What’s the Secret Sauce to Effective Performance Management?

At the start of February, we heard news about a former manager at Yahoo challenging in federal court the company’s quarterly performance review (QPR). This came just after IBM announced it would replace the annual performance review it has used for 10 years with a new system called “Checkpoint.” Meanwhile GE, Adobe, Microsoft, and many others have eliminated numeric scales and stacked rankings within their performance-management process. 

What’s going on? Once again, it seems that the more things change the more they stay the same. Employers continue to search for methods to improve the performance-evaluation process and make it relevant for the 21st century workplace. According to Josh Bersin, principal and founder of Bersin by Deloitte, this means finding ways “to evaluate job performances faster, more efficiently, and more accurately.” Rather than beginning with a top-down approach, as a first step, many companies today are asking employees for feedback. 

This applies to IBM, which asked employees for ideas through the company’s internal social-media platform, and received feedback from 2,000 workers. Similar to others, IBM’s new system, Checkpoint, has done away with performance rankings, replacing the once-a-year review with ongoing feedback. 

But Bersin’s description also could apply to Yahoo’s QPR, implemented by Marissa Mayer shortly after she became company CEO in 2012. Now under fire, the stacked ranking system had managers place employees into “buckets” described in news reports as: 10 percent in “greatly exceeds,” 25 percent in “exceeds,” 50 percent in “achieves,” 10 percent in “occasionally misses,” and 5 percent in “misses.” The problem with this approach is that a company’s total population usually does not fit that neatly into these categories.

It seems many companies are still hoping to find the secret sauce.

In a survey of executives by Deloitte, only 8 percent of companies reported that their performance-management process drives high levels of value, while 58 percent said it is not an effective use of time. The common theme among major corporations in the United States is that annual goals are a thing of the past and annual review processes don’t provide enough timely feedback. Moreover, the time, money, and effort that managers spend on reviews do not accomplish the main goal of driving better performance among employees.  

Moving beyond the headlines, here are a couple useful approaches to learn about. 

Adobe: Clear expectations & frequent feedback

In 2012, Adobe moved away from a traditional ranking evaluation process to more frequent, but less formal “check ins.” Donna Morris, executive VP, customer and employee experience, reportedly had been frustrated with the lack of results. A correlation between the timing of evaluations and the exodus of high performers leaving the company also troubled Morris. The turnover suggested that the evaluations demoralized top performers. Adobe’s new approach is designed around the ideas of clear expectations and frequent feedback. The process works like this:

- At the beginning of each year, priorities are defined across Adobe. As part of managers’ one-on-one meetings with direct reports, the manager outlines expectations for the coming 12 months, taking in feedback from the respective employee.

- Once expectations are agreed upon, manager feedback is expected to occur in real time through on-going discussions that can occur daily, monthly, or quarterly.

- Managers no longer devote long hours preparing detailed reviews. Instead, they conduct “check-ins” throughout the year with employees to set expectations and offer feedback on performance.

In a recent Business Insider interview, Morris said to “think of it as jointly setting the frame of what the focus should be for the year, and making a to-do list for the year.”

“People are more effective when they know where they stand,” she told the magazine. “We want people to be getting feedback on their performance against those expectations in real time (not just once a year).”

INFICON: Aligning performance with company competencies

INFICON, which is headquartered in Switzerland but has an office in the Syracuse area, is a leading developer and supplier of world-class instruments for gas analysis, measurement, and control. When Sue Magari, director of human resources joined INFICON in 2010, she discovered a manual, paper-intensive approach to performance reviews. The system relied on traditional ratings tied to merit increases. It neither reinforced accountability nor helped employees understand the value of their individual contribution to the company. The process was broken, and Magari said management was ready for change. In early 2011, she formed a cross-functional team to design a new, forward-thinking process now referred to as Employee Development Assessment (EDA). The process has no ratings. It includes:

• Employee self-assessments designed to help employees think through how their work can better align with the company’s 10 core competencies. 
• Skills section that asks employees about their strengths, and their view on how the company helps them improve/succeed.
• Goals section focused on both short- and long-term goals. 

INFICON conducts its EDA process each fall across the company, and does follow-ups mid-year. Magari reinforces the importance of continuous, quality conversations between managers and direct reports. EDAs are completed online, which also supports INFICON’s green initiatives. 

Not set in stone, the EDA process continues to evolve, Magari said. The focus is to help employees better understand how individual contributions are valued and articulate how each team can make a difference to the overall health of the company. 

Lessons learned

Building a better model involves many factors, but the following three are among the most important.

Frequency of appraisals. As business leaders expect workers to be project-driven and results-oriented, it makes far more sense for managers to provide frequent feedback, with specific coaching relating to the project at hand. Feedback delayed for up to a year, causes memories to grow dim, can be useless for the employee, and can be dangerous for the company. What organization in today’s fast-paced climate can wait a year to suggest that an employee make a course correction?

Uncoupling raises and feedback. Performance appraisals that attempt to accomplish everything in one meeting are bound to disappoint. A discussion of money nearly always overshadows everything else covered in the meeting. Employees hear only “how much” and become unable to focus meaningfully on their performance. More companies, as they adopt frequent feedback and performance planning sessions, allot separate times each year to discuss merit increases.

Manager training still crucial. Performance appraisals involve one of the most emotionally charged activities in the workplace: assessing an employee’s contribution and ability. The outcome of these assessments can affect an individual’s self-esteem and subsequent performance. Making certain that managers are well trained in the appraisal process ensures that in-person review meetings are beneficial for employees. It also helps managers avoid thorny legal problems for the company. Managers should understand the importance of giving specific, constructive feedback and realize the negative impact of inaccuracy or lack of feedback.

It’s clear the days of traditional appraisals and forced ranking are coming to an end. One perfect system for all companies will never exist, but when performance management has done well, it can have a big impact on employee performance, engagement, and organization-wide results.      

Candace C. Walters is founder and president of HR Works, Inc. (www.hrworks-inc.com), a human-resources outsourcing and consulting-services firm based near Rochester that also has a DeWitt office.