularity, it is best to choose the performance review cycle that works best for you -- we’ve laid out some pros and cons to help you do just that.
Focal point reviews, also referred to as common date reviews, are performance evaluations that occur all at one time for all employees within an organization. These reviews can occur once, twice, four times a year, or even more frequently. Salary adjustments and performance evaluations are conducted on a fixed date for all employees, or segmented groups such as executives and front-line employees.
Anniversary date reviews are scheduled in such a way that each employee is reviewed in cycles that are based on a date specific to that employee (like a hire date). Employees are reviewed and compensated at the same interval, but not the same date. This system usually makes it so that a company is conducting individual performance reviews year-round, rather than at one time.
The advantages to focal point reviews are numerous -- so much so that they have become the favored review approach among many of today’s companies. Organizations that have chosen to implement focal point reviews have found that they are easier for HR to coordinate, as the review process can be completed in a single one-to-two month time frame rather throughout the full year. Synchronizing performance reviews across the organization allows companies to establish corporate goals before beginning the process, ensuring that individual and organizational goals are linked as employees approach performance reviews.
Focal point reviews also give managers the opportunity to compare and contrast employee performance, making it easier to distinguish top performers and to pinpoint low-performing employees. Many companies have found that this approach helps managers to distribute fair and consistent feedback, as well as compensation adjustments that are unaffected by changing business cycles.
Some managers might consider focal point reviews to be a dream performance management strategy; but to others, one-to-two months of non-stop performance evaluations is a nightmare.
A significant amount of time and dedication is required to complete a review process that spans across the entire company, especially for managers with a large number of employees. This might require management to neglect other tasks for as long as it takes to complete the process, which has the potential to hurt organizational growth and development -- not to mention it has the potential to seriously exhaust your managers.
Another downfall of focal point reviews is the inadvertent, but significant disadvantage that it places on newer employees. Employees that are new to an organization will not have a full year of performance to be evaluated, and often, companies make no plans to address partial-year reviews.
These challenges are what have motivated some companies to continue practicing an alternative method -- namely, anniversary date reviews.
One of the appeals of anniversary date reviews is that evaluations are distributed more evenly for managers. This ensures that management does not become overloaded with reviews during a brief season. It also gives them the ability to spend more time and attention on each evaluation.
Proponents of anniversary date reviews claim that the evaluations have the potential to be of higher quality, since more time can be spent on each individual employee’s review. This approach also allows all employees to be evaluated based on one full year of work, placing new hires and seasoned employees on a level playing field when it comes to reviews.
While the spaced-out nature of anniversary date reviews can make it less stressful for managers to handle evaluations, it can also cause some difficulty in a manager’s efforts to keep organized in the review process. With so much data to keep track of, reviews can easily become delayed or postponed -- not to mention the potential recurring issue of retroactive salary increases.
The evaluation process can also become jumbled due to ever-changing data that can evolve over a year’s time. Reviews can become difficult to administer, and managers may find it challenging to gather accurate performance metrics and to make improvements to the review process.
Ultimately, the main goal of your decision making process should be to choose the review cycle that works with your organization. The choice between focal point and anniversary date reviews should depend on the size and needs of your company, and should be implemented with other customized evaluation tools to maximize your performance reviews.
Focal point reviews may be the better option if your company is focused on maintaining organizational excellence in your performance review system. They can also be helpful to managers that wish to evaluate employee performance using a comparison and contrast method.
On the other hand, some organizations wish to evaluate individual employee performance against established standards rather than against fellow employee performance. In such cases, anniversary date reviews work well to objectively analyze an employee’s performance exclusively as it relates to the goals and standards set out by the company.
Focal point reviews allow managers to schedule reviews and salary adjustments according to the timeline that fits your organization’s overall growth, from quarterly to annual reviews. However, anniversary date reviews can be better suited to fast-growing companies that are hiring at an ongoing, consistent pace because they ensure that every employee is rated equally.
If you’re still having a hard time deciding, never fear -- some companies choose to combine the two approaches, transitioning from anniversary date reviews to focal point reviews after the first few years.
Regardless of the performance review cycle your company chooses, the most important thing to remember is to implement the process in a consistent way. The best thing that you can do for your organization and your employees is to lay the groundwork for effective and constructive performance review feedback.
Some have condemned it as a cutthroat, destructive, and outdated practice, while others promote it as the most effective tactic to ensure a high-performance workforce -- stack rankings are one of the most widely discussed (and highly contested) components of performance management strategies.
When it comes to the debate of stack rankings, it’s no secret that the majority lies with people who despise them. Companies such as GE, Microsoft, and Goldman Sachs abandoned them long ago due to employee backlash. But even after facing such harsh criticism, the controversial approach hasn’t been entirely dismissed -- prestigious companies like Amazon and IBM are still implementing stack rankings in their performance appraisals. So, what does this mean? Is the majority wrong about stack rankings? How do we know if (or when) we should (or shouldn’t) use them?
First things first, it’s helpful to understand the origins of stack rankings, and the context in which they were created.
The practice of stack ranking, otherwise known as rank-and-yank or forced ranking, was conceptualized by GE’s CEO Jack Welch in the 1980s as a method of differentiating high-performing employees from low-performing employees. The process ranks individual employees relatively against their coworkers in order to reward top-tier performers, while identifying and weeding out low performers.
Stack rankings came out of a desire to enact performance appraisals in an effective and efficient way, with the ultimate goal of cultivating a high-performance workforce. But this is where it gets complicated:
In a stack ranking performance rating system, managers are forced to rate their employees on a bell curve. Only about 10-20% of employees can be designated as top performers, while a fixed number of employees must be labeled as low performers and are either placed in a probationary improvement period or let go. In the meantime, about 70% of the company’s workforce, labeled the “vital” employees, are depended upon for adequate and reliable performance.
Naturally, the implementation of stack rankings has produced a variety of both negative and positive effects, both in overall organizations and among employees. Here are a few of the positives.
One of the main goals of stack ranking was to achieve meritocracy across organizations and businesses -- and, some would say, that is exactly what they do best.
CEO David Calhoun, a former vice president of GE, defends stack rankings for this very reason, claiming that the system was effective because they had a clear objective to support it. The objective at GE, and for many organizations, was to clearly articulate the specific criteria required for employees to become high-performers in the organization. Stack ranking promotes, and even forces, honest discussions between employees and managers about where they stand in meeting that criteria.
In this regard, the stack ranking system can help to avoid uncomfortable or ambiguous circumstances that employees often face -- whether it’s a high-performing employee who isn’t getting promoted and doesn’t understand why, or a low-performing employee who finds himself suddenly and unexpectedly laid off.
Stack ranking can also be a positive force in employee morale. The process of identifying high-performers makes it easier for organizations to take the necessary steps to keep them. In the stack ranking process, managers are provided with useful data that can help them to more quickly spot and champion talent.
Addressing low performance can also have a beneficial effect on productivity, especially if low-performing employees are given specific objectives to improve and develop. This also serves to motivate regular and high-performers when they see that low performance issues are being taken care of. Overall, the process can help to inspire and spur on employees of all performance levels.
Now, it’s time to discuss some of the less-than-positive outlooks and opinions about stack rankings -- and while the above-mentioned “positive effects of stack ranking” can ring true in some organizations, other companies and employees would fervently argue that stack rankings had the complete opposite effect. Here’s what they might say:
While creating a meritocratic workplace based on employee performance seems like a fair way to promote and fire employees, many companies have discovered that the use of stack rankings has resulted in more harm than good.
Ex-employees of Amazon, where stack ranking is still in use, have spoken out about the tech giant’s cutthroat, survival-of-the-fittest work environment. The company’s work culture, which has been described as “purposeful Darwinism,” evidently pits employees against one another to compete for the top-performing percentile. Naturally, this hardly boosts employee morale.
Others have criticized the flawed nature of forced ranking, claiming that the process was crippling for its employees and overall growth. When Microsoft got rid of stack rankings in 2012, an article was written describing the lack of innovation that the company experienced due to the harmful practice. When every manager was forced to rank their employees on a scale from top to poor performers, two out of 10 employees would receive a great review, seven out of 10 would receive an adequate review, and one employee would receive a terrible review. Author of the article Kurt Eichenwald determined that the practice had caused employees to compete against one another rather than with other companies, stifling the organization’s overall growth and innovation.
So, you might be wondering -- what’s the verdict? Are stack rankings a good or bad tool to use in performance management? It all depends.
Stack ranking is obviously a powerful performance management tool, but should be used with caution and close examination of your organization’s overall goals. Author Dick Grote makes a case for using the controversial evaluation system on an interim basis, saying: “The procedure is not right for all companies, nor something that should be done every year. But in the right company at the right time, forced ranking creates a more productive workforce where top talent is appreciated, rewarded, and retained."
Implementing a stack ranking procedure essentially guarantees that managers will be able to differentiate talent within your organization, which can lead to several positive business outcomes. Rewarding and retaining top talent can simultaneously inspire and stimulate middle-to-low performers toward higher performance. When used in combination with continuous, candid feedback, stack rankings can be a powerful tool to create a more productive workforce overall.
However, be cautious of the pitfalls -- namely, a competitive work environment, and an emphasis on rating rather than cultivating employee improvement.
Taking Microsoft as a prime example, a competitive work culture can be detrimental to both team dynamics and overall company success. The moment that your employees start spending more time thinking about their ranking and where they stand in relation to their coworkers, they become distracted and unable to produce their best work. This can lead to talented employees underperforming, and focusing more on their rating than on the feedback they need to improve and succeed.
Similarly, if your company is reliant on innovation and creativity, you may want to consider leaving stack rankings out of it -- especially if you desire for your performance appraisal process to focus on employee growth and development.
Stack rankings are riddled with issues and complexities, yes, but they could still have a positive impact on your organization. While they shouldn’t be the only facet of your performance management process, maybe there is still room for them as part of your process.
Facebook stands apart from the crowd in more ways than one. Their performance management strategy is no different.
Although some Fortune 500 companies are moving away from performance evaluations, Facebook is standing firm by conducting biannual 360 reviews. The company also facilitates a continuous stream of real-time feedback, allowing employees across the globe to give and receive feedback.
Peer reviews and feedback has the potential to create a competitive and hostile work environment -- but from what it sounds like, you won’t hear employees complain about that at Facebook. Instead, coworkers often exchange feedback with complete cordiality and civility, to the point that one news outlet labeled the work atmosphere “cult-like.”
Whether or not the employees are as happy as their Facebook profiles make it seem is up for debate, but one thing is certain -- Facebook’s talent is certainly taking the already-successful company even greater heights.
Let’s take a deeper look at Facebook’s performance management strategy.
Employees and managers at Facebook generally know what to expect when biannual performance reviews roll around. Due to the company’s continuous stream of 360 real-time feedback, everyone has a good understanding of an employee’s performance prior to the appraisal, minimizing any uncertainty or ambiguity on both ends.
All of Facebook’s global employees have access to internal software that enables real-time feedback among coworkers, while management uses the software to keep track of project progress and provide general support. The information gathered in this system, as well as the feedback collected from three to five close colleagues in peer reviews, is what managers use to determine each employee’s performance at the biannual review.
Molly Graham, a software engineer at Facebook, shared online that the actual process of gathering 360 feedback is dubbed the Performance Summary Cycle. According to Graham, “There is a two week period where employees solicit peer feedback (usually 3-5 peer reviews), and write a self assessment. Managers then read all the peer feedback and the self assessment and determine a ‘Performance Assessment’ or rating of the employee's performance over the last six months as well as whether or not it is the right time to promote the employee.”
You’re probably thinking: “Don’t they also decide which employees to fire?”
In an interview with Business Insider, Facebook’s VP of People Lori Goler stated that the company’s evaluations act as checkpoints rather than in-depth investigations into an employee’s performance. Goler claims that if anything is surprising in these reviews, then “something has gone horribly wrong.”
In other words, management seizes the opportunity during performance reviews to reward the performance of exceptional employees, whereas underperforming employees rarely make it to their performance review.
Employees walk away from their appraisals with a grade out of seven. The numbers are given definitions from “redefines” to “does not meet.” This stack ranking system has obviously worked to some degree, as evidenced by the social network’s astronomical success and impressive talent, but it has had a somewhat polarizing effect among employees and ex-employees.
According to a 2016 edition of the Harvard Business Review, Facebook promotes three core values in their performance management strategy: fairness, transparency, and development.
However, it sounds like some ex-employees would argue that the company did not always live up to these values.
In January 2019, Salvador Rodriguez of CNBC conducted in-depth interviews with more than a dozen former employees to ascertain how the felt about Facebook’s performance culture. The Ex-employees likened the company to a cult, claiming that employees feel a distinct pressure to never show dissent, to keep up appearances on their Facebook profiles, and to force cordiality and friendships with their coworkers in order to advance.
Here are few statements from these employees regarding their struggle with the company’s performance review system:
“It is not OK to act like this is not the best place to work." - Former employee
"People are very mindful about who they're connected with on Facebook who they also work with and how what they're posting will put them in a favorable light to their managers.” - Former employee
"It's a little bit of a popularity contest. [With the Peer Reviews ] you can cherry-pick the people who like you — maybe throw in one bad apple to equalize it." - Former manager
In direct opposition to COO Sheryl Sandberg’s personal mantra to strive for authenticity at all costs, one former employee claimed, "I never felt it was an environment that truly encouraged 'authentic self' and encouraged real dissent because the times I personally did it, I always got calls.”
Many of these ex-employees attributed Facebook’s recent series of scandals to its so-called no-dissent work culture. If employees had been encouraged to give honest and critical feedback, they said, some of these problems may have been caught prior to their exposure in the media.
While the peer review component of their performance management strategy may be an efficient way of assessing each employee’s strengths in such a large company, many former employees felt that it often turned into a simple popularity contest where coworkers were pitted against one another to compete for advancement.
However, there are two sides to every coin, and there are obvious and unmistakable benefits to Facebook’s performance management system that are hard to ignore.
Lori Goler, along with head of HR Business Partners Janelle Gale and writer Adam Grant, implored fellow HR representatives and companies not to “throw the baby out with the bath water” when it comes to performance reviews, claiming that the complete disregard of performance reviews is an overreaction to how they’re executed. Facebook’s implemented system was discovered to be the most practical and efficient among the various methods they tried. They write:
“Many companies that are abandoning performance evaluations are moving to real-time feedback systems. That is an excellent way to help people repeat their successes and learn from their failures. But it doesn’t help them—or the organization—gauge how they’re doing overall.”
And employees seem to agree--in an internal study, Facebook concluded that over 87% of people wanted to keep performance ratings.
Employees recognize that the system has flaws, but most also agreed that what they have is better than no reviews at all.
Former Facebook manager Daniel Ho claimed that the company’s performance review software and 360 feedback twice a year made it easy for employees to give and receive recognition and visibility. Ho said, “Facebook's process was transparent enough that I knew where I stood and what I needed to work on. It was hard not to notice that managers cared about giving employees ownership, responsibility, and opportunities to learn.”
And Goler et al. agree -- at Facebook, performance reviews are used to help employees understand how their contributions matter to the company’s growth, as well as to more easily recognize and reward top performance.
Here’s what we can glean from the way Facebook has constructed its performance management system:
While performance evaluations are not necessarily the perfect system, and can have costly flaws, they are certainly better than no reviews at all. Without formal reviews, performance will still get rated in another, more secretive manner that leaves employees in the dark and creates a sense of distrust toward management.
Even continuous real-time feedback, while a helpful tool to improve an employee’s performance, can employees unsure of their impact on the company overall.
Facebook is not the only organization going its 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.
Just when you thought performance management was getting soft, along strolls Tesla hitting the headlines with its no excuses approach.
If you believe the hype, Tesla has been managing its extreme growth and aggressive goals as an old-school taskmaster.
Back in 2017, the global automotive company reportedly fired hundreds of staff with little or no warning following annual reviews. It was an unexpected move and one that left everyone wondering whether the notorious rank and yank approach would be making a comeback. Then, in 2018, Tesla announced it was planning to cut another 9% of its 46,000-person workforce, citing the "normal ebb and flow of hiring and firing in a business."
Tesla stands out amongst its tech star peers for a less cushy approach to performance management process. Here's what we know about it.
Tesla is one of those mysterious companies we’re all intrigued by.
What’s it like to work there? What do employees do all day? What do they get rated on?
Unfortunately, we can’t answer all of these questions.
Here's what we do know. The company was founded in 2003 and is currently estimated to be worth $60 billion. Led by the enigmatic (and let's face it, controversial) Elon Musk, Tesla is an organization like no other. Its business is luxury cars, but its ambitions are much higher. Under Musk's guiding hand, Tesla wants to revolutionize the entire automotive world in ways we can’t even imagine.
Explaining his master plan for Tesla, Musk writes “the overarching purpose of Tesla Motors (and the reason I am funding the company) is to help expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy.”
The man has grand aspirations. And Musk has made it no secret that the company faces challenging production targets. (He recently apologized to a customer who was waiting for her new Tesla car by tweeting “we’ve gone from production hell to delivery logistics hell.”)
As Tesla ramps up production to hit a target of 5,000 Model 3 cars every week, its priority is 100% delivery execution. Given the goal, maybe a cutthroat performance management approach is the best way to get those results and keep customers happy? We'll let you be the judge.
Like most organizations of Tesla's size and influence, its performance management system is somewhat of a mystery.
But if you know how to read between the lines, there are some interesting strands to follow. For starters, it seems that the performance management culture has changed quite dramatically over the last few years as the company has grown.
Back in 2016, when Juliana Bednarski was HR Business Partner and Louis Efron was Head of Global Employee Engagement, the picture looked quite different. In a presentation for Talent Week, Bednarski and Efron outlined Tesla’s dynamic approach to leveraging the best talent.
They recognized the importance of engaged employees and their impact on customer engagement. In response, they created the Tesla360 Summary. This was essentially a staff survey that used the Maslow Hierarchy of Needs to guide performance management. The survey was a massive success and achieved an impressive 91% participation rate.
So it's strange that during the tenure of Gaby Toledano, the Chief People Officer who left late last year, Tesla appears to have embraced an entirely different approach. Details are thin, but it seems that they've gone back to using a traditional annual review to determine promotions, demotions and firings.
That's a stark switch up from their previous engagement-focused approach aimed at helping employees reach the top of the self-actualization pyramid.
In an email statement submitted to Fortune, a Tesla spokesperson confirmed that performance reviews happen annually and employees meet with managers to discuss their achievements over the past 12 months.
As a result, top performers are rewarded with either compensation, equity awards or promotions. And we saw what happens to the low performers.
Not much to go on there. But it's clear that Tesla is driving hard to deliver what former employee, Spencer Gore (now CEO of Impossible Aerospace) describes as “industry-defining product on a limited budget."
And, to deliver on such a promise, Tesla needs to run a manufacturing operation that is lean and mean.
With Tesla’s formidable production goals, it might make good business sense to remedy the bottlenecks as firmly and swiftly as possible. And if that's the goal, what could be more effective than the good old rank and yank approach?
But to be fair, even the grandfather of rank and yank performance management, Jack Welch would say that this is approach is as much about employee growth as it is about assessment. And it is possible that Tesla's current performance management framework somehow marries the two. But with the layoffs still hot off the press, it may be awhile before they start opening up about their latest performance strategy.
It depends on who you ask.
If you defer to Tesla's current and former employees, some seem to accept that working for Tesla is a competitive and stressful environment. Others are less complimentary.
But for many, the prestige of having Tesla on your resume supersedes the downsides. One anonymous employee writes “having the opportunity to work for a company that is changing the world is exhilarating and rewarding.” But another reviewer warns “Tesla is a high-stress, fast-paced environment. People here work really hard and get things done. I wouldn’t say it is for everyone.”
It’s hard to say where Tesla's performance management process will go from here. For a company with such high aspirations, it’s clear that its employees hold the key to success. But how they attract and nurture that talent seems to be a moveable feast. As the new VP of People and Places, Kevin Kassekert, settles into his role, it will be interesting to watch how Tesla’s performance management evolves in the future.
Tesla is not the only organization going its 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.
Bulky, time-consuming and ineffective. The once ubiquitous annual appraisal has gotten a bad rap — and don't get us started on ratings.
We get it. Employees don't want to be told they're 'better than average, but not excellent'. And we know that 50% of millennials would rather receive meaningful feedback every month than sit down for an hour each December. For many HR leaders, it's clear. The annual review has to go.
But the question is: in exchange for what?
Continuous feedback? Weekly check-ins? Bi-annual reviews? Performance management can be the quintessential HR Rubik's cube if you let it. And while you probably do need to make some changes, those changes might not need to be as drastic as you think.
If you want to change your performance review process but aren’t sure how, here are five steps to help you find a better way.
The number one reason companies stay stuck in an outdated performance management process is perfectionism.
HR leaders become attached to an image, idea or industry case study that made a lot of sense for someone else, but might not be relevant for them. When it comes time to buckle execute on that big idea, the process quickly becomes muddled and eventually stalls out.
But every company has its own unique DNA.
So before you embark on a system change-up, take time to identify who you are as a company.
For instance, if you have a hierarchical structure with highly skilled professionals, many of whom do a similar job, you might have a cultural need to boost employee engagement and motivation. In contrast, a small company with a flat structure of specialist employees all working on different things may need to focus on how they measure performance fairly and consistently across small but diverse teams.
Give yourself permission to do this your way. The performance management process can at should look different at every company.
Once you're clear on what your business is really about, have a good think about what you need your performance management process to accomplish.
In other words: what's the purpose of your performance review?
Is it to increase employee skills or foster greater accountability? To boost engagement or is it there to simply justify salary decisions? Be honest.
If you want your performance management process to produce meaningful outcomes, you need to define why you’re doing it.
For example, there’s no point asking managers to review employees biannually when they work on a monthly project cycle. In a case like that, it would make more sense to have a more regular review schedule while introducing some less formal elements to address issues when they arise.
Want to know a secret?
This performance management stuff isn't as complicated as it sounds.
It all boils down to 3 simple elements. Once you know those, it's easy to come up with an arrangement of those blocks that makes sense for you. For instance, Asana has an end of the year self-review that it combines with a biannual review, while the video game company Valve has a 360 system where teams of employees conduct performance interviews with everyone in the company.
Here are the 3 simple building blocks every performance management process has in common:
Reviews — Does a formal or informal approach fit better with your company culture? How often do you want to review your employees (annually, semi-annually, at the end of every project)? Who else do you need to hear from (self-appraisal, manager, peer-to-peer)?
Goal Setting — What types of goals will you set? Can you connect individual goals to the company's overarching vision? Have you created an opportunity for employees to include their personal goals?
Feedback — Where in your organization's work streams is it easiest and most natural to provide employee feedback? How do your employees want to receive feedback (in a one-to-one meeting, regular check-ins or through 360-degree-feedback)?
Rome wasn't built in a day, and you better believe your perfect performance management process won't be either.
Sure, HR case studies make it look easy but for some companies, it can take years to implement a new process. Managers and employees need time to familiarize themselves with it and they need a well-thought-out argument for why they should change in the first place.
So start with small steps like changing or removing appraisal questions, feedback methods or resetting the cadence for your reviews. Some of the most impactful change happens incrementally. You could even start by simply taking a much a smaller version of your current appraisal and executing it four times a year to test the waters.
Performance management is a moving target.
Finding an approach that works for your company means getting some things right and some things wrong. You have to be brave enough to take that leap and find what works for you. Create reflection points where you can assess what's worked, what hasn’t and how to remedy it.
And whatever you do, don’t be fooled by thinking you need to create the perfect process, especially if it takes you away from your true purpose for performance management at your company.
How often do you hear phrases like 'she's a natural athlete' or 'he's a gifted designer'?
Behind these common expressions, there's a hidden assumption that some of us are more talented than others. But is that true? Is the secret to high performance really just natural-born talent?
Or is performance something we can nurture within our environment? In June 2017, when Alex Honnold made history by becoming the first person to climb to the top of El Capitan without ropes safety gear, the internet was buzzing with speculation over these very questions. What was it that helped Alex accomplish this extraordinary feat? Was it physical aptitude, natural climbing talent or sheer mental will?
HR teams are considering the science more than ever when they design modern performance management strategies. And according to the research, the drivers behind an Olympic goal medal and a Nobel Prize is actually very similar. Let's take a look at what some of the brightest minds in business science have discovered about the "secret sauce" of great performance.
Our quest to understand human performance has intrigued scientists and psychologists for at least a hundred years.During the first half of the 20th century, the labor market was rich in human capital. With plenty of workers at their disposal, employers needed a way to discern between good and bad performance (or in more direct terms, who to keep and who to fire).
But it wasn't just employers who needed help classifying talent. During the First World War, the US military had so many recruits, they needed a quick way to identify poor performers and select stellar soldiers. They designed the first recorded merit-rating system to achieve that aim. By the 1990s the McKinsey War for Talent Study pointed a spotlight onto a fast-changing labor market. A shortage of talent due to the departing baby boomer generation was driving demand for a more sophisticated understanding of performance and reward systems.
This sparked a kind of "performance management golden age" in psychology and organizational theory that shaped our current thinking about performance management.
In 1960, Douglas McGregor penned his well-known Theory X and Theory Y. Together, these two theories clarified the differences between the key management styles of the time.
The authoritarian management style, Theory X, dominated business in the first half of the 20th century. The focus was on productivity, accountability and recognition. It assumed that when left to their own devices, workers will inevitably slack off. Under Theory X, managers were expected to control employee output through rewards and rankings.
In contrast, Theory Y defined a management approach that seeks to support employees. Rather than the classic carrot and stick routine, leaders who subscribed to Theory Y believed that employees genuinely want to perform well. Under this theory, it’s up to managers to develop and nurture this commitment in order to help employees reach their full potential at work.
The influential psychologist Abraham Maslow is best known for his motivational theory The Hierarchy of Human Needs, often shown as a five-tier pyramid.
Each level, starting at the bottom must be satisfied before you can move up. Maslow outlines human needs in the following order, bottom to top: physiology, safety, love, belonging and finally, self-esteem and self-actualization in the top spot.
Until this point in the history of performance management, psychology only focused on curing mental illness. No one bothered to investigate people who were mentally healthy. This piqued Maslow's curiosity. He noticed a correlation between healthy people and increased states of being that he named 'peak experiences'.
Today, the entire field of positive psychology, made up of theories that focus on human strengths rather than weaknesses, is grounded in Maslow's work.
With self-actualization now pinpointed as the holy grail of human performance, management consultant and author Peter Drucker set out to develop a framework that would help managers lead their employees to the top.
In 1954, Drucker argued that employees should have access to learning and development opportunities equal to those of managers and business leaders. And at the time, this was a radical position. Until this point, the biggest names in organizational theory had presented employees as subordinates whose only real job was simply to do what they were expected to do.
Fun fact: Drucker is also the brains behind SMART goals and the term "knowledge worker."
In the 1970s, pioneering psychologist Mihaly Csikszentmihalyi conducted one of the largest psychological studies ever in human performance. As part of the study, Csikszentmihalyi interviewed individuals across all ages, genders and ethnicities about their performance.
He spoke to Japanese teenagers, Navajo farmers, athletes, chess players, dancers and factory workers to name a few. The result was fascinating. Regardless of their background or career, they all described experiencing a sensation they called ‘flow’ during peak performance.
In the 1990s Csikszentmihalyi utilized these findings to fully develop his theory on happiness, considering the two completely interlinked. He defined flow as the experience a person has when they are "completely involved in what he or she is doing." In the example of a musician, Csikszentmihalyi explained: "If you are playing a musical instrument you know what notes you want to play, every millisecond.”
A person performing under Csikszentmihalyi's definition of flow, reaches maximum productivity almost effortlessly and feels great as a result.
Steven Kotler took the concept of flow a step further with his Flow Genome Project.
Kotler is often described as one of the world’s leading experts on human performance. He calls flow the “optimal state of consciousness where we feel our best and perform our best.” He explains that when we're in a state of flow “all aspects of performance both mental and physical go through the roof.”And according to a 10-year study conducted by McKinsey, Kotler's theory holds water. The study found that senior employees were up to five times more productive when performing from a state of flow. The bad news? The study also found that the average employee spends only 5% of their overall time in flow.
Just imagine the impact of increasing this to even 15 or 20%.
But how can you create flow in the day-to-day? According to Kotler, flow happens more often if you surround yourself with novelty, complexity and unpredictability.
The ‘fail forward’ ethos is one example of how companies can alter their culture to encourage more flow at work. For example, Google asked employees to deliver ten times more improvements, rather than 10% growth. By saying ten times instead of 10%, they're opening the door to radical new ideas rather than simply trying to optimize the status quo.
These are the theories, but what about the science behind the theories?
Let’s take a quick look at what happens to the human brain during performance.
Neuroscience tells us that the human brain is malleable. It can adapt to its environment, creating new neural pathways and thinking patterns. Our flight or fight response is a perfect example of this.
Discovered by physiologist Walter Bradford Cannon at the beginning of the 20th century, flight or fight response asserts that when humans perceive a threat, adrenaline is released in the brain causing an increase in our heart rate and often making us feel sweaty or even nauseous. The idea is we'll either stay and fight the threat or take off running.
Thousands of years ago, this physiological response gave us a life-saving biological advantage when faced by hungry tigers and other prehistoric dangers. But in the modern world, our threats are much more minor. Today, it's mostly things like public speaking, deadlines and of course, performance reviews that tend to make us sweat.
So how does this impact our performance? Does a shot of adrenaline speed us up or burn us out? A study by VitalSmarts found that 83% of leaders and 77% of workers say that top performers have less stress, confirming that increased stress and pressure does not lead to increased performance.
Thanks to technological advances like brain imaging, we can now map the brain patterns of high performers to see what's really happening in there.
Historically, many theorists believed that during peak performance our brain usage actually increased and went into hyper mode. But actually, the human brain slows down and becomes hypo during peak performance. The pre-frontal cortex, the area of the brain responsible for our inner chatter and sense of time, gets essentially switched off in a phenomenon that neuroscientists call transient hypofrontality.
That's why when a person is deeply focused on completing a task, they seem to make decisions almost automatically. If your inner voice of self-doubt is activated, you become distracted and lose focus.
The answer to the question what makes one person perform better than another is anything but straightforward. The research shows us it’s a complex interplay of internal and external factors and unfortunately, there's no magic formula for getting it right. But one thing we do know is that given the right set of circumstances, support and mindset, we all have the ability to do great work.
Have you ever looked up from your day to day and realized there's no rhyme or reason to your performance management process?
Sure, you have all the ratings, weightings and paperwork in place. But what if it all amounts to nothing more than an administrative exercise?
This was the situation Michelle Weitzman-Garcia found herself in when she joined Regeneron Pharmaceuticals in 2015 as Head of Workforce Development. From the get-go, it was painfully clear that Regeneron's performance management system was in need of an upgrade. Managers hated it, and so did employees.
Fast forward to 2018, Michelle and her team have redesigned Regeneron's performance management process and the global biotech company has doubled in size. They have kept pace with that breakneck speed of growth and secured a 92% participation rate in the company's performance management process.
Here's how she did it.
Regeneron Pharmaceuticals develops life-changing medicines for patients with serious diseases. Founded in 1988, the company started with a small team guided by two core principles: hire the smartest people and do great science.
One of Regeneron's largest performance management challenges is that their business units do radically different work.
From drug development, corporate functions and product supply — they needed a flexible performance management system that could match the needs of their diverse workflows. For example, it can take a new drug up to 20 years before it's market-ready, but a marketing and sales plan for the same product might only take a few months to organize.
Each business unit needed its own customized approach. Figuring out what exactly that should look like was the first challenge Michelle faced.
She embarked on a three-year intensive redesign of their entire process, And she started by asking each unit of the business what they thought performance management should be.
One of the first things Michelle learned was that Regeneron's original performance management system was complex and antiquated. Structured around an intricate 12-point rating scale, it was also immensely confusing for managers.
Michelle reduced the rating scale to 4-points to make the process faster and easier. "There's a very strong consideration given to making sure that we're not taking time away from our scientists to do HR things, so that they can spend more time doing science and being more creative," she explains.
Armed with this feedback, Michelle and her team created four different review forms, including a traditional structured form for the R&D team and a 30/30 process (every 30 days employees get 30 minutes of feedback) to completely replace the appraisal process for the product supply team.
In 2016, Michelle and her team eliminated the rating scale for half of the company and each year they continue to scale down. As of today, less than 10% of the company uses ratings.
"The benefit we found of not having a rating is that it opens up more authentic conversations between managers and employees," says Michelle. Regeneron still uses compensation ratings behind the scenes, but they're working to separate that from the performance management process altogether.
Rather than setting corporate and individual goals, managers at Regeneron talk about performance targets in terms of "what you need to accomplish."
According to Michelle, "It's really about teaching them about behaviors and performance. You can't have one without the other." Employees are asked to think not only about what they got done, but also how they got it done it. This shift in focus empowers engaged conversations about employee behavior, rather than focusing exclusively on how much they'll be paid.
Michelle and her team also introduced mid-year calibrations to hone in on performance and behaviors. For this, she uses a 9-box model with Results on one axis and Behaviors on the other. This shows her a full picture of how employees live up to both expectation and goals, all the way from "Exceptional Results, Inconsistent Behaviors" to "Inconsistent Results, Exceptional Behaviors." Behaviors are composed of important competencies and are defined at the local or departmental level.
Regeneron also does an annual calibration and discussion, and employees across departments are offered the chance to participate in voluntary mid-year discussions. Additionally, Michelle implemented a learning and development framework to help give more clarity to an individual's career planning and steer conversations around performance.
In 2016, 92% of Regeneron's employees were participating in the performance management process.
So, would Michelle's approach work for you?
The answer is probably yes. A bespoke performance management approach can do wonders for employee participation and engagement. But it's important to remember, change doesn’t happen overnight. And your managers and employees won’t thank you for rushing through a new process, only to discover a few months later it’s actually created more work.
If your goal is to abandon the old ways and create a custom-fit process that works, the unsexy truth is that it will take time. By allowing themselves three years to implement a new performance structure, Regeneron took the time they needed to do three core key things.
And they haven’t stopped. Regeneron's process will continue to evolve, just as the company does.
Regeneron is not the only organization going its 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.
Everyone loves a good TED Talk.
World-renowned experts sharing cutting-edge ideas in a bite-sized format — there's really no better (or quicker) way to get inspired.
And for performance management, a little inspiration in the form of a beautifully original idea is often just what we need. After all, there is so much NOISE out there. It can be hard to steer through the jargon and find a voice that can tell you clearly and simply why this stuff matters.
Luckily, we found four of those voices. So whether you want to be an HR trailblazer, or simply a better manager— sit back and be inspired.
Watch time: 18 minutes
“There’s a mismatch between what science knows and what business does.”
The Puzzle of Motivation by Dan Pink is one of the most popular TED Talks of all time.
What Dan will teach you about performance management:
This video, released in 2009, became part of the performance management canon because it flies in the face of the traditional ‘carrot and stick’ approach which, Dan points out, is actually pretty detrimental to business outcomes.
According to Dan, there's a 40-year-old body of expert evidence proving the classic reward incentives don’t work. Not only that, they're counterproductive. Dan's big idea is based on what he calls ‘intrinsic motivation’ — the desire to do things because they matter, not because we’ll be paid more.
Dan lays out a new business model based on three essential components for employee success: Autonomy, Mastery and Purpose. If you can come up with creative ways to use these tools, you can make your employees feel more motivated than money ever could.
One way to nurture greater autonomy at work is to rely on your performance management process to check in regularly, but not too regularly. When you get the timing right, you reduce your risk of falling into a culture of micromanagement.
The can't miss moment: minute 9:00, hear Dan explain why reward incentives simply don’t work.
Watch time: 20 minutes
“Ignoring the performance of people is almost as bad as shredding their effort in front of their eyes.”
Chances are you’ve seen that quote before. It has made appearances in almost every HR publication on the internet — and for good reason.
What Dan will again teach you about performance management:
In this TED Talk, world-renowned behavioral economist Dan Ariely dives deep into the relationship between motivation, meaning and productivity. By taking us through a series of experiments, Dan demonstrates just how important meaning is in our working lives. And all too often, it's the missing piece.
Dan presents seven key principals that underpin employee satisfaction: Meaning, Ownership, Creation Challenge, Pride and Identity. And the other six principles are just as important as meaning (seriously check this one out!).
In one simple example of how to help employees develop a sense of ownership, take a look at how prototype optics manufacturer Optimax uses peer reviews. Under the right circumstances, peer reviews can not only help identify areas for development, they can also help your team feel a sense of collective support for your performance management process.
The can't miss moment: Minute 13:20, Dan's clever ‘instant cake’ anecdote, which outlines his theory that the more effort we put into a task, the more meaningful it becomes.
Watch time: 9 minutes
“It’s not just the reality that shapes us but the lens through which your brain views the world that shapes your reality.”
In this immensely enjoyable talk, Shawn Achor takes us on a fast-paced journey into the science of happiness.
What Shawn will teach you about performance management:
According to Shawn, the old formula for success — ‘If I work hard, I’ll become more successful and I become more successful, I'll finally be happy' — is broken. Believe it or not, this broken belief system is more a recipe for unhappiness than anything else. That's because our brains are conditioned to constantly move the goal posts. For instance, an employee gets a promotion, but rather than being happy about it, they end up obsessing over hitting the next step on the ladder. And on and on it goes.
By switching into a present, positive mindset, employees and managers can experience what Shawn calls the ‘Happiness Advantage.’ With this performance power tool, employees can essentially harness the happiness hormone, dopamine, to become smarter, faster and more successful at work, without stressing out about it.
In your employee reviews, there are always questions about what’s gone well. But if you really want to tap into the 'Happiness Advantage', you need to narrow down the focus to what's good about the present. One way to do this is to simply ask employees what aspects of their work they feel the most grateful for.
The can't miss moment: Minute 9:20, Shawn explains the 'Happiness Advantage' in detail.
Watch time: 15 minutes
“Companies don’t have ideas only people do.”
With that statement, Margaret Hefferman poses a radical idea: it’s not leaders that save the day but the team.
What Margaret will teach you about performance management:
She argues that the bonds and trust we develop with each other is a key driver of outstanding employee performance. Yet many companies ignore this. Leadership has been conditioned to create a competitive environment that values the "stars" rather than the group.
For those of us who see the importance of social cohesion at work, we often we assume it'll happen organically. But it doesn’t. (After all, anyone who's ever worked in an open plan office can tell you it's no guarantee of camaraderie.)
So how do you overcome this age-old culture of competition?
A great starting point is to encourage peer-to-peer recognition. For instance, the healthy snack delivery company Snacknation has ‘crush’ Friday, where employees are encouraged to publicly praise each other by simply calling out someone on the team who's really "crushing it". And it doesn’t matter if it’s for finishing a massive project or simply a small act of kindness. All crushes count.
The can't miss moment: Right at the start, hear Margaret talk through ‘the super-chicken model.’ It's pretty great.
Ask the HR critics and they'll tell you, the future of performance management has been hanging in the balance for quite a while now. Clickbait headlines like, "The Annual Review Is Dead" and "15 Reasons Your Employees Hate the Performance Review" hit a strong note with those of us who know there are improvements to be made.
But the truth is, there will always be a need for a system of checks and balances to help employees be their best at work. As humans, we just care more when we know where we stand. In fact, in one survey 92% of employees that negative feedback is effective at improving performance (that is, if you deliver it well).
Love it or hate it, performance management is here to stay. But that doesn't mean you need to rip out and replace your entire system. More often than not, a couple small tweaks is all it takes to get your existing process back on track.
Let's take a closer look at some of the most common issues that might be tripping up your system.
If that sounds like you, know that you're not alone.
In many ways, the annual review has become the scapegoat for companies that have much bigger cultural problems. Do they take too long? Usually, yes. Are they too one-sided, formal, and complicated? Probably. Does that mean you should throw the performance review baby out with the bathwater? Not so fast.
Before you get rid of the annual review altogether, first consider a faster, more efficient framework, including more feedback opportunities throughout the year. Second, engage employees in the process so they feel a sense of ownership over their performance goals and the metrics you use to measure their performance.
Rating employees can be a contentious endeavor, especially when ratings are tied to pay increases and promotions.
But when used correctly, ratings can be a great way to create and uphold workplace standards. The challenge is knowing when to use, and when not to use ratings in performance reviews. For instance, if you're rating an employee on a vague personal identity characteristic like how "collaborative" they are, you could easily see a backlash. Especially, if you're not bothering to follow that rating with development opportunities to help them learn how to play better with others.
Instead, focus your ratings to help carve out a growth path for employees or measure a manager's subjective opinion of the employee, not the employee themself.
The biggest mistake in performance management is forgetting why you’re doing it. But if your approach isn’t aligned with your company goals, you’re working with a blunt tool.
A 2016 study found consumer companies whose employees understood their role in delivering the organization’s aims managed to triple their annual growth rates.
Start by finding your performance management north star. And keep in mind, this probably won't be an exact match to the mission statement hanging in the lobby wall, but it should definitely be related. For example, Starbucks's mission statement is “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”
It’s ambitious, but also simple. So for Starbucks's employees, the ‘north star’ is all about creating the kind of culture that leads to stellar customer service.
When you sit down to evaluate an employee, are you asking the right questions?
A well thought-out question can mean the difference between a productive employee and a toxic workplace culture. And there are many ways to say the same thing. Think about your language, tone and phrasing. Is it accusatory or focused on growth? Is your intent clear? Dig deep, ask follow-ups and allow a two-way conversation to take place.
Here are a few example questions to help get you started:
Despite the buzz, there's no one-size-fits solution to performance management. Your performance management must evolve right along with the rest of your business. And if your business has changed and your performance management process hasn't, it's probably time for a tune-up, not a complete trade in.
Ready for a modern and effective performance management system?
Is Amazon a lone wolf in the tech world?
Unlike Apple, Microsoft, Google or Netflix, Amazon's working culture is anything but glamorous. You won't find employees skateboarding across the office or kicking back in high-tech meditation pods. Yet, Amazon is undeniably a direct competitor to some of the brightest Silicon Valley darlings. So if it's not competing on Michelin-star rated lunches and unlimited vacation time, how is Amazon winning its talent?
In 2015, a controversial New York Times article described Amazon's culture as "purposeful Darwinism" and accused the company of creating an environment where employees are ruthlessly pitted against each other using a brutal rank and yank performance management system. But employees, including Jeff Bezos himself, spoke out against the article saying that much of it was nothing but hype.
So what's true and what's false when it comes to the retail giant's performance management system? Unfortunately, it's tough to know for sure. But luckily, there are a few clues that can give us a good glimpse into how leaders at Amazon run their employee appraisal process.
Before we start piecing together what we know about Amazon's performance management strategy, let's not forget how influential the tech giant is.
Amazon is arguably the most successful startup of our era, and has eclipsed the likes of Walmart as America’s largest retailer. Amazon created the modern category of retailing, pushing the boundaries on everything from eReaders to video streaming, web hosting, smart devices and so much more.
The tech giant currently boasts 100 million prime members and a market cap of about $380 billion. Its workforce is comprised of 560,000 employees from all over the world. Despite their top-dog status, Amazon remains ever-aware of the competition. “Our customers are loyal to us right up until the second somebody offers them a better service,” says CEO, Jeff Bezos, “And I love that. it’s super-motivating for us.”
Jeff's known to lead by lean, Six Sigma–style processes that enable Amazon to offer the best possible customer experience at the best possible price.
But Amazon arguably gets its edge by using a data-driven approach with clear metrics to measure both consumer and employee behavior. In Gallup's more objective assessment of the company's work ethos, head of finance for Amazon Web Services, Sean Boyle says, "Data creates a lot of clarity around decision-making. Data is incredibly liberating."
So is performance management at Amazon about liberating employees to make the best decision on behalf of the customer or is it as ruthless and unfair as the Times suggested? The answer depends on who you ask. (More on that in a minute.)
“You can work long, hard or smart, but at Amazon.com you can’t choose two out of three.” — Jeff Bezos
At PerformYard, we're strong believers that every performance management process should have a clear reason for existing. Whether you're pro or anti-Amazon, you have to admit, its performance management purpose is clear: always demand the best.
Amazon's 14 leadership principles serve as clear performance guideposts. And almost all of them focus on an individual's ability to own and objectively test and defend their ideas, as opposed to "softer" things like collaboration or development.
But how does this play out in practice?
From what we were able to garner from a limited amount of public info, Amazon uses a "stack ranking" (a.k.a. "rank and yank") performance management process in which employees are rated against each other in an annual review.
As Don Weobong President of Telania e-learning platform puts it, "every aspect of a worker’s performance is measured and ranked — from the earliest stages of the onboarding process, employees are also treated as data subjects in every respect. At the end of the day, employees are only kept if their metrics add up."
But here's where it gets interesting. Amazon also uses continuous feedback via its "Anytime Feedback Tool". This is an internal platform where workers can anonymously praise or critique colleagues. While the majority of the business world grapples with annual vs. continuous feedback, as if it's an "either/or" debate, Amazon boldly powers ahead with both.
And for employees who literally don't stack up?
Amazon uses a 3-month "Performance Improvement Plan," (or "PIP") to help the employee get back on track. You can guess what happens if they don't.
If scathing accounts like that of the Times are to be believed, you might be thinking, "No wonder turnover at Amazon is so high."
And it's true. Median tenure at Amazon is just 1 year. But at Google, it's 1.1 years — not much better despite its cushy 5-star perks and seemingly well-rounded performance management model. So what do employees love and hate about working at Amazon?
Here are a few anonymous Glassdoor testimonials that can help shed some light.
“Keep doing what you're doing. The reason such a big company can still operate successfully is because it runs as a start-up, and you can see that in every part of Amazon. Every Day is Day 1.”
“The culture demands that you're able to defend your views or decisions in a rigorous, data driven way, and accept criticism constructively without taking it personally. This doesn't suit everyone, however if it does, then both these things become significant Pros, adding to your experience and growth.”
“You work with smart people, you work on exciting projects, you are pushed to your limits...which can be rewarding when you accomplish great things. The diversity of the potential work and innovation can be very alluring. I've often called Amazon my 'Sexy Mistress'...she's emotionally abusive, but she's so sexy that I go back for more punishment."
“The management process is abusive, and I'm currently a manager. I've seen too much ‘behind the wall’ and hate how our individual performers can be treated. You are forced to ride people and stack rank employees...I've been forced to give good employees bad overall ratings because of politics and stack ranking.”
“You're responsible for your own career progression and finding the places and teams that are doing the stuff you want to do. No one is going to take you by the hand and help you with that.”
“You have to be self motivated. NO ONE will hold your hand and tell you that you're doing a great job. If you need constant affirmations from management, this company isn't for you.”
Then there's the most famous employee review. The one that virtually cemented Amazon's reputation for "purposeful Darwinism".
“Amazon is built, quite deliberately, to be Darwinian. The strong survive and the weak perish (metaphorically speaking) and the 'bar' is constantly increasing. The level of performance that would have been acceptable five years ago will get you canned today. It’s a kinda crucible that will help you develop a harder edge, if you can survive, that will service you well in your career and in life.”
Diverse challenges, breakthrough performance, zero hand-holding — these are attributes that may work well with a specific type of high-performer, and they definitely seem to match Amazon's unique position as a fast and fearless innovator.
And there is some indication that respect for this approach is growing. The average company rating on Glassdoor from current and former employees is a 3.4 out of 5. As of 2018, Amazon receives an above average rating of 3.8 — up from its score of 3.4 in 2015.
But not every company has the kind of magnetic employer brand that can be considered the "Sexy Mistress" of professional growth. While Amazon's clarity of purpose and hard focus on objective, data-driven feedback are solid performance management principles, smaller brands who need to hang to their people might be better off leaving the "ratings politics" and "emotional abuse" at the door.
Amazon is not the only organization going its 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.
Goals are an elusive subject. Research on how to set them, track them, and of course achieve them has dominated both the personal and business spheres for decades, maybe even centuries.
According to some of the crème de la crème goal-setting researchers, a goal "is the desired outcome of a particular behavior or set of behaviors, and therefore goal setting involves specifying the level or standard of performance to be attained, usually within a predetermined time frame."
Let's think about that last part for a minute. Goals can be incredibly motivating, but only if the time period makes sense. If a goal cycle is too short, we don't get the rush of taking those giant performance leaps. Too long and we risking working on outdated, ho-hum goals that no one takes seriously.
But how do you really know when one goal should end and the next begin?
Spoiler alert: As much as we'd love to give you one, there is no magic formula for setting the perfect goal cycle.
In today's rapidly-changing business climate, even the time-honored quarterly goal has come under scrutiny. At the end of the day, establishing a relevant end date for your business goals is about asking yourself the hard questions, things like:
One way to simplify the process is to start by drawing a line between your long and short-term goals. Again, this will look different depending on what business you're in.
A startup may have vastly different long-term goals than a centuries-old business that functions in a slow-moving industry. For example, 10x growth within 5 years might be the kind of high-stakes long-term goal that makes sense for a sparkling new tech company. But without clear criteria for how that goal will break down in the day-to-day, you could be putting your business at risk for the sake of pleasing investors.
For a 3-5 year goal, you might need performance reviews every month, or even week to keep your teams on track. But what if you're a major contractor who's just won a big-ticket infrastructure project that will take a decade or more to complete? In that case a long-term goal might be a 20-year goal broken down into "short-term" annual or biannual goals based on project specs that are already fully fleshed out.
Here are a few examples that can help give a little more context to how you think about the right goal cycle for your organization.
Apple - 3 Annual Objectives
"I want to put a ding in the universe.” – Steve Jobs, Former CEO, Apple
Steve Jobs was known for setting massive goals. Every year, Apple hosted a strategy meeting where the famed CEO would gather dozens of yearly objectives from key staff, then narrow them down until they were left with just three. Τhose 3 goals then became the core goals for the next year.
Jobs also set expectations for how those goals were to be reached. Focus was big. He was known for demanding zero distraction. Every activity his teams undertook either supported the annual goals, or simply weren't a priority. Apple even assigned a DRI (Directly Responsible Individual) to every project to make sure their teams stayed on track to hitting their yearly goals.
Starbucks - Why over when
“These goals represent our aspiration to create impact on the issues that matter.” - John Kelly, SVP of Global Social Impact and Public Policy, Starbucks
For Starbucks, social responsibility is the north star. The coffee giant's 2020 vision for social responsibility has clear guidelines and expectations. Starbucks breaks down their 2-3 year responsibility vision to smaller, more actionable goals under following headings:
By stating that these are the goals for 2020 "and beyond", they're letting stakeholders know that this is an ongoing, long-term goal that they're committed to setting and resetting every couple of years.
Facebook - Non-goals take you farther
"Lots of times you have very good ideas. But they're not as good as the most important thing you could be doing. And you have to make the hard choices." - Sheryl Sandberg, COO, Facebook
At the end of the day, there isn't enough time to do it all.
Sheryl Sandberg has a great trick for choosing which goals really matter. Non-goals are secondary goals employees should focus on only after the main goal has been met. "You have your goals and non-goals. The non-goal is the next thing that you would do, because it's a really good idea," she says.
A rule like this might make more sense for a 20,658-person company like Facebook than a ruthlessly determined startup, but it's a form of prioritizing we could all learn from — both for the big picture long-term goals and the smaller day-to-day actions that get you there.
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.
What could cause an 80% drop in employee engagement at one of the world's most successful pharma companies?
The truth is rating scales are one tool in the performance management toolbox. Like any tool, they’re useful — but not made for every situation.
Let's take a closer look at ratings to find out when they work and when they don't.
The classic example
The classic performance scoring matrix uses a 5 point scale and in most cases, probably looks something like this example from UC Berkeley:
The problem with a scale like this one happens when it's used to assess vague competencies, like 'organizational skills.' Managers aren't good at rating broad competencies, one person's self-starter could be another person's insubordinate trouble-maker. You run the risk of broadening the gap between managers and employees with the disagreement of terms that is bound to result.
On the other hand, assessing employee performance without ratings opens you up to more subjective opinions that we know often show bias.
If you want to use ratings fairly and effectively, start by applying them to well-defined behaviors rather than personality traits.
The modern example
Deloitte addresses all the concerns raised above with their two rating questions-
It's important to note that Deloitte’s survey has open-ended questions as well, but these simple ratings-based questions help use their managers' inherent biases to understand how teams are performing, while making reviews incredibly fast and easy to execute.
It's important to note that there's no limit to the number of ratings statements you can use. In one of the HR world's most popular examples, Google uses 11 ratings statements plus 2 open-ended questions for employees rating their managers.
For years companies have overused ratings, applying them to every aspect of the business and the people within it. But the best employee rating system has everything to do with your own specific performance goal, and the amount of intention with which you use your ratings.
Here are some of the best ways to use performance rating scales, according to research.
While ratings probably aren’t as objective as we wish they were, research shows that a manager's subjective ratings can be good enough for short-term performance improvement.
Dick Grote, founder of Grote Consulting, took a deep look at the data, including a study of 100 companies using a GE-style rank and yank. He found that identifying the lowest 10% of performance, and replacing them, succeeded in helping the business improve. Dick writes that “organizations got their best results immediately, in the first few years after implementing a forced ranking system.”
It makes sense when you think about it. After a few years of cutting low performers, the issue won’t be talent, it’ll be talent management. Brutal as rank and yank can be, it can also be fair in circumstances where the business might be holding on to a group of underperforming employees who simply weren't a great fit to begin with.
If you're using performance ratings to boost short-term results, you could easily use the classic 5-point rating scale with any of the following statements.
This person clearly explains how change will impact the team/department/individuals
This person achieves optimal levels of performance and accomplishment with/for ...
This person provides strong evidence of achieving results [list specific accomplishment]
This person excels at developing projects that have delivered X results
This person improved production by X% through [the following specific tasks and strategies]
This person exceeded the original goal of X by X% through [performing/introducing the following tasks/strategies specific task]
This person keeps meetings action oriented by [using the following strategies/task]
Deadlines and Time Management
This person consistently meets all deadlines [provide numerical figure e..g completed 8 out of 10 tasks on time]
This person prepares meeting agendas that are concise and time-saving
This person keeps meetings on schedule
This person respects the time of others
This person makes effective use of discretionary time
Ratings can also be great for creating standards, a crucial foundation for any high-performance culture.
Companies like Asana set standards of independence and responsibility (using their famed AOR model), while Netflix sets unapologetic standards of excellence and skill. Held together by regular performance reviews, these standards coalesce to form the pillars of their workplace culture. While ratings have recently come under fire for being somewhat "counter-cultural", they can actually boost transparency and help employees know where they stand in relation to the company standards.
For example, GE also used ratings to support their company-wide standard of growth and improvement. Ron Ashkenas, consultant and author of The GE Work-Out, writes that GE, “assumes that most people have the capacity to continually grow.” The powerhouse company used rankings and ratings as just the start of a longer performance management conversation, a way to differentiate what employees need what kind of help.
That doesn't mean you put a 10-point scale on a vague metric like, "organization". The qualities you rate must be meaningful and aimed at providing a transparent framework for helping the employee develop. In GE's case, they followed up their ratings system by offering tools and programs to help employees reach their potential. After all, if you're going to tell someone they "Need Improvement", you better be able to help them improve.
This person excels in living the organization's values
This person promotes strong support of the company's mission and vision
This person excels in contributing to the company's goals
This person promotes the company culture among peer
This person enforces company policies and values without creating negative reactions
This person is able to turn visions into actual action plans [give examples]
This person demonstrates an ability to transfer vision into execution by [implementing the following strategies/tasks]
This person collaborates with individual team members to establish a development path
This person initiates and executes creative ideas such as [provide examples]
This person provides their team with the resources needed to attain results by [performing/introducing the following tasks/strategies specific task]
This person provides substantial support during periods of organizational change
This person is a key contributor to the successes of the department
This person makes a significant contribution to the continued operation and growth of the organization
In Deloitte's case, the company was spending way too much time on annual reviews.
After completing the forms, holding the meetings, creating the ratings, then arguing about the results behind closed doors, Deloitte's leadership team found that their performance reviews consumed close to 2 million hours a year.
The company scrapped much of its appraisal form but kept its 5-point rating scale (strongly disagree to strongly agree). To make it more effective, they simply adjusted the performance factors to lean into manager bias by asking managers to rate based off of their feeling, something research showed they could do accurately.
At the end of the day, ratings will work. But only when approached intentionally. If you suspect your performance review system is too reliant on ratings, step back and ask which employee competencies or behaviors really need a clear and scalable rating, and which performance factors would benefit from a more open and honest discussion.
A more balanced approach will almost always pay off in more balanced employees.
Leading businesses need more than hard work and solid results right now. They also need a pipeline of talent that will drive future success.
That is why many organizations evaluate employees on not only their current performance, but also their future potential.
According to one study from Mark Huselid at Rutgers University, programs for developing high-potential employees can lower turnover by 7% and deliver a big boost to a company's bottom line.
Not only that, research from the Journal of Applied Psychology found that star performers can bump up a team’s performance by as much as 15%. And as you would imagine, the reverse is also true. A 2017 Glassdoor survey found that keeping employees confined to one job without a clear career path gradually increases their chance of leaving. Turnover is never fun, especially when it's your high-potential faction of talent heading for the door.
But how do you identify high-potential? Isn't it the same thing as high performance?
Let's take a deeper look at the difference between potential and performance, and what characteristics to look for to help tease out your future top talent.
Future leaders, rockstars, high-pots...
Potential is that elusive — almost magical — HR intangible that separates a good employee from your next gen business visionary.
Performance, on the other hand, is simply how well (or poorly) a person is doing their job.
While potential and performance are definitely related, they aren’t perfectly correlated. For example, a member of your IT team may perform job tasks only a little above average, but they consistently rock at bringing out the best in all the teams they interact with. They could be perfect for a project management role.
On the flipside, a star performer might totally nail their job tasks with consistent speed and quality, but they bring a negative attitude and don't care about the company. Move them into a leadership role and they could easily pull the company in a bad direction.
Don't get us wrong, we're not saying you should overlook performance. Past performance is always the best indicator of future performance. But there is more to future performance.
The point we're trying to make is that, as much as we wish there were a clear-cut path to bringing out the best in our people, it's just not as simple as, "Promote X employee after 5 years of solid work". The truth is, in order to reach peak performance, everyone needs opportunities to stretch and test their skills — and they deserve them, too.
But how do you know which high-pots are truly up to the challenge? Here are the fundamental signs to look for.
While many high performers may be totally satisfied in their current roles, a high-potential employee is much more likely to seek out a totally new task, or be eager to take a much bigger step forward (or upward) into management or another role where there’s plenty of room to learn and advance.
If you're wondering whether a specific employee might be ready for growth, here are some of the core traits to think about.
Most high-potential employees are highly engaged in their field, industry and/or company.
Whether that extra layer of passion comes from an intrinsic drive, a set goal, or just a genuine interest in their work (hopefully, all three!), high-potential employees are like hot air balloons — to reach new heights, they need a little fire inside.
These individuals want to be the best at what they do. They're often the ones thinking more deeply about the job and asking the hard questions. In fact, Douglas Ready, former head of leadership talent management company ICEDR (along with several other experts) took a good look at the characteristics of high-potential candidates across a variety of different workplaces. They found that high-potential employees can be so ambitious, they “realize they may have to make sacrifices in their personal lives in order to advance.”
You'll recognize your high-potential employees as the ones who are always willing to stay late or come in early. But beware. Burnout is like kryptonite for employee engagement, even among your high-potentials. Employees with a bit too much drive might need some help keeping a balance, before they burn out and head for the door.
Relationships matter. If they didn’t, Gallup wouldn’t have found that having a best friend at work can bump up profit by 12%.
A high-potential employee might not be everyone’s best friend, but they probably won’t be lone wolves either. But let's pause for an important distinction here, in HR circles, when we talk about "high-potential employees", we're often talking about candidates or employees who can move up the ladder into a leadership role — and as with any leadership role, your ability to work with people is crucial.
While your typical high-pot employee would ideally be able to socialize in order to get the internal skills, tools and buy-in needed to excel in a role, this characteristic might not actually apply if you're looking for someone who can perform at a high level within a set role.
In fact, organizations like the Israeli Defense Force have high-performing teams of neurodiverse talent that are fantastic at what they do, even though they may not check the box for "sociable".
There's just no cure for incompetence.
Beyond being good with people, high-potential employees are undeniably capable.
Tomas Chamorro-Premuzic, Professor of Business Psychology and Chief Talent Scientist at ManpowerGroup, found that high-potential employees are not only able to do the job, they can also handle more complex tasks and questions, and are able to step back and think critically about those tasks. According to Tomas, “creativity and a knack for systems thinking” are hallmark signs of high-potential talent.
This characteristic can be phrased many different ways, depending on who you ask.
Douglas from ICEDR calls it, “catalytic learning capability” — basically, an individual's ability to take on new ideas and turn them into action. Claudio Fernández-Aráoz, a Senior Adviser at global executive search firm Egon Zehnder, calls it “seek[ing] understanding”.
Whatever you call it, at the core of the idea is a person's interest for deep growth. Employees who are eager to uncover new knowledge and opportunities beyond an established capacity or business "comfort zone" are typically excellent at finding profitable areas to expand into.
Curious, able, sociable, and driven are all wonderful things to be — but for many, these characteristics can come with a hidden tendency to bite off more than you can chew.
Enter the "dynamic sensors."
According to Douglas, individuals with dynamic sensors have the uncanny ability to see the difference between the tasks that yield reward, and those that are pure risk. “Their enterprising spirit might otherwise lead them to make foolish decisions, but these sensors help them decide, for example, when to pursue something and when to pull back,” he says.
At the end of the day, achieving high performance on the right things, is what moves a company forward. Some of your most practical employees will likely have the ability to sniff out the difference between the critical and the frivolous, without being overly skeptical or risk averse. (Either way, you'll want to make sure you give your people enough room to learn — even if that means embracing the occasional failure.)
If you google the words “the smartest guys in the room” you’ll find a documentary about Enron right at the top.
A culture of reward and recognition is a beautiful thing, but let's not forget: The only thing worse than wasted potential, is potential that's abused or misused.
Rewarding potential based solely on results only invites trouble. A high-potential employee might be great at consistently hitting performance outcomes, but if they use immoral or illegal tactics to achieve those outcomes, is it really worth it?
In addition to having their own moral guidelines, high-potential employees will boldly embrace the values of the organization. It's important to never look the other way on this one. Employees who cut others down just to pull themselves up won't make the best leaders once they’re at the top.
No matter what doors you’re trying to open, context is always key.
Though the above characteristics translate well to many organizations, the factors your business looks for in its people and leadership will depend on your unique culture.
In some roles and companies, speed is a priority, so “quick thinker” may need to be on your list. In other places, thoroughness matters more. In that case, you may be looking for your “detail-oriented” individuals. Compassionate, competitive, experienced — there are so many more characteristics that may need to enter into the equation depending on your organization's unique goals.
And your definition of "high-potential" should change just as frequently as your goals do.
The same way you look for specific characteristics in the people who will take us to the next level in our business, you've got to look at the characteristics of your talent management systems as well. Are your systems for hiring, coaching and promoting reflective of the goals and actions you need to take in order to reach your peak? Or is it time for an upgrade?
Develop a high-potential talent system worthy of your highest performers and you'll be surprised how many eagerly step up to the plate.
The performance gap is one of the simplest but most overlooked business concepts out there. Miss it, and you could be putting the very survival of your company at risk.
Simply put, a performance gap is the difference between intended and actual performance. This can happen at any level of the organization. For example there can be a performance gap with one particular salesperson who doesn't hit their target, with an entire sales team who falls short of the goal, or with the sales process itself not responding promptly to requests.
Performance gaps are a real problem and you'll need to bridge them if you want to stay profitable long after the competition has come and gone. Let’s take a look at a few common causes for performance gaps and how to avoid them altogether.
Let’s start with one of the most common causes of a performance gap: Lack of clarity.
Despite rampant advice to establish clear goals and expectations from day one, many employees feel completely left in the dark about what is and isn't ok at work. In a 2015 Gallup survey, only 50% of the American workers surveyed said they firmly knew what was expected of them at work.
Employees can’t meet performance standards if they don’t know about them. By simply setting and maintaining clear performance targets for your people, you can prevent many of the most common (and costly!) performance gaps.
The first step to closing a costly performance gap is to get crystal clear what the real goals and expectations are in your organization. (Hint: They are NOT the same thing.)
Not sure what goals and standards to set, change or replace? Why not ask the people who know you best? Start with your customers. Ask them why they continue to work with you and what they want to see more of. Then, it's time to check in with your employees.
By reaching out to employees (through surveys, one-on-ones and regular performance reviews), you can get an accurate assessment of what standards to set. You'll also get a clearer picture of the standards that aren’t being met, and the exact steps to take to prevent future performance gaps.
With real-world insight at your fingertips, it will be much easier to set challenging yet reachable goals. When setting goals, be sure to make them SMART: specific, measurable, achievable, relevant, and time constrained. These five categories keep you away from the type of flimsy goals that are inherently prone to misinterpretation. (Values like, “Always try your best” are great ideals, but they're nowhere near clear enough to be bona fide goals.)
Clear goals are a must, but sometimes the problem can be a simple lack of skills or tools.
A skill gap occurs whenever the goal can’t be reached because some part of the company, whether that be an individual employee or a whole branch, lacks the skills needed to reach it.
Skill gaps are pretty common — especially when industries shift. Coders have to learn the latest cutting-edge platforms, customer service pros need to stay up-to-date on the latest best practices, and so on. Anticipating a skill gap takes the kind of research and high-level thinking few of us have time for. Luckily, closing them is a bit simpler.
For the most part, you can either train or hire your way out of a skills gap. If your business is running well overall — meaning there are no major problems in leadership, management, staffing, etc. — feel free to train away! But if your business is understaffed, overworked, or simply pointed in the wrong direction, no amount of training can help close those gaps.
In those situations, a focus on performance makes all the difference.
Even if you're convinced your employees know exactly what targets to hit, and that they have the skills to hit it, they will miss if they don’t feel like pulling the trigger in the first place.
Business consultant and author of Good to Great, Jim Collins says it best in brief. The question isn’t, “ ‘How do we motivate unmotivated people?’. It’s, ‘How do we lead in such a way as to not demotivate people?’ ”
To avoid demotivating people, Jim recommends three strategies:
Building performance expectations on a foundation of clear, data-driven goals will earn you a ton of respect from your employees and keep them motivated to steer clear of performance gaps. Instead of arbitrarily expecting them to hit targets they don't understand, you're using data-backed insights to set metrics that matter.
After that, all you have to do is follow up to let them know you care enough to keep paying attention and ensure that they have the skills and tools they need in order to get the job done.
When those boxes are ticked, you’ll be closing gaps well before you fall into them.
Did you know that managers spend about 17% of their time working with low performers? Yes, you read that right. Your managers spend almost 1 day of each week dealing with poor performance. When you take a deep look at it, these poor performers are costing your company a lot.
When your company has many departments and businesses processes, it won't be easy. But, tracking poor performance in your business isn't impossible.
It doesn't matter how big or small your company is. The best way to do this is by using the right employment performance management system.
Still, think we're barking at the wrong tree? We're going to show you how using the right system will help you identify low performance.
Read on to learn how!
Yes, you can fix poor employment performance at your company. The key is how to identify it early enough that you can fix it at the right time. What makes performance analysis complex is that not all departments run the same way.
As a company, you can't measure your sales team the same way you would your human resources team. Most of the time, performance evaluations fall on the department managers.
When your management team has to spend more time on the performance of their employees than on company goals. It translates into your business running slower and less efficient.
Having a system in place that runs all your performance reviews and check-ins can fix this. It will make it easier for your managers to focus on getting more business done.
These systems can help take your company to another level. Many companies look at performance only from a performance appraisal point of view. But, this is one of the many ways you can measure an employee's performance.
Not all employees work the same way. That's why the right system will focus on these areas to help you fix performance issues:
Performance appraisals have become essential in measuring your employees' performance. We know that there's always a time of the year where these become a headache for every manager and employee. Many companies work on a one size fits all way by having one set performance review form for all employees.
Yet, at the end of the day, we know that every department doesn't work the same way. It would be ideal for every department to have their own tailored form. The right system will provide you a way to customize your performance review forms for each department.
This way you can measure your employees based on your company needs and expectations. Another way, this system can help is by giving you the option to deploy these reviews at a set time. This means that you can decide if you want some departments to run their performance reviews at a set time.
This can help human resources be more efficient when these reviews come their way. Also, the right system will provide you the option to track goal performance in your reviews.
This will give management a way to track how your employees have been doing on their work performance goals. Tracking progress is essential to identifying low performance. These options will give you updates for you to fix the problems on time before they become a headache.
As your company keeps evolving, so are the goals you set for your business and employees. The work performance goals that were set at the beginning of the year aren't the same mid-year. The right system will provide you a way to track the goals set for your employees.
It will give you a dynamic way to track and update these goals. This will help your employees visualize their progress. This way they'll have a clear idea of what's expected of them.
Also, a goal management system can help you motivate your employees. Since they know where they stand, your employees can work toward what they want to achieve.
This option will help you identify low performance early when it's related to established goals because of the constant monitoring. Identifying these deficiencies can help take your company to the next level faster than you'll expect.
Did you know that almost 60% of employees would like to receive feedback on a daily or weekly basis? Yes, we may not be huge fans of negative feedback. But, if it's delivered in the right way it can do wonders for an employee's performance.
The right system will give you the option to provide continuous feedback to your employees. This way you can identify and document low performance as well. The system may also provide you with ways to give 1 on 1 feedback and keep confidential employee feedback notes.
This will make your manager's job easier and provide a friendlier system to communicate with your employees. About 62% of employees have said that they would work harder if their employer recognized their efforts.
This means that your employees will be happier if you use this system to recognize their performance as well. Happy employees translate into better performance and efficiency. Your employees are the heart of your company so if they perform better your company will be smooth sailing all the way to success.
Yes, an employment performance management system can be the right call for your company. This type of systems gives you control over the performance data of your employees. When it comes to poor performance, the more you know the easier it's to fix.
The right system will help you identify low performance in each of your departments early enough for you to make the changes. If you're able to do this, it will translate into your company running better in all areas.
Remember to look for a system that fits your needs focusing on performance reviews, continuous feedback and goal management. If you find the right system, you'll be able to take your company to the next level in no time.
Are you looking for the right employment performance management system? We can help!
Contact us to learn more about our services.
There is a large body of online content offering general tips and guidelines on performance management. And sure, they can be helpful. But they can also be a bit...one-size-fits-all.
Performance management should be unique to the needs of your organization. Rather than speaking in broad terms about what makes for a great performance management process, let’s take a deeper look at three examples (extreme examples) of performance review processes, and the management strategies that support them.
The story of Jack Welch and his epic "rank and yank" system is one for the business annals. To date, it just may be the biggest examples of stack ranking in the workplace (not to mention the most extreme).
For decades, Jack Welch and the leadership team at GE ranked employees into three categories — top performers, underperformers, and normal employees. The top performers comprised the top 20% of employees, the bottom 10% were labeled underperformers, and the remaining 70% were neither here nor there.
And those poor underperformers. Under Jack's ruthless leadership, those 10% of employees were often fired on the spot — and the feedback given was very candid. Welch felt that "failing to differentiate among employees — and holding on to bottom-tier performers — is actually the cruelest form of management there is."
To be fair, Jack didn’t use rankings solely for firing. Ranking was as much about growth as it was about assessment. He called his process "differentiation" and paired it with tools and coaching approaches to build up the 90% of employees that were performing up to par.
Business writer and consultant Ron Ashkenas notes that Jack’s differentiation “assumes that most people have the capacity to continually grow if they are stretched, challenged, and developed.” To match that belief, Jack offered in-depth assessments, rotation programs for new hires, training programs for new managers, and mentoring.
Though it's not as headline-worthy, ranking and yanking could actually be secondary to coaching in the legacy of Jack Welch. After all, he even had a campus where he brought high-potential executives and employees for intensive training and lectures that he sometimes led himself.
While it's tempting to view GE's rank and yank as a cold and detached way to manage employee performance, a case could also be made that it's actually a very human and hands-on approach.
Asana is an innovative tech company and popular team communications platform. And like the name could suggest, they have a surprisingly zen approach to performance management.
Rather than approaching feedback annually or linearly, Asana does feedback often and in very different ways (for example 100% face-to-face and with 0% paper trail).
According to a deep dive into the company from Rachel Zurer at Conscious Company Media, Asana has a self-review at the end of each year, on top of a biannual review of the company’s general direction. During the biannual review, the team takes weeks out to discuss specific goals and performance-related issues and hold regular feedback sessions with peers and managers in a closed retreat-like setting.
But a performance management process this hands-off could never exist without a strong culture to back it up.
Throughout the year, Asana maintains a strong focus on growth, transparency and trust. Instead of a traditional business hierarchy, the company is broken down into what they call AOR’s - Areas of Responsibility. An AOR might be "marketing", or "customer service", or any other area within the business. Asana’s founders offer opinions to AOR-holders, but ultimately trusts them to make the final call.
To manage their AORs, and all the feedback given, Asana actively works to keep the load lighter and the human contact tighter. New managers only have 4-6 employees (or, "reports" as they call them at Asana) and experienced managers have 8-10.
It's tempting to see Asana as being on the other side of the spectrum from GE, but their focuses are similar. Both companies want to grow their employees, but each company looks very different (startup vs. massive manufacturer) and as such, they arrived at very different solutions.
As you would imagine, it's a wildly creative company. To stay that way, Valve shed all hierarchy and created what they call, “Flatland”. Valve writes in their employee handbook that, “when you’re an entertainment company that’s spent the last decade going out of its way to recruit the most intelligent, innovative, talented people on Earth, telling them to sit at a desk and do what they’re told obliterates 99 percent of their value.”
In Flatland, employees create teams as needed. Their desks come equipped with wheels so they can rearrange their space. Hiring is also an employee initiative and they're encouraged to interview candidates and help make hiring decisions.
Valve creates a team of employees who conduct performance interviews with everyone in the company, asking them who they worked with and what their experiences were working with that person. They anonymize the feedback and present it to employees. It’s a fairly standard 360 system.
According to their former economist-in-residence, Yanis Varoufakis, "It is important to understand that such spontaneous order-based enterprises rely to a large extent on individuals that believe in the social norms that govern their existence. So by the very nature of the beast, you don't have people there who try to hide and who try to somehow create a smokescreen around the fact that they're not very good at what they do."
When someone can’t quite fit in, they talk to the the employee to find a solution. If firing is the consensus, they make an attractive severance offer and part on amicable terms.
Flatland, rank and yank, or AORs might not fit for many businesses, but they're a great reminder to try new things and commit to the unique "extreme" that works for us.
One of the foundational ideas behind modern performance management is digital systems. The frequency and complexity becomes too big of a distraction unless it can be automated away with software.
All the recent performance management transformations, like Adobe, Deloitte and GE have been enabled by technology running in the background.
If you are designing a modern performance management system for your organization, you should also be considering performance management software.
Here is what you should be looking for.
This software enhances organizations' performance by driving employee productivity. It ensures that teams and individual employees are aligned with the organization's goals.
A performance management system essentially eliminates the annual employee review process. Instead, it promotes high-quality real-time feedback, performance tracking, and goal setting.
In other words, the system does what tedious annual reviews cannot do. It enables businesses to adjust employees' goals as business conditions change.
Put another way, annual reviews focus too much on the past, while performance management systems focus on future needs.
Just as human resource departments handle annual reviews, they oversee performance management systems. This includes teaching employees and managers how to use them.
Well-designed performance management systems are aimed at keeping your employees engaged and motivated. The more energetic they are, the higher your organization's daily output will be.
Ultimately, this helps to reduce staff turnover. It also boosts productivity and enhances operational efficiency. In other words, these systems tie performance into a business's bottom line.
Want a performance management system to work for you? Your organization must promote constant communication between managers and employees.
After all, a major feature of today's performance software is 360-degree feedback. This feedback includes input from not only employees' supervisors but also subordinates and peers.
Effective software also interacts with workforce analytics. In this way, you can easily analyze data. Then, you can compare this information with the data you receive from sales performance and financial management systems.
Performance management systems use live dashboards for collaborative and quick reviews.
In addition, they can report individual-, team- and project-level performance. Today's systems can also provide helpful employee rankings.
The future of these systems appears to be bright, too, given the improvements that have been made in artificial intelligence.
For instance, many studies have reported that gender bias is a major problem for female workers during performance reviews. However, artificial intelligence-enabled tools that can detect bias in language patterns are already being used in recruiting software.
Performance management systems offer multiple benefits. One of them is that they can help employees' work standards to remain consistent.
A performance management system maintains a collection of human resource data. It then follows an established protocol for feedback, reviews, transfers, and promotions.
As a result, you don't have to worry about discrepancies in your company's work practices.
This makes your organization appear more credible, thus leading to a more ethical and better company culture.
With a performance management system, your organization can promote personal growth and career development more effectively.
The software provides a forum for your company's senior management to create, monitor and update workers' personal development plans.
Of course, the goal here is to give workers strong autonomy and control when it comes to their career paths.
A personal development plan assesses a worker's current skills and charts out his or her development route.
The development plan also allows for training sessions. This is because training helps to uplift the whole workforce's competency levels. This enables the organization to keep moving on a trajectory focused on high growth.
Employees generally appreciate independence, not micromanaging.
This is why performance management software is so invaluable. It automates routine human resource jobs to give your entire workforce more flexibility and freedom.
The freer your workers feel, the more motivated they will be to do their best and to be innovative. Also, the more confident they will be in their individual job roles.
Employees can't be engaged unless they understand how they contribute to meeting their organization's goals.
This is why your workers need to have definite goals they can stay focused on achieving.
Fortunately, performance management systems enhance the company's goal-setting process. How? By taking advantage of the increased communication taking place among all management levels.
As soon as a worker has clear objectives, he or she can plan his or her target path. The employee can then use relevant business resources to achieve his or her goals.
Want your company to be successful? Your workers must understand their objectives. They must also receive helpful guidance and stay invested in the organization's goals.
A performance management system can keep your organization's diverse group of workers as engaged as possible.
That is why we have created PerformYard, a flexible performance management software solution.
We take your requirements seriously. We'll help you to manage your staff's performance in a single place, including handling feedback, reviews, and goals.
In fact, you can see your review process results through various exports and visuals. These tools make it easy for your human resource team to complete the necessary analysis to identify and reward top performers.
We also stand out for offering an automated and streamlined experience.
Most initiatives involving performance management fail because they are inconsistent and clunky. But we remove the unnecessary steps and headaches from your company's process.
In this way, employee and manager participation is painless -- the way it should be.
Get in touch with us to find out more about why hundreds of our unique customers have turned to PerformYard.
Just as we have helped them, we can help you to improve your company's performance and bottom line long term.
Ever since the HR world woke up to the idea that the workplace is dependent on humans and not red tape, the idea of using behavioral insights to guide business decision-making has been gaining traction.
Behavioral economics is one of those HR "trends" that we know is important, we just don't know how...exactly. We're going to take a closer look at one of the main principles of behavioral economics to get a firm handle on how it might be helping or hurting.
Here's a straightforward definition from Wikipedia:
"In psychology, heuristics are simple, efficient rules which people often use to form judgments and make decisions. They are mental shortcuts that usually involve focusing on one aspect of a complex problem and ignoring others."
In psychology circles, heuristics are also known as rules of thumb — mental decision-making hacks that help us make a call faster.
In her article for Psychology Today, cognitive behavioral therapist Alice Boyes gives some practical examples of heuristics in daily life.
"Rule of thumb: If it's the third time I've thought about a small decision, it's time to make the decision then and there. Specific example: A piece of mail came in about something in my neighborhood where the public could make submissions. I had it sitting around, and needed to make a decision about whether to read it properly or not. After glancing at it twice, on the third time, I ended up putting it in the recycling without reading it."
How much easier would life be if you always knew exactly when to scrap the junk mail? Or when to address (or NOT address) a situation with a top-performing employee?
Heuristics are a crucial behavioral tool because they give us the ability to practice the kind of snap decision-making that's often necessary in the fast-moving world of business.
But shortcuts can be dangerous.
Heuristics are naturally prone to bias and, due to their quick nature, they can sometimes tempt us into making a rush decision at times when a slower, more rational approach would lead to a better outcome.
Here's a closer look at the pros and cons of heuristics in the workplace and in the world of performance management, specifically.
There are plenty of healthy heuristics your organization might already use, like “trust your team” and rank and prioritize problems according to their impact on customers, etc.
But as mentioned, heuristics do create problems. In fact, that’s part of why they came under the spotlight in the first place. In their groundbreaking research, behavioral economists Amos Tversky and Daniel Kahneman found that heuristics often make us prone to making poorer decisions, without even knowing it.
(Funny enough, this is part of what makes people fear sharks more than mosquitoes, when in actuality, mosquitoes kill many more people than sharks. Anyone who's ever watched Jaws will agree that shark attacks are much more vivid than an unseen virus carried by a mosquito.)
Whether it’s jumping on a flash-in-the-pan HR trend or letting recent strong performance get in the way of a holistic assessment, heuristics can creep into parts of the workplace that are better left to rational thought.
And the racial, gender, and demographic biases holding businesses back? Yes. Those are heuristics, too.
The best way to use heuristics is the best way to use any tool: intentionally.
Don’t let your rules of thumb lurk under the surface. Take an honest look at your heuristics and ask yourself a few objective questions to see how well they work.
In the words of cognitive behavioral therapist Alice Boyes, "Use rules of thumb to make your decision-making better, not perfect."
Rules of thumb can help you stay flexible, but not when you’re all thumbs and no thought. Acknowledge your own heuristics and those of your managers, and you may end up with a more just, rational and productive workforce.
Carl Reichardt is one of those epic CEOs business authors love to write about.
In the late '80s, he famously led Wells Fargo through an historic cost-cutting exercise that delivered returns of 33.5% to shareholders, despite a massive real estate crash that put many of his competitors out of business.
Carl was ruthless. He froze executive pay raises, closed the private dining room and sold the corporate jet. His penny-pinching ways ultimately earned him the title of, "The Banker Who Would Be Scrooge".
"There's too much waste in banking. Getting rid of it takes tenacity, not brilliance," he proclaimed. It was a mantra that would go down in business history.
Which got us thinking…
What's the real difference between tenacity and brilliance? Can a business succeed with one and not the other?
Lindsay McGregor and Neel Doshi are co-authors of Primed to Perform: How to Build the Highest Performing Cultures Through the Science of Total Motivation.
In researching for their book, Lindsay and Neel asked 2,823 US-based employees whether they have the ability to find new ways of working. Only 27% said yes.
That's because the vast majority of businesses only measure an employee's tactical performance. That is, the steps, process and standard operating procedures that can be easily tracked from one day to the next. Number of widgets produced per hour is the classical example of a tactical performance metric that can be found in almost every business system.
The ability to consistently complete these tasks to a highly efficient degree is what constitutes a company's "tenacity". So it follows that this is how most employees should be measured.
But there's another type of performance that often gets overlooked.
Adaptive performance is an employee's ability to innovate a better process, standard or SOP. When an employee comes up with an idea for how to shorten the number of steps in the assembly line, or veer off-script to creatively upsell a client — that's adaptive performance in action. Some might even call it brilliance.
In the words of Lindsay and Neel, "Essentially, tactical performance is how well you stick to your plan, and adaptive performance is how well you diverge from your plan."
Carl Reichardt's cost-cutting crusade was clear, consistent and easily measured.
It's success was largely due to executing simple ideas.
Before Carl, Wells Fargo had exuberant culture that would have surely led to its demise. The Scrooge CEO rolled up his sleeves, did the simple things with tenacity and saved the company in the process.
Many employees don't have the luxury of CEO-level autonomy.
That's why it's important to consistently encourage (and measure) both an employee's tactical and adaptive impact on the business.
(In an ironic twist, Wells Fargo's overemphasis on tactical goals may have been part of what led to its recent account fraud scandal.)
A balance of tactical and adaptive performance is what helps even the scales between goals and expectations so employees don't feel pressured to compromise the business values (or their own morals) just to hit a target.
Tactical and adaptive performance are the yin and yang of every high-performance business.
In order to free up your employees to innovate new efficiencies, you must protect their time. That means delivering the tactical performance structures that help them produce quality work faster so that they have time and energy to think creatively about how to do things better.
To strike that balance, spend some time thinking about which specific aspects of an individual's role absolutely must be measured on the tactical level versus those that can be opened up to adaptive performance.
For example, could you grant your new business team the autonomy to spend up to X amount of money in discounts, refunds or gifts without manager approval? How does this affect your NPS score and close rates?
Look beyond the non-negotiables to identify clear places where employees can act autonomously. Then focus on the impact their adaptive performance has made on the organization. And if you're ever in doubt, simply sit down with your team and ask for their ideas.
Here are some questions to think about:
Build the balance into your culture by making these sit-downs routine. Next time the proverbial "stuff" hits the fan, you'll be glad you did.
Sometimes it can feel like we’re forced to choose; between a tightly managed stack and rank annual review system, or thoughtful in-the-moment feedback from manager coaches. Popular headlines are often about “Dropping the Performance Review” in favor of feedback, or “Why X Company is Going Back to Performance Reviews.”
The reality is that most organizations choose to land somewhere in the middle. HR finds ways to provide the right amount of structure to achieve the organization’s goals, while still giving managers and employees the flexibility to engage in one-to-one feedback. For more, we created a guide all about designing the performance management process for your organization.
With this in mind we asked 4 practicing HR influencers, from 4 very different organizations, to tell us how they think about structure and flexibility when setting up a performance management program.
Director of Human Resources at Compassion-First Pet Hospitals
It depends on your culture and needs. It’s not so much the structure as it is the comfort level of the people delivering the feedback and the utilization of the tools available that makes the difference. Prior to implementing any new system or tool, talk to your managers and find out what they are currently doing, and what is a pain point for them. If your shiny new system or process can address a pain point, that’s a win for everyone. What works for one organization may not work for another. No system will solve world peace – or even organizational peace, so have realistic expectations. Any new system or tool must be accessible, easy to use, and be perceived to make the manager’s job easier – not harder. HR can’t be the sole driver of the process. Your most influential people can be your greatest adopters and champions of your system if you utilize them as your pilot testers. Then HR isn’t telling others about this great new tool we love. Of course we love it, we’re HR. This is cool to us. If other managers love it, tell their peers, and adoption spreads, you will have more guaranteed long-term utilization.
Nicole is currently holding down her dream job, combining her love of animals and passion for HR, as Director of Human Resources at Compassion-First Pet Hospitals, a family of more than 30 emergency and specialty veterinary practices with locations across the country. Drawing upon more than 14 years of proven experience throughout Human Resources, specifically in the manufacturing, telecommunications, and veterinary medicine industries, Nicole has a proven record of establishing HR as a vital business partner with an earned reputation as an intuitive, wide-ranging HR Generalist. Nicole is a proud member of the SHRM A-Team, and she is on the Board of her local SHRM Chapter, GCHRA. Nicole has a blog, HR Without Ego, where her faithful sidekick, Maximus the Minimus – her 10 lb Shih Tzu serves as mascot.
Senior HR Business Partner at Otak Inc.
I recently joined a firm that is implementing a formal performance review system. It’s given me a great chance to reflect on the best way to give feedback.
As large corporations like GE, Google, Microsoft, and Netflix have ditched their annual performance reviews for a more fluid system, many HR professionals have been wondering whether unstructured feedback systems will result in decreased performance. How do we decide annual pay increases without a stack and rank system?
I prefer a performance management program that is a little of both structured and unstructured feedback. I suggest that managers have a casual goal-setting discussion once a quarter, with biweekly or monthly casual conversations. Then once a year, they can evaluate the year and progress toward goals. I’ve found that most employees still want a structured review, just not all the time.
This structure gives employees an opportunity to manage their time and create their own goals. Knowing they have an annual structured review helps motivate them to meet their goals.
This system provides the right balance of unstructured and structured feedback and has allowed our firm to grow and become more consistent while preparing for the future.
Keith works at Otak Inc., an architecture and civil engineering design firm that is headquartered in Portland, OR where he is a senior HR business partner. Keith obtained his bachelor’s degree at Portland State University and his MBA from the University of Phoenix. Keith is recognized as a leader in the HR industry and participates in the Portland Human Resources Management Society and SHRM and has SHRM-SCP and SPHR certifications.
Vice President of Human Resources and Marketing for the Key Family of Companies
Having a structured program in place to cover all the bases doesn’t mean that you shouldn’t still engage in ongoing informal feedback. It is easy to fall into a trap of either setting up too many structured meetings that it becomes unrealistic or going the other way and making it so informal that nothing gets done. Having a baseline of structured meetings that incorporate ongoing informal feedback can be a good balance and creates a realistic expectation that both sides can manage.
Getting the managers on the same page early on and communicating the expectation for the performance review program and its delivery is key.
I would recommend just maintaining a good balance and defining the expectation for both managers and employees up front so that the process and delivery is consistent between departments and across the organization.
Craig Frazier is a lucky husband, proud dad, culture leader and small business advocate and works as the Vice President of Human Resources and Marketing for the Key Family of Companies. @craig_frazier
VP of Human Resources for Berner Food & Beverage
It is important to understand that a formal system is used for a certain purposes and frequent coaching is useful for other purposes. Sure there is a link but when you consider the reasons for both you will see that we are talking apples and oranges. A formal process is usually used to document and justify annual merit increases, satisfy some arcane need rank everyone and/or to continue a process that the ownership feels is how things should be done “because we’ve always done it that way” (yeah….that last one is fun). Frequent coaching feedback sessions are for improving the employee’s performance, growth, goals and engagement. We easily see which of those things are more impactful to both the employee and the organization, but reality is that most of the companies in this country are stuck in doing some type of formalized review process.
One creative way to accomplish both is to design your formal system that summarizes the frequent coaching sessions. If you have quarterly coaching sessions, the “annual” review form could be used to just summarize those coaching sessions. So rather than ranking on the five or ten qualities that represent performance, you can grade employees on progress toward their goals or just categorize them into groupings as needed. Be creative. It may not look like the old standard review form, but it can satisfy the need for both performance management concepts.
Ed Wood has been active in Human Resources for over 30 years. After receiving his degree from the University of Wisconsin Ed began his career as an officer in the U.S. Army. Over the years, he has held several positions in Human Resources in a variety of industries including manufacturing, hospitality, and media. With over 30+ years of a wide variety of HR and operational experience in numerous industries, I have found that regardless of the company or industry, it still comes down to leadership and people.
The Colorado Health Foundation is bringing health within reach for all Coloradans by engaging closely with communities across the state through investing, policy advocacy, learning and capacity building. The Foundation’s mission is to improve the health of Coloradans and is grounded in the belief that health is a human right.
Today over 60 employees work together in the Uptown neighborhood of Denver, Colorado. Their roles vary from technology to communications and finance to philanthropy/grantmaking.
The Human Resources (HR) team has implemented a truly thoughtful performance management program they call Staff Excellence. The program provides the structure for regular conversations between employees and their managers while also giving every department, team and person the flexibility to make it work for them. Most importantly, it is a perfect fit for the Foundation.
We sat down with Alison Jeske, Human Resources Manager, to learn more about the program.
PerformYard: How did the team decide on the current performance management program?
Alison Jeske: When I started with the Foundation, the HR Director was leading the revamp of our performance management process. It started with a group of representatives from across departments, including employees and managers. We wanted to make sure we were hearing from voices across the organization.
Our goal wasn’t to create something from the top down; it was to create something that would be effective for our organization, which meant starting with input from our staff. The HR team said to employees, “This is your process; we are here to support and facilitate.” And we asked the Foundation’s managers, “what do you need to be able to evaluate the performance of your employees?” We asked employees, “what do you need from your managers and how can the process support your development?”
HR’s role was to educate, facilitate and balance everyone’s needs. For example, it was not clear what the right frequency would be. In the beginning the design team wanted monthly check-ins, and managers were saying, “Monthly seems like a lot, but I am willing to try it.” For the first year we operated with topic specific conversations every month, and now we do them quarterly.
[PY] So the program has continued to evolve?
[AJ] Exactly. Especially in the beginning we were asking ourselves, “What is this going to look like?” and we realized that it needed to evolve as the needs of the organization evolved. Everything was driven by our experience going through the process. So we would do the initial monthly conversations and get feedback from the Staff Excellence and Leadership team. That is what drove the edits and changes along the way.
I’m glad we started with monthly because after the first year staff felt heard, but everyone also agreed that we should try a more condensed version of the process. We continued much of what we did in the first year but we just did it in fewer conversations.
That’s one thing I think anyone about to go through this journey should expect. Year one, two and three may look very different, and that is okay.
What does your performance management process look like today?
We do four “conversations” a year between each employee and their manager. The first conversation sets goals for the year. Those goals flow naturally from the last conversation of the previous year. The middle two conversations focus on varying topics based on business needs, in addition to reviewing goal progress.
At the beginning of the year the HR Director will present the annual conversation topics to the leadership team and get feedback. For example, we’ve prompted employees to talk about any barriers they’re facing and discuss possible solutions, and we’re planning to dedicate a conversation this year to reviewing job descriptions.
The topics are planned in advance, but they’re also dynamic. A manager might say, “Actually this idea came up, can we add it to the next conversation?” – and we do that.
What happens in these conversations?
We created a form with a single long-answer box. Above the box we prompt a conversation by using a variety of guiding questions to encourage discussion around a specific topic. Some use the questions verbatim and others simply use them as a guide. Both are completely acceptable. The goal is to have a rich and productive conversation and the questions are just there to help, if needed.
It is really about stepping away from the computer. Rather than focusing on a large and complicated form, today we focus on a topic and have a dynamic face-to-face conversation between the employee and manager. We like that discussions can flow off-topic based on each individual’s performance needs. As long as the employee and managers are having a conversation and documenting it, that’s what’s important.
Then the next step is to put the notes from your conversation into PerformYard. We encourage folks to record what is important and relevant. They don’t need to write a novel or answer each question, just key takeaways. Each conversation form is initiated by the employee and they put their notes into the form. The manager reviews the notes, adds additional comments and signs off on the form.
Was the flexibility of your program an important part of the design?
Yes, we were previously using software that was driven by structured annual goal setting and it did not work for us. It was a product that drove a process. We needed to design a process that fit our organization and find a product to support that.
How do you use the data you collect from these conversations?
Employees are referring back to the signed-off conversations to carry over goals, questions or follow-ups to their next conversation. They also have the ability to easily access previous year’s notes and discussions.
Managers are using the conversations as supporting documentation and references for the year-end performance review and merit increases for their employees.
We see the program continuing to grow and evolve to include new measures.
A huge thank you to Alison Jeske for taking the time to share the Colorado Health Foundation’s performance management program with us. We are so impressed with how their team has iterated on a process, and arrived at something that is a perfect fit for their organization.
When your top HR VP publicly speaks out against your current performance management process, you know it's time for a change.
In fact, that's exactly what happened with Adobe’s Donna Morris when, jet-lagged and pressured by a relentless interviewer, she accidentally told one of India’s biggest newspapers she wanted to scrap their performance management system. It was a major slip-up, but one that ended in Adobe’s epic performance management transformation.Truth is, most of us can "feel it" when our performance management system isn't up to snuff. But how to you turn a hunch into insights you can act on? One word: Testing.
Testing gives you the real-world data to back-up your performance management decisions and create a system everyone can be proud (and loud) about.
To be fair, execs at Adobe knew a change was in order. After all, it was taking more than 80,000 hours to get annual reviews done. And on top of that, the tech giant saw an immediate increase in turnover after wrapping up the review process each year. (Yeah, it was BAD.)
But with so many new tools, philosophies and trends flooding HR, how do you know what really needs fixing? You don't want to overhaul your entire process only to find the real issue is one bad seed in the managerial team. Worse, what if you jump the gun and migrate to an entirely new system that everyone hates more than the last one?
Experimentation is awesome because it lets you look before you leap and know exactly where to tweak your process.
If you're a regular here on the PerformYard blog, you know we love a good goal. (How else are you going to know when you've won?!)
First, take the temperature of your current performance management process to figure out exactly what it is that's not working and set a clear goal so that you'll know when it's fixed. Your metrics will vary depending on your business and industry but you might want to look at sales, employee turnover, customer satisfaction, etc. (For more on that, check out this post.) And remember, numbers are great, but don't forget your biggest assets are your people. Survey your employees to find out what they really think about the performance management process and what they want from it.
HR expert Ruth Mayhew recommends going a step further to review your exit interviews for complaints. Whether it’s a lack of coaching, meaningful rewards, or upward mobility, the exit interview is where you're most likely to find those juicy gems of truth.
Once your vision for change is crystallized, the real work begins. Testing and experimentation is a BIG area. There's a lot of different methods out there.
Whatever approach you choose, there are some solid fundamentals worth keeping in mind. We like HR consultant Arne Van Damme's three great tips for testing:
1. Hypothesize Well - Come into an experiment with an idea of what you’d like to prove and how you’d like to do it. Don't just throw the latest software at the wall to see what sticks.
2. Test Entire Groups - Take an entire team, say the whole finance team, at one branch and give ALL of them the new system. Testing a smattering of individuals makes for a much worse sample because you're not controlling for variables. The team culture in finance is NOT the same as in your marketing team. On the other hand, when you see a variable across an entire sample, you can better understand its effect on the system at large.
3. Experiment Deeply - For those in the experiment, fully bring on every aspect of the new process or system. Pretend like this is the big launch. Go for optimal buy in. Get them excited. Then, set a solid time period to run the change and let your teams adjust to it. Good experiments take time, honesty, and effort.
Testing a new performance management process can deliver insights to help you drive success throughout your company and make you a true HR hero. It can also turn up information that shows you crucial mistakes in your business. You need to be prepared for both.
Change is almost always hard, and almost always worth it.
If you'r ready to get started read our guide to designing modern performance management systems.
Are you managing your employees with the same level of care you afford your business balance sheet?
In Google's first letter to investors, the founding team explained that, “it is easy to be penny wise and pound foolish with respect to benefits that can save employees considerable time and improve their health and productivity.”
But people are much trickier to manage than any number in a spreadsheet. If your performance management system is suffering from a lack of efficiency, you could be letting time, money and talent slip through the cracks.
Before looking at what a bad system can cost you, it's important to know what a bad system looks like. Here are some of the classic failings of a poorly run performance management system:
In an effort to bypass the HR bottleneck, many managers try to reinvent the wheel themselves.
But a fragmented and siloed approach only ends up making things less fair. Employees in the same job classification get reviews at different times, self-assessments get skipped and there's no guarantee that the review criteria are subjective. Now your employees are skeptical of their managers, not just HR.
The cost of employee turnover can range from between 6 months of the position's salary to 2 years for highly paid executive roles. And these are just some of the hard costs.
The fact is, the way your employees feel has a lot to do with the way your customers feel. And while the soft costs can be trickier to measure, they definitely have an impact on your bottom line.
In fact, according to Gallup, engaged employees are more likely to improve customer relationships, which results in a 20% increase in sales. Of course, the amount of energy and excitement your employees feel at work has everything to do with the approach of your managers.
But do they have the tools they need to lead effectively?
Okay. We now know that a bad performance management system is pretty awful. But what does a good system look like?
A good system will make it easy to:
As you'd expect, a great performance management system is truly the opposite of a poorly run system. Instead of costing you money just to keep it running, it's actively driving value throughout your organization.
Research firm McKinsey found that organizations with good talent management outperformed their peers by 22%. And Watson Wyatt found that similar good practices could increase company value by 30%.
Whether you boil it down to lower turnover rates, better productivity or increased revenues, the one thing that ties it all together is a commitment to practical, real-world employee recognition. (After all, there's a reason Fortune’s '100 Best Companies to Work For' regularly outperform the S&P 500.)
A truly effective performance management system goes beyond the generic everyone-gets-an-above-average-rating review system to giving you a structured approach for connecting with your employees in a focused and practical way.
And while it's not necessary to hire chefs for in-office meals or fit the rec room with the latest high-tech meditation pods, it IS important to accept that your people are your biggest assets. And it's people (not investors, numbers or algorithms) who make sure that companies like GE, Google, and even your own organization, consistently outperform the competition.
Thinking about designing a modern performance management strategy for your organization? Start here: Getting Started with Modern Performance Management
Amy is an HR manager at a firm that isn’t tanking but isn’t exactly succeeding with flying colors either.
The company’s performance management system was outdated when Amy became head of HR four years ago. Since then, Amy has updated the system twice and swapped it out entirely three times. And for the time, money and energy it takes to get a new system up and running, it hardly seems worth it.
Amy’s problem might not sound unfamiliar. In fact, a large survey of organizations from Deloitte found that 89% of respondents either recently changed their performance management system or planned to in 18 months. Only 10% of the firms surveyed thought that their performance management system was "excellent" and succeeded in driving employee engagement and high performance.
Clearly, a change is in order. But is testing yet another performance trend really the answer?
The problem that most execs and HR pros keep making is that they're too focused on finding an easy ticket to better performance management by way of the hottest new trend or tool in the market. But the real magic comes from the decidedly unsexy task of constantly aligning (and realigning!) your performance management strategy with your organizational strategy.
It's not hard to see why people like Amy get stuck. There are so many ways to design a performance management system and so many different HR platforms to choose from. It can be tempting to grab up the latest game-changing idea from other best-in-class companies in the hope that almost overnight, THIS will become your awesome new MO.
Harvard Professor Michael Beer explains that this only deepens a company’s troubles. He argues that many companies don’t try to align strategy with change and so they “develop many disconnected initiatives to bring about change — initiatives that by their piecemeal nature are doomed to failure.”
So let's say Amy sees that Netflix focuses mostly on regular 360 reviews, so she tries that for one year. The problem is, she’s doing it through two new HR platforms while also adopting Google’s upward feedback model to try and improve managerial performance.
It's a lot. Her HR department and managers feel overworked by the extra load of learning new review processes and platforms. Her execs aren't used to a bottom-up review structure and have become so accustomed to a revolving door of HR experiments, they don’t put their full weight behind it. In the meantime, her employees are totally confused about what performance metrics matter most and are quickly becoming disillusioned with the entire process.
Amy and her teams haven’t taken the time to align their performance management strategy with their business strategy. The result is a Frankenstein’s monster of mismatched HR policy pieces and platforms.
It’s easy to talk about strategic alignment but actually fixing a misaligned performance management system takes some serious elbow grease. Luckily, plenty a business leader has been there. Here are some solid experts and examples that can help.
Over at investment firm Betterment, CEO Jon Stein aligned his performance management system and business strategy through a series of measured adjustments (and continuous calm).
At first, he started with an OKR-based approach like what he saw Google do. When that put his teams on objectives they didn’t agree with, he refocused to a system that gave his teams more agency to make narrower goals. When that system made his teams too inwardly focused and myopic, he adjusted again and made flexibility a goal.
Rather than throwing out an entire system, he tweaked each strategy and approach within his current system, letting his strategy (and people!) adapt to changes in the business over time. He followed up with his teams after giving each new strategy a little time to sink in to see what went wrong, what went right, and what could be done to make their performance management system even better.
At Deloitte, research is a big part of the business, so naturally it factors into their performance management system. The top-four firm rebuilt their performance management strategy using the smart data crunching they're famous for and redesigned their employee review process to be faster, more open-ended and less prone to bias by removing many of the major bottlenecks (and ahem, paperwork) in the system.
For businesses like Betterment and Deloitte who have succeeded in removing the headaches from their performance review systems, keeping everyone abreast of the changes and the vision behind those changes was important.
An ability to stay steady, resist shiny object syndrome and focus on doing more of what works and less of what doesn't was crucial to developing and maintaining a winning performance strategy.
There is no shortcut to great employee performance. But what if, instead of immediately jumping from one performance trend to the next, we take a little extra time to think about what is right for our business and our people?
You might find that your days of constantly revamping your systems are finally over.
Ask any HR expert and they'll tell you the performance review process has two main goals — employee accountability and employee development. But that's not the whole story. A truly great performance review strategy will also drive inclusion.
Inclusion and performance go hand in hand. In fact, experts like Bernadette Dillon, Inclusion Specialist and Director at Deloitte, report that companies with an inclusive culture are “twice as likely to meet or exceed financial targets” and eight times more likely “to achieve better business outcomes.”
Fairness is fundamental to a diverse and inclusive company culture, yet according to Gallup, only 29% of employees strongly agree that their performance reviews were fair.
And it only gets worse once you start digging deeper into the data. For example, one study found that African Americans and women were less likely to get good ratings, and that ratings were more favorable for people that shared the same race as the rater.
Another survey found that 41% of African American women managers felt they needed to outperform their male counterparts in order to help offset bias in the review process. Unfortunately, that’s just the tip of the iceberg on the well-documented problem with performance reviews and diversity.
Despite their unfortunate track record, performance reviews don't have to be a barrier to diversity and inclusion. In fact, they can be an essential tool to help you create the kind of company culture that embraces diversity in a real, practical and performance-driven way.
When launching into a new diversity and inclusion initiative, experts often talk about the need to "rewire" your systems, so that you can rewire your behaviors. Well-designed performance reviews help you do just that.
With the right tools and questions, your performance review system can help you discover and eliminate bias in managers, workflows and talent management processes, and even help you collect data on diversity and inclusion measures that you may not have otherwise known where to find or how to track.
And of course, by focusing on clear and tangible goals, performance reviews can be a great way to get an objective view of each individual contributor on your team, while naturally creating a regular time and place to acknowledge the unique skills they bring to the table.
Handling biases is tricky business and you'll need to be very intentional about how you design your performance review system to help weed bias out of your organization. Whether based on race, gender, or other unconscious prejudices, our biases don’t always sit on the surface. According to bias-reduction trainer Sondra Thiederman, “bias is an attitude” — it can be tough to spot from the outside.
A great way to start checking for biases on a deeper level is to simply be aware of what they are and how they can manifest in the workplace. Here's a list of some of the most common performance management biases from the experts at Diversity Best Practices.
Set up your performance review system with the goal of rooting out these biases as much as possible. Make it known to your teams that the system was designed (or revamped) with the goal of supporting the company's vision for diversity and inclusion and help them understand why it's important to the bigger picture.
You can also help your managers learn to spot their own biases by hiring a professional to come in and workshop with your teams. Tests like Harvard University’s Implicit Association Test (IAT) can also help you and your team leaders identify your own biases in a way that's more private and personalized. Remember, this is a challenging subject for almost everyone. If you're using tests like the IAT, make sure you allow each member of the team to keep their results confidential so that no one feels shamed, blamed or singled out.
Your performance management system can be a catalyst in creating a more diverse and inclusive culture, but it isn’t the end point. A winning diversity and inclusion strategy is one that never reaches a finish line. It's a continual process of evaluating and handling our own biases and it requires a constant re-commitment to stepping up and doing what's right for our people and our business.
When it comes to performance metrics, the business world loves a good acronym. KPI, KRI, KRA, OGSM, OKR and so many more swirl in and out of the business zeitgeist — it can easily become more confusing than helpful.
No one wants to be surprised by a new acronym during an important performance meeting, so we’ve compiled handy list of the most popular ones and added a quick, plain-english explanation of how to use them.
Let's start with one of the most (if not THE most) popular terms in business, the KPI (a.k.a. KSI). This handy little metric will show you whether your business, department or team is on track. Basically it's just a shorthand number that shows how well you're organization is doing
KPIs will vary based on industry, organization, or even department. For example, your sales department might use Average Profit Margin, while HR could look at Employee Churn Rate.
KPIs include many other terms you’ve probably heard of, including but not limited to:
And many more. The important thing is to choose a set of KPIs that will give the clearest picture of whether your team (or business) is on track.
If KPIs are the performance metric you use to show you how well things are going, your Key Risk Indicator (KRI) is there to make sure things keep going well. In a nutshell, a KRI is any indicator for trouble, failure, and risk — whether that's within your team, department or business at large.
KRIs can be a bit broader than KPIs and can include things like disruptors and wider industry risks, rare and black swans events, and common issues that need tracking, such as logistical and supply chain risks. Of course, KRIs will vary greatly depending on your unique line of business but you can look at them as the inverse of KPIs. For example, employee turnover for HR, server lag/network volume for IT, and number of deals lost for sales.
Simply put, a Key Process or Key Process Area is one of the most critical functions of the business.
This is the section, or handful of sections, that must keep running like a well-oiled machine in order for everything else to be smooth sailing. Remember when Facebook’s servers used to crash regularly and the site would go down all the time? No? That’s because the teams at Facebook have identified IT stability as a KPA.
The Key Results Area (KRA) and Critical Success Factor (CSF) metrics are a bit like the KPA, but wider.
A KRA goes beyond processes and looks at general areas where results are necessary in order for the business to succeed. Use a KRA to set down some broad areas necessary for long-term success, then define your Critical Success Factors (CSFs) within those areas in order to stay on track to hitting your KPIs.
For example, KRAs can usually be summed up in one or two words such as: Productivity or Cost Management. The CSF is the specific action you and your team members must take in order to drive progress in that area. For example, 'focus on developing product for 2 months without distraction', or 'reduce waste from our distribution process'.
Ah, the OKR. This goal-setting framework was popular even before the likes of Twitter and Google started using it.
This performance metric aims to strike a balance between the qualitative and quantitative. OKRs first articulate a goal without worrying about measurability. Something like "Aggressively increase revenue." That's the objective. The second step is to decide on several metrics that will track progress towards the goal. For the revenue goal above we might want to 1) Increase revenue 50%, 2) Keep our profit margin above 5%, and 3) maintain the R&D budget. These are the key results.
OKRs are great for setting big gnarly hard-to-measure goals, and then placing concrete guideposts that define success more quantitatively. For example is we weren't using OKRs in the example above we might try to increase revenue by investing the R&D budget in not-so-successful advertising campaign. That would increase our revenue, but it's probably not "success" the way we originally imagined it.
The Objective, Goals, Strategies and Measures (OGSM) model basically takes the KRA and builds a more structured outline out of it. With this performance metric, you take on an objective as the largest frame. So for example, the mission statement of your company or your biggest long-term business goal.
Then you set goals that are steps leading up to that objective. Strategies are the ways to reach goals, and ultimately, your main objective. Last but not least, you need to measure whether everything falls in line — if the strategies satisfy the goals, which then help reach the objective.
And for that, you need good measures. Your measures, bringing us full circle, are likely to be your KPIs.
As you can see, there's plenty of overlap in these performance acronyms. The acronyms themselves are mostly only good sounding smart, but the underlying ideas can be a great way to bring structure to your discussions of performance.
Finally, don't be afraid to stand up to jargon. When you don't understand something, just politely ask what it means. The other person is either being intentionally confusing in a self-obsessed attempt to appear important or they're using a useful shorthand that you should know. Either way, asking is better for everyone.
If you’ve ever received career counseling, you’re no stranger to the many personality tests out there. At this point, it feels harder to avoid the Myers-Briggs than to take it.
And actually, that makes sense. Humans naturally want to build patterns out of the information we take in, in order to make faster, easier decisions about how to adapt and thrive in our environments.
If you're looking for ways to help your people adapt and thrive in your shared work environment, it can definitely help to know a few things about who they are and how they tick.
From eagles to owls to INFPs to ENTJs, you can find tons of personality assessment tools to fit your team. But if you’re looking for a simple system that’s easy to learn, teach to others, and has a plenty of studies to back it up, look no further than the Big Five (a.k.a. the Five Factor Model).
The Big Five groups personality types using 5 core metrics:
And of course, it's all wrapped up for you in one tidy acronym: OCEAN.
The Big Five was created in the 1970’s by two independent groups of researchers and it’s still heavily studied today. According to research from executive coaches and psychologists Iain McCormick and Giles Burch there is personality-focused coaching using this model, can help managers and leaders get better performance from their employees, even if they didn't start with this approach from day one.
Before we dive into what "type" of people are on your team, it's worth pointing out that none of the Big Five traits are necessarily good or bad. They're simply an indication of how a person will behave.
The magic lies in understanding where your employees stand with these personality types so you can hire and coach for balance. (Believe it or not, neuroticism is useful sometimes!)
Here are the Big Five personality traits you're likely to see on your team.
Employees with high extraversion tend to be very relationship-focused. Extroverts make great glue for holding office relationships together. But beware, an office with too many extroverts could result in tons of talking, and not enough walking. Give your extroverts a chance to share their knowledge with other team members, and they'll LOVE your for it. Just make sure to always check in and keeping them accountable for the daily deliverables, too.
Employees with high agreeableness are similar, often serving as office diplomats. According to the coaches at Crowe Associates, agreeable employees are good at managing conflicts in a constructive way. Yet McCormick and Giles note that some studies show that people who are more agreeable don’t always make the best leaders. It can be hard for them to make the unpopular decisions leaders are often forced to make.
If you've got a highly agreeable team member in a senior or manager position, teach them how to deliver negative feedback in a constructive way, and remind them how important it is to both the organization and the team to make those harder calls.
High conscientiousness is the bigger social feature of good leaders. According to Live Science, these workers have a keen sense of duty and organization. Though conscientiousness often links to better job performance, it might hurt with less organized work environments where the natural rhythm and culture is to jump in and keep moving.
Ask your conscientious employees what tasks give them energy and be transparent about the aspects of your office that might be frustrating for them.
The trait for adaptability and creativity is openness. Researcher Courtney Ackerman writes that research links openness to “broad intellectual skills” such as creativity and knowledge, which can also lead workers high in openness to find their place in key leadership positions.
Yet, McCormick and Giles remind us that the flip-side of the open employee is that they sometimes come with an overly strong creative drive that often needs checking. Make sure you always take time to listen to your open employees and provide clear path for them to visualize their future within the company and be clear yet supportive when they have an idea that just won't work.
Neuroticism gets a bad rap. In fact, Ackerman links it to worse job performance and “added life difficulties.” Yikes. But all neuroticism really means is a propensity to feel and react to the negative things around you — letting things get to you.
And that's not always a bad thing. In a paper from Center for Applied Cognitive Studies in North Carolina, Pierce and Jane Howard explain that, “susceptibility to negative emotions” can make for strong social scientists, customer service professionals, and scholars. McCormick and Giles stress that neurotic workers need help to be resilient, manage their stress, and handle their negative emotions in constructive ways.
A varied team can be a blessing and a curse depending on how agreeable and open the disagreeing parties are. While personality tools like the Big Five can be a great guide, what matters most is that you stay open to getting the best out of everyone.
No matter where you look, you'll find a conversation about employee recognition.
Pepsico CEO, Indra Nooyi made headlines when she revealed that she writes 400 letters per year to the parents of her senior execs. And in his trending LinkedIn article, Global CTO at DailyMail Online and Metro.Co.Uk, Oleg Vishnepolsky makes a strong but surprisingly simple case for employee recognition.
His story is barely 300 words in length, yet it illustrates with perfect clarity just how easy it is to get employee recognition right.
So why do so many of us still miss the boat?
Don't get us wrong, we love tech, but HR is overflowing with it.
With tools for everything from sending automated birthday GIFs to doling out points on a Slack scoreboard every time someone restocks the toilet paper—let's just say, it's easy to lose sight of why these tools exist in the first place.
So what is employee recognition, really? Here's how some of our favorite HR thought leaders define it.
To Ben Eubanks, employee recognition is an essential driver of innovation.
The expert HR analyst and founder of upstartHR, explains that with the right approach to employee recognition, you can drive innovation across every department within the organization (not just the flashy R&D teams).
"It might not be your job as an HR leader to recognize employees, but it is your job to design/build the system that your employees and managers use. We know that recognition improves employee engagement, and innovation provides an opportunity to target those employees that are dreaming up new ideas and methods to improve the business."
By showing all your people that you value their input and ideas, you're opening up every system, process and product to new efficiencies that can take your organization to a whole other level. Here's Ben again:
"The outcomes for submitting ideas can be as simple as peer/social recognition or it could include financial incentives and rewards. Whatever the case, be sure to create a system and culture of recognition that makes employees want to find smarter ways to work. Don’t just attempt to motivate your people—inspire them."
An important piece of this is making sure you recognize employees by acting on their suggestions and ideas. Even if it's just on an experimental basis, showing your commitment to smart innovation will always take you farther than simply talking about it.
We love most things Kris Dunn has to say. The Kinetix CHRO and author of the HR Capitalist blog gave an epic shoutout to low-key recognition, using awesome examples of low-key ways to communicate your appreciation to employees who might not be comfortable with public recognition.
Kris points out that while we're used passing out awards and making big announcements in the white-collar world, this may not be the best approach for introverts or blue-collar workers.
"The broader point for any of us thinking about recognition is simple. To maximize your approach and the subsequent results, you’ll have to customize your recognition programs for different employee segments.Failure to consider when and how to recognize individual segments can and will be held against you in the court of employee sentiment. If you’re wondering why your managers don’t use the recognition tools you provide, it’s likely because you haven’t provided them with choices that work for the employee types they manage."
Employee recognition is an inherently personal thing. Set your managers up to win by taking the time to figure out what works best for each individual on the team.
One of our favorite stories of employee recognition in action, involves a manager and a millennial (obvious, right?).
Fistful of Talent author and former HR Manager Tim Sackett explains how, after conducting a performance review for a high-performing millennial, his executive sent a handwritten letter to the employee's parents thanking them for raising a rockstar.
Here's what happened next according to Tim:
"About a week later, I got a call from the front desk. It was the employee’s father, asking the front desk to talk to the executive and telling them they were the father of this employee. The front desk person called me, believing something bad must have happened, so I took the call.
I spoke with a man in his 50’s who had a hard time holding back tears of pride, thanking me (and our executive) for sharing such a wonderful story and how proud they were. The employee also came in to my office to thank me for doing this – believing I must have put the executive up to it (it’s an HR touchy-feely thing).
The employee said that they could never imagine a better place to work. A 3-minute hand written letter = powerful recognition and engagement."
How's that for appreciation?
At first glance, it's tempting to see this as just another story about performance strategies for millennials, but one of the most beautiful things about employee recognition is that a little truly goes a long way. Or as Tim says, "Employee recognition doesn’t have to be hard, or take a long time, or be a part of a process. It has to be genuine, in the moment and meaningful. Too many times we forget this on the organizational front."
By now, we know there's a reason Oleg's post has 31,454 likes (at the time of writing this article). And we know it has nothing to do with star-studded perks and rewards programs.
But surely we can't just throw employee recognition to the wind and hope that it magically happens, right? Right.
Or at least, mostly right.
The problem is work gets in the way. We get caught up in the day-to-day and forget all about the people who make work happen.
According to research from management consulting firm Cicero Group, employees found that a simple "well done" was more effective for engagement than a 5% increase in salary.
Do you need really need an employee recognition program to make sure these simple words are being exchanged?
Yes, you probably do. But it's important to note that, at the end of the day, you can have the trendiest employee recognition program this side of Silicon valley, but it will mean zilch to your employees if you don't lead with integrity.
But if the research on employee recognition is to be believed, any effort you put into making your people feel appreciated will definitely come back to you in the form of hard returns for the business. If you're ready to do it right, there is a very solid business case to be made for employee recognition.
We all love having something to look forward to and designing a program to reward and recognize your can definitely encourage the whole office to develop a deeper commitment to each other and the business.
Here's some math that makes a clear case for employee recognition:
If that's not enough to convince your CEO it's time to invest in an employee recognition program, try this:
Companies who spend a minimum of 1% of payroll on recognition are 79% more likely to have better financial results.
Despite the massive market for employee incentivization, employee recognition programs don’t have to cripple your budget.
Employee recognition programs are not what they used to be and as the experts note, real employee recognition has basically nothing to do with mass-manufactured trophies or bringing your pet to work, and everything to do with how you treat your people in the day-to-day.
Here are five simple ways to make your employees feel appreciated.
According to Harvard Business School professor, Francesca Gino, “Receiving expressions of gratitude makes us feel a heightened sense of self-worth, and that in turn triggers other helpful behaviors toward both the person we are helping and other people, too.”
Francesca and Wharton professor Adam Grant measured a groups of students’ sense of self-worth after receiving feedback on performance. They found that 25% of the group that received just an acknowledgment felt higher levels of self-worth, compared with 55% of the group that received thanks.
Apparently, there's a pretty big difference between "Good job" and "Thanks for doing a good job."
The days of tenure-based recognition and employees of the month are long gone. Those methods just don't work on younger employees, especially considering how often they change roles.
As Gallup’s chief scientist Jim Harter puts it, "recognition is a short-term need that has to be satisfied on an ongoing basis -- weekly, maybe daily."
And nothing says you care more than taking time out of your hectic schedule for a set one-on-one. There are a number of reasons to meet privately with your employees. If you're looking for a little inspiration (or questions to get the convo started), start here with our post on 11 Types of Employee One-on-ones.
We love managers, but sometimes their faces are just too close to the mirror to see what's really happening within the team.
Peers who work shoulder to shoulder on the business's frontline will always know when someone deserves a pat on the back. Peer-to-peer recognition can also help offset some of the rater effects that can skew a manager's perspective and contribute to a broader environment of support and recognition.
The best way to encourage peer-to-peer recognition is to simply lead by example. Don't be afraid to say something nice about a high-performing employee or manager, even if they're from a separate or "competing" department. You might be surprised at how quickly others follow suit.
According to Mercer, 78% of employees would stay with their current company if they knew there was a clear career path for advancement. In another survey, 53% of employees said respect for their knowledge and experience was their biggest expectation from management.
Performance reviews are the perfect opportunity to show your employees you appreciate their potential and you're ready to take advantage of it. Remember, recognition doesn't always have to be delivered in the form of a pay raise or promotion (though those things do help!)
What matters most is that you have a system in place to help them feel great by keeping that momentum toward the bigger picture.
If your employees are disgruntled and disengaged, it's usually due to a lack of follow-through on the part of the manager or exec team.
Any exec can call an employee into their office and ask for the next big idea, but not many can fearlessly hand over the trust, resources and autonomy it takes to let the employee run that idea past the finish line.
If you're committed to showing your employees you care, you must have a system in place for delivering and collecting feedback on both sides of the table, and actively follow up to measure your progress on shared goals.
You just moved one of your best employees into a management role. As an employee they were smart, savvy, and socially skilled — but now they’re stressed and struggling, and so is their team.
You're six months in and the promotion is starting to look like a bad decision.
Effective managers and supervisors make a BIG impact on the office.
In fact, according to Harvard Business Review 88% of employees with supervisor support felt “motivated to do the very best” and 86% felt satisfied with the job.
And when a manager's not working out, we feel that lack of support even more acutely.
Nine out of ten times, the manager is seen as a "bad fit" and the lack of support spreads through the office like a plague. Rather than work on it with the manager, everyone suffers in silence until they eventually end up leaving, usually full of resentment that they didn't get the support they needed either.
But the problem isn't just the manager, HR also has a role to play.
Far too many HR leaders simply assume a new manager can snap right into the job after an hour of training, or no training at all. But even if the new manager was a star performer for years before being promoted, the role of manager is vastly different from that of employee.
No matter how experienced they are, all managers need strong, consistent training and support in order to own the role of manager successfully.
At first, it can be tricky to know how to train managers.
There are so many "off-the-shelf" solutions that work perfectly for employees, but management is a different game and it requires a whole other set of tools. HR needs a solid curriculum for onboarding new managers — and they need to work it consistently until it starts to feel like a natural part of the business.
Leadership trainer and expert Dan McCarthy offers some great ways to get started with training your managers. First, he recommends some “pre-work” in the form of assessing what your company's needs and goals are.
The next question is how do both your official and your unwritten policies align with those goals?
Take an objective look at your handbooks, policies and guidelines, and don't be afraid to face up to your daily practices and politics, either. If your HR mission statement says you support your people, but your entire staff complains whenever a manager seems to drop the ball, that lack of alignment will be immediately be sniffed out by your managers and employees alike.
The skills and guidelines a new manager needs to learn will always depend on your company's unique vision and goals, but if there's one thing every manager across the board will require, it's the ability to coach others.
Interpersonal skills are absolutely critical to a manager's success. But the same skills that help employees rise through the ranks (e.g., hard work, attention to detail, ability to hit targets and deadlines, etc.) are not inherently indicative of strong emotional intelligence.
A manager simply cannot thrive in their role without the ability to deliver feedback and coach employees effectively.
Dan Schwartz, founder of the Ground Floor Leadership Institute writes that, “it is the manager’s responsibility to ask the question, ‘What can I do to make you more successful?’”. Dan recommends having new managers role-play giving constructive feedback to each other. It might feel a little silly at first, but a firm, compassionate, diplomatic manager is exactly what your employees need and want.
Managers also need to know how to delegate, organize, and step back.
Delegating can be hard to teach but modelling it by giving your manager some space to manage in their own style can be a great start.
Note that a coaching approach is crucial, especially when it comes to millenials and younger workers. Instead of telling them how to do their job, simply encourage your managers to be accountable for their own teams.
Many HR leaders will give managers a two-hour training session the day before they start, then walk away.
But as HR, it's your responsibility to make sure the people come before the processes. Check in with managers at critical times throughout the year, such as before or after a major launch, performance review or business milestone.
And the next time you see someone pointing the finger at management, take a moment to think about how your managers have been trained. Do they have the space, resources, and ongoing support they need to shine in their own way? If not, the problem may be bigger than the manager.
“I’m motivated” versus “I’m determined”.
In a lot of conversations, you could probably say either sentence and get the same idea across.
Yet, there is a difference. To put it in the words of executive coach Jamie Douraghy, “Motivation is what gets you started. Determination is what helps you finish what you started.”
If we’re determined to do something we’ll stay on it, even after that initial motivation disappears. For most c-level and HR leaders, that's exactly the kind of drive you dream of seeing in your employees.
So why does the highly motivated, truly determined employee seem so elusive?
There are thousands of articles on how to motivate your employees.
Most of the traditional advice focuses on encouraging more fun at work, recognizing individual contributions and, if you really want to go big, integrating some sweet perks into the mix.
And that all makes sense. After all, can you imagine a workplace where everyone communicates clearly, thanks each other (both verbally and with rewards), and works in an office with a fully stocked kitchen and and the latest ergonomic workstations?
It would be hard not to feel motivated at a place like that, right? Or would it?
The truth is, both motivation and determination probably come from somewhere much simpler.
Professor Edward Deci and clinical psychologist Richard Ryan created the basis for something called the self-determination theory. Like the name suggests, the idea is that most people are already intrinsically motivated and determined. The trick is to sustain it.
Self-determination theory suggests that fostering a sense of “autonomy, competence, and relatedness” helps make sure people don’t lose the intrinsic determination they start with. But doing that in the hustle and bustle of a busy workplace is a whole lot harder than it sounds.
It can be easy to think of employee motivation in terms of giving.
Giving employees proper feedback, acknowledgement and rewards, all contributes to their level of motivation. But if we already have an inherent sense of determination, then maybe employee motivation is more about simply not taking anything away.
Business consultant and author of Good to Great, Jim Collins reverses the framework and suggests that people usually start with motivation and end up demotivated. He goes so far as to say that a boss thinking they need to motivate you is, “discounting what you really are as a person.” Instead, he suggests ways to avoid demotivating.
Here are Jim's three strategies:
According to Jim, these factors help keep the motivation on your side. He argues that it's the opposite—avoiding problems, making decisions before asking for input, and pointing to intangibles—that robs your employees of the natural motivation they came in with.
At the end of the day, it might not be a question of how to motivate through performance reviews, but how to make sure your performance review process doesn’t demotivate your employees.
Consider whether your review process and management style gives employees a greater feeling of autonomy and whether you're really ready to listen with open ears to what they have to say. If you're taking the time and steps necessary to address problems head on, and use tangible data to backup your decisions, the rest will take care of itself.
I once attended a high-level conference of executives managing high growth enterprises and many were in industries facing extreme disruption.
In a panel discussion on talent management, these fast-moving c-levels bemoaned increasing turnover rates and agreed that "adaptability" was prerequisite for future talent.
And they were right. Generic job descriptions have a tough time keeping pace with modern business.
But apart from revamping your entire organizational hierarchy (which is neither easy, nor a sure bet for solving your succession planning problems), what can you do to align the right talent to the right role? Here are some practical steps to take.
As it turns out, HR consultant Professor David Clutterbuck had a similar experience to my own.
David was moderating a panel of HR practitioners on the topic of succession planning and was completely blown away by one panelist's (a top HR dog at a leading multinational) comment that, "We are running 21st Century organizations with 19th Century ideas about succession planning."
The comment sent David on an in-depth expedition into succession planning practices in which he interviewed dozens of HR professionals across the globe to find out what works and what doesn't when it comes to succession planning.
Here's one of the biggest problems David uncovered:
"They [HR leaders and managers] expect the individual to adapt to the job description. Yet talented employees rapidly shape the job to their own strengths and interests. The more detailed the job description, the more candidates it is likely to deter and the more likely that the new incumbent will be like the previous one. Yet the transition between one incumbent and the next is an important opportunity for new perspectives. A critical question for candidates is: 'What can you bring to this role, that’s different?'"
Instead of attempting to judge the strength of a candidate on a set of outdated competences, David recommends using three simple criteria to identify future talent:
David also sheds light on some of the most common misconceptions among managers and HR leaders that keep them from finding innovative solutions to succession planning. For example, factors such as ethnicity, gender and demand for work-life balance can make a big difference in how a high-potential candidate will view, negotiate and consider a promotion or offer.
And regardless of their background and professional goals, any employee who believes they're responsible for one particular set of tasks will feel justifiably blindsided when they suddenly find out they're expected to change, adapt to, or even innovate a totally new way of doing business, without any official acknowledgement that their role has changed.
By encouraging employees to initiate their own growth and development, you not only foster greater drive and accountability, you leave the door open to getting the kind of game-changing insights that can keep your organization on the leading edge, without having to force it.
But this means managers, execs and HR leaders must be willing to adapt roles and hierarchies to the changing needs of both the business and the people driving it. And that's not going to happen if your performance review process is as rigid and outdated as a jargon-packed job description.
Performance reviews are a great way to track the things that really matter.
The key is to consistently collect feedback about an employee's job satisfaction and goal-getting capabilities, and balance those insights with their individual long-term vision for professional growth.
We've all met the account rep who was once an excellent producer on the sales floor and is now a miserable mid-level manager. That's why the success or failure of your performance review and succession planning system depends in no small part, on the questions you ask.
Start by taking the temperature of your talent pool. If you're one of many organizations focused on reducing turnover, you probably already have some form of the 'Are you happy?' meeting in place.
Here are some of the key questions you may want to mix into your performance review process to help guide your succession planning. Keep in mind, these can be distributed and recorded via your performance management tool, or added to the system later if it's something that needs to take place in a more personal or informal setting.
When thinking about succession planning, it's important to remember that everyone develops in different ways and at different speeds. Aligning the 'Are you happy' questions with key project milestones, 360 reviews, or coaching programs is a great way to see what tasks and responsibilities are the most and least motivating for your people.
Knowing what adds to, or detracts from, the energetic reserves of your employees is key to helping you assess how they can excel in the future, whether that's in an established role, a newly created position or a lateral change in the scope of an employee's core responsibilities.
Succession planning at its best is about getting the most out of everyone in your talent pool.
And no one knows how to get the most out of your employees better than your employees themselves. (That's right, they know better than your managers do.)
Instead of assuming you know what positions your individual contributors want to grow into, why not simply ask them what motivates them and where they're looking to go in life?
A great performance management tool will make it easy to align their personal goals with the company’s goals, resulting in smarter succession planning and better productivity from top to bottom (or in this case, bottom to top).
This last point is not going to win me any extra points, but here goes. One of the most helpful succession planning tools also happens to be the most tried and tested: the 9-box.
Love them or hate them, these classic performance plots are a great way to understand who your ideal successors will be. But as leadership development experts like Dan McCarthy have pointed out, a 9-box can also be used to help assess individual contributors and guide development planning.
For example, an organization may create development guidelines based on where an employee places on the grid and then use those guidelines as a sort of performance roadmap, helping to map feeder roles and offer a more personalized internal learning experience with every performance milestone.
According to Dan, "Most organizations use the 9-box as a tool to assess managers for potential to move up in the organization for succession planning. However, I’ve seen some leadership teams use it as way to discuss whether individual contributors have the potential “to grow, learn, and take on new responsibilities”, etc… They’re just defining for themselves what “potential” means, but it’s important to have clear and valid criteria, just as you would when assessing for “leadership” potential."
Your performance management tool can help you customize your 9-box scales in the way that makes the most sense for your organization. Because just like people, every business has different needs on the path to growth and development.
Stay tuned in to what's happening with yours, and you'll have no problem getting the talent you need to stay ahead of the game.
Between staying on top of day-to-day tasks and good old-fashioned fear of confrontation, there are hundreds of ways your performance reviews can go off track. But with 69% of employees saying they would work harder if they felt their efforts were better recognized, it pays to have a steady appraisal system in place.
Here are four simple ways to get your performance review process back on track.
Your current business goal is surely not the same goal you set five years ago—it might not even be the same as the goal you had six months ago. But when was the last time your performance review process was updated to reflect those changes?
The very thought of combing through your appraisal forms to align each and every question with your latest top-level strategy would make any sane person want to run for the hills. But agillity is critical in today's business climate and you need a performance review process that can support big-picture decisions, no matter how quickly they happen.
Knowing where you're headed is the first crucial step to keeping performance reviews on track. Get clear on what the goal is at the organizational, team and individual level, then use a clear goal-tracking system to keep everyone empowered and accountable.
Before Adobe famously changed its performance review process in 2015, managers were spending an average of 80,000 hours conducting annual reviews. At Deloitte, the number was a staggering 2 million hours company-wide.
Truth is, people don't like the annual performance review for the same reason they don't like the DMV. If your appraisal process feels arcane, time-consuming and bureaucratic, they'll do everything they can to avoid it.
If reviews aren't happening on time (or at all), take a close look at your process. What questions, systems or steps can be eliminated? It can be hard to let go of parts of the process that have been there since the beginning, but it's more important to have a system that works.
If there's a question that doesn't directly tie into a clear performance goal or KPI, don't be afraid to strike it out. Rest assured, when your performance review process is fast and effective, it will keep your teams on track.
Business moves fast, which can sometimes leave a big gap between leadership and employees. If your review process doesn't reflect the real, on-the-ground goals and challenges your people are facing, it will feel totally irrelevant to your teams.
Sure, employees need to be tuned into the bigger picture. But they also need feedback as and when work is completed. In fact, 72% of employees believe their performance would improve if their managers would provide corrective feedback.
But if managers are operating under the belief that there's a one-time process in place for giving that feedback, they'll be all too happy to skip the kinds of uncomfortable, in-the-moment conversations that lead to better productivity now.
Encourage managers to adjust reviews to match goal changes at the ground level and give them free reign to deliver result-oriented feedback whenever the need arises. Make it easy for them to document that feedback in a central place where anyone who needs to can reference those insights for more relevant reviews in the future.
Speaking of managers, one of the biggest pitfalls of any performance review process is a manager's reluctance (or inability) to have tough conversations.
But linking performance reviews to specific goals and results not only makes it easier to give employees the feedback they need, when they need it—it also helps managers deliver negative feedback more effectively. Because it's all well and good to make blanket statements about "why managers need to be better coaches", but giving them the tools they need to do that is another game altogether.
A great performance management system will make it easy for managers to visualize what is working and what isn't, so they can focus their feedback on the hard data, and eliminate the hard feelings.
Are "personal reasons" ever really the whole reason?
Probably not. Despite the contents of their resignation letter, the reality is most people quit because of something their employer either did, or failed to do. And it's time to start paying attention.
Unemployment is the lowest it's been in years and the open talent economy is no longer a prediction, but a reality. Your best people have a wealth of job options at their fingertips. (That's right. Get ready to see "war for talent" cliches back on HR conference agendas.)
You already know employee retention is expensive and of course you want to hang on to your best performers. But apart from investing in high-tech meditation pods or doling out raises you can't afford, how can you retain your best people?
We're going to tell you what many of your former employees wouldn't, so you can focus on what really matters to your top performers.
According to Gallup, 87% of employees worldwide are disengaged at work—and that's not entirely their fault.
It's important to understand there's a fine line between burnout and apathy—and top performers don't just "get bored" or stop caring. Most of the time the real problem is simply an imbalance in workload or a lack of vision and motivation, both of which can be easily rectified with the right conversations and coaching.
Get the feeling your best people are starting to switch off? Meet with them immediately to find out why. What's stressing them out? Is there a part of the job that's just not working for them anymore? When was the last time they felt awesome about coming into work?
Be open to their feedback and consider whether a change in role or responsibilities would do the trick. And if you're worried about a pay raise, don't be. According to a survey from executive search firm Korn Ferry, 63% of employees would rather get a promotion than a raise.
For now, focus on coming up with a creative, collaborative way to keep your best talent and commit to working the math out later.
Think back to your very first interview with your employee. You probably discussed the company mission and their individual career path as an important driver of that vision.
When was the last time you had a conversation like that?
People need to be reminded why they're coming into work every day. What is the big-picture point of even the smallest mundane tasks they're responsible for? Where does their time and effort actually lead? Better opportunities and a stronger career path is probably why they came to you in the first place. Have you delivered?
If your top performers are looking a little uninspired, meet with them to discuss the things they've done that have directly impacted the company in a positive way. Work together to create a defined development plan that aligns with the overarching vision.
As with starting a new diet or learning a new language, seeing your progress is what keeps you motivated to stick with it. And we do our best work when we're excited about what's next. Your performance tracking tool should make it easy for your people to visualize their progress and feel excited about the future.
According to the 2017 Edelman Trust Barometer, 63% of survey respondents said CEOs are only somewhat or not at all credible. Ouch.
There's a lot of manager-bashing on the topic of why people quit, but managers and CEOs probably deserve more credit. Most of them care deeply about the happiness and work satisfaction of their employees—and they absolutely want to keep their best people.
But they're busy. Really busy. They don't always have time to give employees the feedback and attention they deserve. More importantly, they don't always make time to follow up on the feedback they get.
For leaders to effectively bridge the trust gap, they need to prove their commitment by following up on the conversations they have with their employees. Even if that's just to say, "I need more time on this. Let's discuss it again at the beginning of Q2."
Set the date. Prepare for the meeting and act on the feedback you receive. Or, explain why you didn't. At least you'll be letting them know you value them enough to keep the conversation going.
Many recruiters and HR vendors will advise leaders to conduct a 'stay interview' with the goal of course, being to uncover some key insight you can act on to prevent them from leaving.
That's not a bad idea, but it's really only one step up from the dreaded exit interview. A truly preventative approach is one that goes straight to the heart of your employee's biggest motivations and is always focused on retaining your best people.
From pay increases to sales targets, some of our most crucial business decisions boil right down to our performance data.
But unfortunately, manager ratings just aren't as accurate as we'd like them to be. Here are some simple ways to help your managers improve their performance review skills, so you can make better decisions for your people and your business.
If you ask them, most managers will agree that performance reviews are important. But if employee appraisals are rushed, incomplete, or not happening when they're supposed to, there are probably some very real ground-level fears holding them back.
Dealing with subjects like pay and performance takes A LOT of courage. Before you launch into your manager training program, take a minute to sit down with your team leaders and have an open and honest conversation about their concerns.
Are they worried about how the feedback will be received? Confused about how to carry out a performance review that doesn't come with a pay increase? Once you know what the gaps are in your performance review system, you can adjust your process to eliminate those concerns or focus your training on specific areas, such as how to handle difficult conversations.
We all know performance reviews serve an administrative and compliance purpose, but more often than not, a company's review process is heavily skewed toward the mind-numbing procedural elements at the expense of the performance and productivity-driving benefits managers can get excited about.
Work to remove the administrative burden of your reviews so HR can spend less time training managers on procedure and more time coaching them on improving their performance feedback. Remind managers why performance appraisals are important to them, the employee and the organization at large so they know how to frame their conversations in a way that's productive and inspiring for everyone involved.
Truth is, we're all a little biased. And that's ok—as long as we acknowledge it. But it's a lot easier to spot bias in someone else, than to find it in ourselves.
Train managers to become aware of their own biases for a fairer, more accurate review process. Here are five of the most common biases according to HR insider and founder of the HR Bartender blog, Sharlyn Lauby:
Most managers either shy away from giving negative feedback, or end up inadvertently demotivating the employee in a misguided attempt to deliver constructive criticism. But negative feedback is essential to growth and the good news is, your employees want it.
Once you've uncovered any potential biases and set a clear standard of objectivity, it's time to help managers deliver negative feedback effectively. Encourage managers to take on the role of a coach as opposed to "judge", "boss" or "critic". A great coach goes beyond the criticism to help their team strengthen their skills and work together to devise the next play—all with one eye set firmly on a winning game plan.
Craft your manager training program around your performance appraisal strategy with regular refreshers near review time. For some organizations, this may be a week-long intensive course held annually, for others it might just be a quick check-in at the end of the month.
Whatever your training program looks like, remember that by simply taking the initiative to help managers deliver performance reviews more effectively, you're leading by example to help all the coaches within your company make better calls.
Congrats! You've made the decision to upgrade your performance management strategy. Get ready for a happier workforce and healthier bottom line!
As you consider different software solutions be sure to ask about these most important, and often overlooked, elements of great performance management software.
For most organizations, getting started with a dedicated performance management system will be completely new territory. You may have several members of your management or even leadership teams who are software-fatigued and wary of learning another system. That's why implementation is so important.
Your performance management system should come with the kind of support that makes a great first impression with users. But many performance management vendors only provide limited support, or charge support as a separate service.
Unless your entire office is extremely tech-savvy, you should probably select a solution that offers full training (preferably at no additional cost) at kickoff so that every employee feels great about using your new tool from day one.
Even with the smoothest launch possible, questions will arise. As mentioned, many vendors charge support as a separate service, which can dramatically increase your ongoing expenses throughout the year.
Look for a solution that offers regular, ongoing support at no additional cost to avoid sticker shock after kickoff.
We cannot overstate the importance of data security when it comes to selecting a performance management system. More data than ever before is falling into the laps of employers and HR departments, and you need to make sure your business is protected by using a system that's completely compliant.
Look for a solution that offers real-time encrypted backups (preferably using HTTPS protocol) to reduce any exposure to data loss. A performance management system that goes above and beyond will also have features that protect against liability, such as review reminders and alerts for missing signatures.
But beyond the legal and regulatory risks, performance data that is collected and stored properly can be a huge asset to your business. Make sure your performance management system offers consistent, compliant record keeping to help guide decisions about hiring, promotions, compensation, succession planning and more.
Let's say you've finally found a performance management system that checks all your boxes for features. Great, right? Not so fast. Just because a performance management tool is packed with bells and whistles does not mean it will work on a day-to-day level.
Employee performance is a company-wide initiative and if you really want to bring those productivity benefits home, your performance management software must be adopted by the whole organization. That means it must be intuitive and enjoyable to use.
This is especially important for teams on the go. Make sure your software can be accessed 24/7 on any device. You should be able to get more feedback, from more stakeholders, more often—while reducing the overall cost and admin burden of your performance management process.
The state of performance management is changing fast and your software must be capable of evolving along with your business.
If the CEO asks for something new next year, will it require switching platforms? Or paying for an extra module? Make sure your performance management system is flexible enough to meet all your needs, both current and future.
Walk through your existing process and make sure the software can support every last step, or that there is an easy change that doesn't impact your long-term vision. Many solutions won't support seemingly simple things like multiple sign-offs, automatic calendar reminders or self-assessments.
As much as we wish purchasing a performance management solution were a golden ticket to running a perfect OKR process like Google, the reality is great performance management takes time. Find a solution that lets you automate your existing performance management process while helping you grow into the performance strategy you aspire to.
One of the most important features to look for is how the system traces personal performance objectives back to the organization's most important goals. A great performance management system will make it easy to break down top level objectives and track progress as part of the employee performance record.
Your people are your biggest business assets. And purchasing a performance management system is an important decision.
A future-proof performance management system will adjust to your business—not the other way around. Choose a system that will make it easy for you to make the incremental changes that will yield big results in employee happiness and productivity.
Ever since "needy" Millennials joined the workforce and Silicon Valley giants started offering more and more gimmicky perks, the concept of employee engagement and fighting turnover has gone off the rails.
Some say we jumped the shark when Ask.com introduced drag-racing tricycles into the office as part of their “funnovation” initiative.
There is nothing wrong with these perks, it’s just that they are beside-the-point.
That's because our goal shouldn’t be just to have happy employees who don’t leave the company. We should be building organizations of extremely productive employees who are also happy and don’t leave the company.
To achieve the latter we need to do something much more difficult than building a yogurt bar or calling the extra conference room the “meditation room.”
If we want our employees to be both productive and happy the source of the happiness must be the work itself, not peripheral perks. This could mean the work feels purposeful, or the work could feel fun, or the work could be an exciting challenge.
Are you still with me? If so, here are 5 foundational ideas for increasing employee engagement.
One of the best ways for employees to find meaning in their work, is when they feel like they are advancing towards who they want to become as a person.
In a paper appropriately titled, “The ideal self as the driver of intentional change” researchers found that when working towards our own personal ambitions we achieve a unique degree of intrinsic motivation, engagement, and fulfillment.
How managers create this alignment will be different for everyone, but the first step is always the same. Managers must understand the personal ambitions of their employees.
Most of us are competitive, it’s human. We see our success in relative rather than absolute terms and so we are always trying to be not just better, but better than our peers. The American Satirist H. L. Mencken famously said wealth is, “any income that is at least $100 more a year than the income of one’s wife’s sister’s husband.” (or husband’s brother’s wife).
When cultivating competition it is important to respect its power and not let things get out of control. There are countless examples of perverse competitive environments where incentives become misaligned with company goals. One way to prevent this is to think about who is competing and who they are competing against. The simplest solution is to frame the competition as the whole company competing against peer companies.
There is an interesting paper called, A Theory of Action Identification, which looks at how we identify our actions. For example at a low level I’m currently typing on a computer, on a higher level I’m helping people around the world live happier lives by becoming more engaged at work.
When employees are disengaged they’re often saying things like, “I enter numbers into excel documents all day,” or “I push paper.” A manager can help energize employees by walking them up a ladder of purpose, connecting their work to more intrinsically meaningful things it contributes to. This technique can help people find meaning in even the most mundane tasks.
It is important to be able to see how every job in your organization could be meaningful. If you can’t, then you might be better off getting rid it.
Almost any job can meaningful, you just need to be willing to invest in making it so. Harvard Business Review is currently doing a great series called A Case for Good Jobs on how companies like GAP and McDonalds are investing in their front line jobs to make them more appealing for employees.
If through some lack of creativity you can’t make one of the roles at your organization a “good job” you are probably better off contracting that work out, because disengagement is contagious.
The truth is not everyone is looking for a meaningful relationship with work. There are some people who just want a paycheck from their job and nothing else. Don’t be afraid to part with these people, because again, disengagement is contagious.
However, remember that most disengaged employees are just the victims of bad jobs and bad management, and they have become disengaged over time. Work closely with them using the techniques above and you’ll find they quickly come back to life.
Asana, is a silicon-valley startup founded in 2008 by former Facebook developers, Justin Rosenstein and Dustin Moskovitz. (Fun fact: Rosenstein was one of the developers who created the Like button.) And in 2017 Asana ranked #2 of the top 100 Best Mid-Size Workplaces in the country by Fortune Magazine.
The company is well-known for its offerings of top-notch employee benefits like unlimited PTO, a culinary program, yoga, and Uber credits, but where it really shines is in the area of employee self-improvement, Asana describes self-improvement as fundamental to its culture.
The 297-person company offers employees external mentorship and life coaching. The program includes an all-star list of coaches to help with anything from improving interpersonal relationships to hands-on engineering apprenticeships.
One reason Asana invests so much in employee growth is that they give them a large degree of personal autonomy.
Rather than a traditional business hierarchy, the company uses "areas of responsibility" or AORs to delineate the roles of its employees. Each department is documented as an AOR with one person as its "directly responsible individual", or DRI. While everyone in the AOR is expected to take full responsibility for the tasks within it, the buck ultimately stops with the DRI.
The role of the manager is to be a coach. Rather than directly approving or directing decisions for the DRIs, managers empower them to make their own calls and give them the direction for the future.
Asana is completely mission-driven. Rather than focusing on the wheels and bearings of 'how', each and every project is led by their overarching 'why'. But that doesn't mean they're completely free of a structured appraisal process.
On the contrary, Asana's leaders regularly engage with employees to increase employee happiness and keep performance on track.
Every six months, the company halts all normal business operations for its Roadmap Week. This is the time for every member of the organization to step away from the daily grind and reflect on the big-picture progress made over the last six months.
They consider it a kind of organizational meditation—a time to sit, reflect and gain deeper insight on the business. During Roadmap Week, Rosenstein and Moskovitz will either lead a session, or simply sit in on DRI and manager-led sessions in order to get a better feel for what's happening on the ground.
In addition to the bi-annual Roadmap Week, select teams at Asana hold a regular Friday Product Forum.
The goal of the Friday Product Forum is to share observations and offer guidance—but managers and DRIs are trained to detach from any need to have the last word. In an exclusive interview with Conscious Company Media, Moskovitz described their transparent, bottleneck-free philosophy as, "Strong opinions weakly held." This approach allows them to challenge employees to do their best work, while remaining agile as an organization (a typical Friday Product Forum can take as little as 15 minutes per team).
Asana also uses regular peer reviews and conducts an annual employee survey via a third party. They even go as far as to share negative feedback publicly, and commit to making changes quickly. And according to their head of people ops, Anna Binder, this is the real reason behind their 4.9 star rating on Glassdoor.
“Our employees say wonderful things about us on Glassdoor. That doesn’t mean that we’re perfect, or pristine. What it means, what I believe that it means, is that we’ve created channels internally for people who have unhappiness to speak about those unhappinesses in a direct way.”
In keeping with its emphasis on personal growth, the company has regular one-on-ones between reports and managers. But instead of focusing on status updates and deadlines, these meetings are meant to address employee satisfaction and engagement.
Here are some of the common questions an Asana people manager will ask:
Compared to traditional performance review structures, Asana's approach may seem a little out-of-the-box, even hokey. But with 99% employee satisfaction in virtually every area, it would seem its enlightened approach to appraisals is working out pretty well.
Asana is not the only organization going its 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.
Performance management software allows companies to effectively track, analyze and evaluate their employee performance and productivity. The software should distribute forms for feedback, collect data, manage administrative tasks like sign-offs, analyze information about performance and store feedback securely.
Other important features include automated workflows, continuous feedback, access control, upward, downward and peer reviews, customizable review forms, goal tracking, single sign-on, built-in reporting, anonymous feedback, email reminders, e-sign, flexible review timing, and intuitive navigation.
When performance data is collected and stored properly it can be used to guide company goals, hiring decisions, career trajectories, compensation, succession planning and all other human capital decisions. Additionally, consistent and formal record keeping of employee performance is an important protection against liability. Dedicated software can prevent issues like forgotten 90 day reviews, missing signatures, annual reviews that happen four months late, and managers going dangerously off-script.
Finally, great performance management software can dramatically streamline an existing performance management strategy. This can result in substantial time savings for managers, employees and HR. It also can be an opportunity for companies to increase the amount of feedback data they collect on employees. The best software will allow your team to increase the frequency of feedback and solicit feedback from more people while still reducing the administrative cost of performance management.
When a company is small there is less of a need for dedicated performance management software. At this size one or a few managers can keep a close eye on performance and manage a pen-and-paper or word-and-excel process at relatively low cost. Regular feedback and record keeping is just as important as it is for larger companies, however the management benefits of software will be harder to notice.
When a company grows over 15 employees the formal review process starts to become a hassle for the individual managing it. Often at this point the company will either move to a module offered by their payroll provider or begin to dig in their heels on the homegrown system.
The simple performance management software that is often offered in a suite with payroll and other HR tools can be great for companies that are willing to run their performance management process the way the software company says they should. The problem comes when anyone on the team makes a suggestion for a change. Simple HR suite software tends to be very easy to use one way, but very difficult to use any other way.
The other alternative at this size is to continue adding complexity to the homegrown system. This can work for a while and has the benefit of allowing a company to continue to use a performance management process that is custom to them. The danger is that when a company grows beyond 30 employees, the small annoyances and wastes of time inherent in most homegrown systems get multiplied by every new employee. The number one request from companies coming off a system of excel spreadsheets is “Please streamline our process.”
This is the sweet spot for dedicated performance management software. Organizations need something that will be both flexible to their needs, but also simple to operate for their growing ranks of managers. At over 30 employees home-grown systems begin to break down, and fighting with limiting software offered in suites becomes more trouble than it is worth.
At the larger end of this bucket companies often start to have ERP systems and there can be a push from leadership to run every aspect of the organization through one vendor. More and more this is seen as an outdated mindset and companies are opting for the best solution to each problem as long as it integrates well with their other solutions. For this reason even the largest companies often continue to choose dedicated performance management software.
If you are finding yourself in some of the situations below it is probably time to invest in dedicated performance management software.
Does any of that sound familiar? If so, moving your performance management process onto dedicated software can often pay for itself just in time savings and still give you all the benefits of more effective performance management.
At PerformYard we serve mid-size organizations (50-500) that are tired of their homegrown performance review system. Their old process is often a combination of paper forms, clunky excel docs and maybe an under-supported feature from their payroll provider.
Before our customers come onboard their performance reviews are-
Costly: with weeks of HR’s time and many hours of managers’ time spent facilitating the movement of forms and tracking down the right information.
Hated: with outdated ideas and cumbersome busy work that makes managers and employees frustrated and uncomfortable.
Unhelpful: with no system for efficiently collecting and managing the data, performance reviews are a huge initiative every year that has little to show for itself.
The question of what to do about this problem is often complicated by discussions of recent HR research and ideas from TED Talks, but the answer is actually very simple.
The first step to fixing performance reviews? Stop spending so much time on them.
Even if your ultimate goal is to create a world class and innovative performance management strategy you have to start by being more efficient with your existing review process. That is why so many mid-size companies love PerformYard. There are two things that break a review process, more employees and more complexity. When your review process is already breaking and your company keeps growing the answer is definitely not to implement a bigger and more complex review strategy from the latest issue of Harvard Business Review.
PerformYard first and foremost streamlines any review process you want to run. By design we do not force anything on our customers. If you want to do annual manager reviews or are going to try weekly 360 reviews it can all be very simply managed in PerformYard. Give our customer success team your forms, timelines, employee hierarchy and in a few days your manual and time consuming review process will be digital and running on its own.
An efficient review process unlocks a tremendous amount of time for our customers and gives them the flexibility to improve their performance management strategy however they see fit in the future. To see PerformYard in action and get an estimate of just how much you should be saving let’s have a five minute conversation right now - (888) 745-0761.
There is a revolution happening in Performance Management. It is easy to see at corporate leaders like Adobe, IBM, Microsoft, Deloitte, Accenture, GAP, and General Electric, but the revolution is happening everywhere.
The revolution is being driven by employees. The traditional end-of-year performance review has not fit with modern company and employee goals for many years now and employees are demanding a change. This has forced many HR departments to design new modern performance management strategies.
For more read:
A Deloitte manager described their old review process as “an investment of 1.8 million hours across the firm that didn’t fit our business needs anymore.”
Performance management can go one of two ways. You are either putting structure in place to force accountability (Jack Welch asking the bottom 10% to leave) or you are creating an environment that helps employees grow. If you have a once-a-year process that emphasizes financial rewards and punishments, whether you want to or not you are focusing on holding people accountable for past behavior rather than improving current and future performance.
Accountability and growth are both important, but as the labor market heats up the need to go beyond just accountability is more important than ever.
An employee has little to no motivation to participate in a system that is just about accountability, and managers don't like it either. Beyond that, it is an impossible task. How is anyone supposed to summarize a years worth of work into a single conversation.
Employees want a focus on growth. This often takes the form of regular checkins where the conversations can be about fixing issues going forward rather than revisiting issues from the past. Managers also prefer a growth focus, research has shown that managers are far more likely to give regular feedback than year-end feedback because it feels more natural and can be framed as a growth opportunity rather than a reckoning.
However, despite overwhelming support for moving away from traditional accountability focused performance appraisals, there are many issues that remain. In fact many of the industry leaders we mentioned in the first paragraph have returned to numerical ratings and some sort of year end review, but more on that in a moment.
The four biggest challenges of moving away from a structured system are...
The most progressive companies which all started removing qualitative year-end performance reviews a few years ago have begun to bring them back for the reasons stated above, but that doesn't mean they've returned to their old ways.
Companies have adopted a third way. Now companies like General Electric are having their managers meet regularly with employees as part of the natural flow of the business. This means at the end of projects, when roles change, or when issues arise. These natural checkins are recorded in simple technology solutions like GE's PD@GE which allows managers to quickly jot down notes after meetings without all the traditional paperwork overhead associated with HR meetings.
Then at the end of the year the manager can compile a years worth of real-time feedback with the press of a button, add a quick summary and give the employee a more accurate rating of their performance. This end of year meeting also become less of a reckoning and more of a simple qualitative summary of past discussions.
While accountability and development are the most common goals of performance management systems, there are more. Read: The Purpose of Performance Management (5 Options)
Interestingly, one of the challengers to this new way in performance management has been HR departments. Despite understanding the benefits the process has not been achievable with their outdated systems for managing reviews.
The answer is technology. The industry leaders we've been discussing have all turned to software to manage the continuous feedback and end-of-year feedback processes. This has left HR to spend less time cajoling managers and forcing through review sign-offs on time and more time on creating a review process that is effective at driving growth and accountability in the company's employees. Companies like GAP have seen an increase in the coaching they can provide to managers on the best way to mentor and lead their teams to improvement since implementing their performance management software.
PerformYard was designed for whichever review process your prefer, whether it focuses on accountability or growth, or whether it is year-end, continuous, or both. PerformYard removes the time-consuming paper logistics work that bogs down so many HR departments, so that if it is time to reform your review process you will finally have the time and technology to make it happen.
If you are interested in scheduling a demo with one of our team members to discuss your performance management process and how PerformYard can help, just click the button below.
Google has a famous HR department, they call themselves People Operations or Pops for short. The reason so much is written about Pops is they are driving meaningful change in the way Google manages their most important resource, people.
One well known example was when the company increased maternity leave to five paid months. The shift in policy had no net impact on the bottom line because it dramatically reduced the recruitment costs of replacing the mothers who were leaving Google. Even more importantly it allowed Google to retain the top talent the company had worked so hard to attract in the first place.
This is an example of "Strategic HR." It's when HR takes a more active role in driving business results rather than managing paperwork and people processes given to them by leadership.
Unfortunately most HR teams are faced with so much paperwork and record keeping that they do not have time to do as much of the impactful work we see at companies like Google. The Harvard Business Review recently released a paper on the future of work that frames this problem very well. They divide work into two types, “proficiency work” and “pivotal work.” Both types of work are important, but the impact of the work is different. Proficiency work must be accomplished to a certain standard, but anything beyond that standard doesn’t contribute much to the company. Pivotal work has a big impact on the company, and extra effort and creative insights in this type of work can bring meaningful change or growth. Getting documents signed is proficiency work, finding a way to retain talented female engineers at Google is pivotal work.
HR is full of pivotal work. “People are our most important resource” has become a cliche, but it is an honestly held belief among most executives. Yahoo CEO Marisa Mayer has said that she reviews every hire her company makes, and Facebook CEO Mark Zuckerberg still spends 50% of his time finding and attracting great people. So if finding, attracting, retaining and growing great employees is the most important things a company can do, that makes HR one of the most pivotal departments.
To fully embrace its pivotal role HR must first invest in clearing out all the proficiency work, and this is where technology is so important. The right system can dramatically reduce the time it takes to finish all the things that just need to get done. Which means that teams can refocus time and energy on the projects and ideas that have a transformative impact on the organization.
Proficiency work doesn’t go away, but the best teams will prioritize getting it done as quickly and efficiently as possible. Think through your day, are you spending enough of it on the transformative work you are best equipped to do? You can not make that difference until you invest in taking back your own time. HR needs to lay full claim to its pivotal role.
To learn more about how we at PerformYard envision the future of work and the future of HR, schedule a demo by clicking the button below.
Performance reviews can be a source of frustration for many in the business world. If you're a part of the group of people bogged down by a dysfunctional review process, take comfort. This is a great time for a fresh start.
Unfortunately, if you are looking for advice, you may be in for a shock. Every day on the Internet, for each article written with ideas for solutions, there are another five dedicated to the problem itself. You may have seen some version of the standards such as "Why Your Employees Hate Performance Evaluations," "6 Reasons to Stop Your Employee Reviews," "This Is Why Your Employee Appraisals Are Broken," and on and on.
Unless you're one of the few trailblazing companies trying to live without reviews, these articles can be a drag. By mostly focusing on the problem, they don't help you much with plotting out potential solutions.
Let's change that. To help make 2015 your year to get your review process back on track, we scoured the Internet for everything you need to run a productive, insightful review cycle. If you have any additional articles or resources that have been helpful for you when revamping your process, share them in the comments.
Smart Performance Review Processes
Performance Evaluation Tips (Drexel University): A useful foundation for creating any performance review process from soup to nuts.
The Big Benefits of Remaking Performance Reviews (Derek Irvine, TLNT): Irvine offers a case study on the successful performance review overhaul at Adobe.
Applying Psychology 101 to Performance Reviews (Jon Malpass, PerformYard): Performance reviews work best when they are tailored to how we best learn desired behaviors, and receive feedback.
A Better Approach to Performance Reviews (Souvik Choudhury, Forbes): A somewhat contrarian approach to performance reviews that focuses on building up employee's strengths and minimizing their weaknesses.
The Top 5 Pain Points in Performance Reviews and Their Solutions (Morgan Norman, TLNT): Solutions to common performance review problems that can help you avoid some major snags.
Fixing the Annual Performance Review (Paul Hebert, fistful of talent): A strong argument for combining regular, brief performance check-ins along with your longer term review cycle.
Delivering an Effective Performance Review (Rebecca Knight, Harvard Business Review): Detailed guidance for managers preparing to deliver performance feedback.
6 Tricks for Better Performance Reviews (Kathryn Minshew, Inc): Six strategies to add value to your regular performance review meetings told through the perspective of a new hire's first review.
Ditch Performance Reviews? How About Learn to Do Them Well? (Sytch & DeRue, HBR): These two authors suggest a number of tips for delivering feedback supported by scientific research and their own field research.
"Everyone is Above Average!" or Why Your Performance Ratings Need Work (Ben Hastings, PerformYard): Avoid the trap of rating too many of your employees as above average by calibrating your performance ratings to accurately reflect exceptional performers.
Better Performance Reviews in 140 Characters (Tim Sackett, fistful of talent): Examples of concise performance feedback for several categories of employees.
Get Comfortable With Giving Negative Feedback (John Scott, PerformYard): Performance reviews lose value when managers sugarcoat or avoid giving negative feedback. Use these tips to deliver effective constructive criticism.
5 Ways to Make Employee Recognition Mean Something (Kevin Daum, Inc): Reward your most accomplished employees, and drive others to high performance with these strategies.
Performance Review Form Template (Entrepreneur)
Writing Self Assessments (Chad Brooks, Business News Daily): This article includes great tips on writing an effective self assessment, and includes a number of templates for self assessment forms.
Job Descriptions (BLR.Com): Examples of several different job descriptions.
You may have noticed a trend in companies where, because of skews in performance ratings, most employees are labeled as above average. You may have even heard a quote like this:
“I’m happy to report that almost everyone at our company is above average. They’re mostly high-fliers and we’re lucky to have them.”
In this case, who’s average, you ask? That’s simple:
“Some other company must have them because nearly everyone we have is top notch. We don’t hire mediocrity here.”
You don’t need to do much number crunching to understand why this is a problem. By thinking so highly of your employees (and therefore, of yourself as the hiring manager), you might actually be doing them a disservice.
Telling truly average performers that they are doing above average work signals that on average you actually expect below average work. Needless to say, this practice is not a part of building a high performance culture.
By the same token, mischaracterizing employee performance like this may also stifle professional growth. In this environment, truly average workers don't get feedback telling them that need to improve and develop their skills, likely despite signs to the contrary. Research has shown employees want that critical feedback.
Fortunately, you can get your performance ratings back on track with these three tips:
Create a Well-Defined Ratings System: Having a system in place that clearly defines what separates exceptional from above average and average from below average sets the stage for accurately measuring performance. The ratings do not need to be tied to the concept of average performance, though. Others use easier to define terms such as “meeting” or “exceeding expectations.”
Regardless of the terms you use, make sure that they are defined in a way that is easy to understand and are clearly tied to each employee’s goals. Finally, once the system and definitions are set, be sure to communicate them to your employees at all levels.
Stick to It: Sticking to your system can be the trickiest part. Line managers that only oversee a few employees may find it difficult at first to determine how their team members are performing relative to the rest of the company. At this stage, HR or more senior managers can help make necessary adjustments during performance reviews.
Additionally, as you near the end of your review cycle, assess the distribution of the performance ratings. While we don’t advocate for a stack rankings system, the performance ratings in your company should still naturally follow somewhat closely to a normal bell-curve distribution with the majority of your employees falling in and around average.
Recalibrate As Needed: If you are actually finding that most of your employees are in the above average range based on your system, part of the problem may also be that you need to bump up your definition of average. Since one of the goals of a talent management process is to steadily improve the quality of your workforce, adjusting your definition of “average work” in the positive direction is a great thing.
Of course, the opposite may be true, and your expectations may be too high. In either case, recalibrating your ratings system is an important part of making sure that it is accurate. When you do recalibrate, make sure that you adjust your thresholds for each performance level based on data that you receive from your review process.
Have you seen this issue in your own company? What were some adjustments that you made to your performance ratings?
The carrot or the stick. Teaching a behavior is often a combination of feedback that rewards desired actions and punishes undesired outcomes. While this is an easy concept to understand, not all reinforcement is effectively delivered.
This is especially true in the workplace where recognizing a job well done is an important part of a high performance culture. Not only does it boost morale, it also helps define the behaviors and outcomes that your company values. However, if it isn’t done right or with the right frequency, your positive feedback might not be making an impact.
Next time you get the opportunity to reward a high-flying employee, remember these five characteristics of good positive feedback:
Be Timely: The most important aspect of giving positive reinforcement is that is it is delivered shortly after the action. As time passes, not only will it be harder to recall the details of the success, you will have missed the opportunity to allow your employee to reflect on their hard work.
Even if you are planning a more formal recognition, it is still important to follow up within at least a day or two with an appreciative note.
Be Honest: Rewarding the right employees for work that they actually did is important for your credibility and also for team morale. Giving too much credit to an employee on false grounds can lead to unintended consequences by showing that you value dishonesty over teamwork.
This may take some investigating, so be sure that your mid-level managers are on board and understand the importance of giving honest feedback.
Be Meaningful: Make sure to set a high enough threshold that employees and teams have to stretch to earn recognition. Rewarding a mediocre employee performance devalues the high performers on your team.
Additionally, sincere delivery of a reward for great work shows how much you appreciate exceptional effort. In some cases, a thoughtful, appreciative note can be just as effective and appreciated as a small gift.
Be Detailed: Make sure that your hard worker doesn’t lose the lesson when you feed them praise. Adding in specific details on the work they did and why their behavior was outstanding will help them repeat their performance in the future.
Be Attentive: It can be easy to overlook the quiet performers on your team. However, finding the diamond performances in the rough shows that you have a finger on the pulse of your company. Additionally, demonstrating that popularity isn’t a factor in rewarding a job well done will help better convey how you define exceptional performance.
Developing a talent for providing good positive feedback is an important part of growing a high performance culture at any organization. How do you handle recognizing your top performers?
Even the best companies have problems with their processes. Unfortunately, identifying the problems is often a very small part of actually solving them.
In many companies, the performance management process is a great example of this reality. You might know that the way you manage your talent needs work, but for a number of reasons, it is not always easy to find the best way to fix it.
Of course, successful change happens at companies every day. When it comes to performance management, many companies have found a way to commit the time to move from an annual review process to an ongoing performance conversation. The key to their success has been identifying the roadblocks in their way, and sticking to a successful model for developing a tailored solution.
We’ll get to the successful model at the end of the post, but first, think about these potential stumbling blocks before you start to build your own performance management process.
Navigating these and other bumps in the road will be vital for establishing a new performance process. If you need a helping hand to guide you on your way, download our free guide – 10 Steps to Building a Performance Management Process.
Lots of ink was (figuratively) spilled in the digital media world a few weeks back talking about the implementation of stack rankings at Yahoo. Was this Marissa Mayer’s second fumble when it comes to employee management? You remember the first (well debated) fumble being the work-from-home kerfuffle earlier this year. While the true impact on their workforce and, ultimately, corporate performance certainly cannot be seen immediately, that hasn’t stopped people from discussing it and, generally, panning their decision to implement stack rankings.
And in an interesting twist... the news came the same week it was revealed that Microsoft stopped that same practice. So what's this all about?
So let’s talk about what stack ranking is… at its simplest, it’s what the name implies. You stack every one of your employees.
Under these, like most performance systems, those at the top get the accolades, bonuses, promotions; those at the bottom, well, they see the opposite. This certainly seems reasonable. Determine your top performers and reward them. Perhaps part ways with your poorest performers. Simple, right?
But it’s not just ranking them first to last that makes the Yahoo and Microsoft cases newsworthy, but rather distributing them into groups based on some sort of bell curve (or other pre-set distribution) where a certain percentage must fall into categories from best performers to worst performers. This is the distinguishing factor in this debate - not just rating or ranking performers to create your list, but forcing a distribution.
The result of using a curve is that, regardless of performance, some percentage of employees are always ranked in the lowest tier (and the highest tier, but that's not discussed much). No matter what. Is that the right thing to do? In my mind, it begs questions like:
The most important question, however, is whether or not this type of stack ranking method achieves the purpose for implementing it.
Microsoft implemented a stack ranking practice, but abolished it after it didn’t work well for them. Pure coincidence that it was the same week as Yahoo's announcement. Anecdotal evidence for Microsoft suggested that top performers would avoid working together lest face the possibility that they could be stack ranked into the bottom tier based on having competed against only other high-caliber performers.
Wisdom there says you’d be better off competing with people against whom you believe you can rank higher.
The practice was also forcing people to look at short term gains at the expense of long term goals. As well, it created a more politically-charged environment that was less about doing and more about building relationships to ensure a better ranking irrespective of actual results.
What’s Microsoft doing now? Focusing on teamwork, collaboration, growth and development. And now, it comes without ratings or rankings.
I’m picturing them all holding hands and singing Kumbaya.
Now let’s wait and see the results come in.
Back at Yahoo, employees have already lamented being forced to rank some employees in lower tiers on the scale, even if the person really didn’t perform to what that level describes. They just performed at a level below their peers and were forced downward to fit the curve.
But isn’t that a good distinction to make? Not everyone performs equally, so why shouldn’t we express those differences in some meaningful way and allow a ranking to dictate. Apparently some at Yahoo felt they were forcing acceptable performance into what seem like unacceptable categories based on the distribution.
It seems like part of the logic at Yahoo fits with what also helped drive the change in the work-from-home policy – that there were laggards that needed to be weeded out.
These might have been people that weren’t producing results, were taking advantage of the system, coasting, working on side projects, etc. The stack rank in this case might be appropriate if the objective is to weed these folks out. And maybe with a company of that size and those perceived issues, perhaps that’s the way to go.
I wonder too if another part of the logic provides commentary on Yahoo's managers. Could their managers, all the way down the line, have been doing a better job over time to make sure that forced stack rank was unnecessary? Is that what this is all about?
If managers are not capable or not willing to manage performance, distinguish high performance from poor performance or deal with performance issues, forcing them to use a methodology like the stack rank might be the way to go. With stack ranking, managers are forced to think about and differentiate between employee performances – an admirable goal even if you dislike the implementation.
I certainly don’t have an answer here as to whether or not it’ll work for Yahoo… it might meet some of their objectives, even if it ruffles a few feathers.
Certainly the quantitative part of me likes the idea of rankings, but I can see the clear issues with the forced distribution. Most management systems I’ve seen work toward some common rating scale to evaluate people. And when there’s only so much to go around for bonuses and promotions, you do want to separate, and reward, your best. You also need to document performance issues that might surround your worst in the event you move toward termination.
But can be these done in a better way.
Ultimately, this is where a good performance review process comes in… you know, the one that’s interactive and on-going. The one where managers are giving both positive and critical feedback, and employees are open to receiving it. The one where managers are engaged enough to know (and easily document) what's going on. The one where they’re not just celebrating the high achievers, but also working to improve everyone’s performance for the better.
Is that world out there?
I was reading an interesting debate in a LinkedIn group about when to do employee reviews – on the employee’s anniversary of employment or annually. OK, if you’re like me, you first realize that technically the anniversary is annually, but the original questioner was actually suggesting that annual meant at the same time every year for every employee. I’ve been at companies where both have been done, and even one that did a combo process that had an anniversary component and annual component.
The answers were pretty interesting for managing performance, especially since it wasn’t a poll, per se, where people would pick one or the other, but an open ended question. So you ended up with lots of opinions that didn’t directly answer the question. But overall the stream of comments was insightful for anyone managing employees and determining corporate review policies.
There were certainly a majority of opinions that pushed toward annually, reviewing each employee at the same time every year. There are definitely benefits for that, like the ability to coordinate reviews with the company’s overall performance. This cycle also allows for more even comparisons across employees at the same level or in the same position, since everyone is being reviewed at the same time. Consistency can be your friend here.
But having been in that process myself on both sides of the table, the main difficulty with an annual process can be the volume of reviews. Trying to do strong, individualized reviews of multiple employees at the exact same time can be difficult, especially trying to fit evaluations and performance discussions into the rhythm of a busy job with other tasks that don’t stop just because it’s review time.
A few opinions pushed for the anniversary review, with the pro-anniversary reasons matching nicely to the anti-annual camp, and vice versa. The main benefit was the ability to devote more attention to each review since there aren’t as many to be done at the same time, with the con that your reviews don’t necessarily tie well to the company’s performance cycle. How can you effectively tie individual contribution to corporate performance when they’re on different cycles? The other issue here was the potential for these reviews to be impacted by most recent events… sure, that can happen with annual reviews too, where someone who does something great in the last month before reviews seems to have atoned for failures in the rest of the year. Commenters seemed to think this problem was worse on the anniversary reviews, perhaps because you don’t have the same mindset of the annual review with multiple reviews.
But sometimes, especially in a busy environment, employees find that these anniversary reviews are late or forgotten, because they’re not tied to a clear schedule that everyone is following. It’s hard to ensure that the review really happens on time, since it likely doesn't have the same sense of urgency or deadline. I think that’s a problem easily solved with the right tools, but one that happens nonetheless, since the review becomes a backburner item.
The more interesting part of the whole thread came in the comments about reviews in general. Some of these views were pretty blunt, calling for the death of the performance review and suggesting that you’re already failing at managing employees if you’re only reviewing them once a year, no matter the cycle. There’s definitely merit in that employees need feedback more consistently than once a year. I don’t think that was the intent of the original question – many people still think there’s a place for a formal, recurring review of some sort, even when you’re doing the best job possible giving formal and informal feedback throughout the year.
My own views seem to fit into that camp to some extent, though I think there are benefits to ensuring that at least one well-documented retrospective review occurs at least annually. Managers should be able providing ongoing feedback, every day, week, month and quarter, not just year. If you’re not on top of performance regularly, your yearly review itself is not going to make much of an impact, to the detriment of the employee and the organization as a whole.
So how do you do reviews?