5 Performance-Management Trendsetters
Organizations that have found a way to create dialogue that inspires change and progress between managers and their employees deserve to be emulated. Here are five companies that stand out for their progressive performance-management processes.
By Kris Duggan
It seems like the more we try to manage or reward performance, the worse employees perform. The problem with traditional performance management, as stated by People Firm's Tamra Chandler, is that it "impedes the reception of feedback and limits honest dialogue. This flaw speaks to the gaming that often occurs during an annual review discussion. Because of what's at stake and because of the design of the system, those meetings often become more of a negotiation than a rich conversation about development and contribution."
Dialogue between managers and employees, whether nonexistent or micro-managerial in nature, is hurting -- and rarely helping -- the employee's ability to perform well, and get better at their job.
In recent months, there's been a growing backlash between employees and their employer's performance management systems or processes. Former Yahoo! employee Gregory Anderson filed a lawsuit earlier this year for the way the company's senior managers manipulated the rating system "to fire hundreds of people without just cause to achieve the company's financial goals," according to the New York Times.
On the other hand, we're also hearing more triumphant stories about companies who face financial trouble or organizations going through a rebrand who have relied on a change in performance management or internal people processes to keep them out of the red. Despite unprecedented disasters out of their control, Malaysia Airlines implemented an updated performance-management process and experienced its first profitable month in years.
We've studied dozens of companies, and found these five stand out for their progressive performance management processes. These organizations have found a way to create dialogue that inspires change and progress between managers and their employees.
General Electric may not have invented stack rankings, but they might as well have. Although the company and its previous CEO Jack Welch are notorious for ranking its employees and letting go of the lower part of the stack, this is quickly changed, inspired by millennials. According to GE's head of human resources in an article featured in The Atlantic, Susan Peters, who has been with the company since 1979, says much of the company's new performance-management processes are inspired by millennials. It makes sense -- according to an October 2015 survey by TriNet, 62 percent of millennials have felt "blindsided" by a performance review, and 74 percent said they feel "in the dark" about how their managers and peers think they're performing. GE's new processes are flipping these daunting statistics upside down by giving a way for employees to get feedback from their managers in a more frequent, faster pattern.
Ryan, the global tax firm that has been around for nearly 2 decades and ranks as the largest indirect tax practice in North America, currently employs around 1,600 people. According to a case study written by Brenda Kowske, PhD., Senior Analyst at Deloitte, the company completely revitalized its work structure beginning in 2008, by going against the norm by getting rid of required office hours and offering its employees unlimited vacation. While a slew of organizations have taken the "unlimited vacation approach" for a myriad of reasons, Ryan had managers and employees work together to develop specific goals and performance metrics to measure the work actually being done, and employees and teams respond immediately to sub-par scores. Ryan has become a poster child for work-life integration, and the key to the company's success is the amount of transparency, communication and conversations that happen regularly around employee goals and progress.
This airline was under fire in 2015 for a number of reasons, many out of its control. Yet under the leadership of a new CEO, and internal tweaks to its performance management processes, it reported a profitable month in February 2016 for the first time in years. According to the company's quarterly report released in March 2016, one of its primary focuses, and a driving force behind its new-found profitability, is "investing in a talent pipeline." For Malaysia airlines, this means revamping its performance management so employees have clearer targets and goals and a well-defined path for career progression. The company, according to its website, will be "exploring joint ventures with established international organizations to provide training and specific skillsets." On the road to profitability, Malaysia Airlines is tapping into its most valuable resource -- its people -- and growing its employees for the future by investing them every day.
This tech giant, with nearly 400,000 workers, just recently traded in its 10-year-old performance-management process, dubbed "Personal Business Commitments," to try out a brand-new approach. But instead of a top-down, HR approach to the makeover, IBM listened -- and most importantly conversed -- with its employees by posting on its internal social system for recommendations. The post received 75,000 views and 2,000 comments and from this dialogue IBM created an entirely new system, called "checkpoint." IBM's chief human resource officer Diane Gherson told Fortune that the company's employees "were already doing work differently than the [old] system assumed." Under the new "checkpoint system," IBM employees can expect feedback on short-term goals at least quarterly, and often more frequently, from their managers. Employees will be given feedback across a variety of dimensions instead of being rated in just one area. This new system lets IBM managers and employees keep a regular cadence of conversations about the work at hand, instead of assessing outdated areas.
In April 2015, Deloitte published the results of a public survey that revealed huge gaps in its performance management process. The company found that giving employees numerical ratings consumed close to 2 million hours each year. How the consulting firm -- which employs close to a quarter million employees -- chose to respond was extraordinary because they revealed how much they value the dialogue and conversations taking place during manager and employee 1:1s. Deloitte understands the critical role these conversations play in bettering both management and performance. Deloitte asked its team leaders to evaluate what they would do with each team member rather than what they think of each individual, and then conduct regular conversations where leaders could review priorities, comment on recent work and provide coaching for individual employees. According to Marcus Buckingham and Ashley Goodall, for Deloitte the check-ins are "not in addition to the work of a team leader; they are the work of a team leader."
We're experiencing a pivotal time in performance management's history, where there are two extremes: some companies are giving their performance management processes a makeover with astounding success, while others may still rely on outdated HR processes like stack ranking employees to power their company. Late last year, we published our first PM Watch, in which I predicted that 50 percent of Fortune 500 companies will kill annual rankings by early 2017, and replace these systems with a continuous feedback model. Now we're in the thick of this performance-management revolution and, as we take a closer look at the pioneers in driving cultural change and the difference between the organizations driving cultural shifts in performance and management -- and those remaining stagnant -- one thing is clear: the performance conversation is an agent for change.
Kris Duggan is CEO of BetterWorks, an enterprise software company based in Redwood City, Calif.