Old-school performance management doesn't work. The dreaded annual review alienates managers and their reports alike.
But companies the world over have discovered the positive changes a new approach to performance management can bring. Here are some examples:
Google: Leave Nothing to Chance
In the (almost) 20 years since its founding, the tech giant has become synonymous with innovation. Its unique work culture and human resource and development policies have become famous (and in some cases, infamous).
This is no accident. Google is deliberate in its actions and does not do things by chance, including its performance management. Essentially, Google uses people analytics to navigate their people management practices. Nothing is done solely on gut feeling, or in accordance with outdated HR policies of the '80s and '90s which still plague many companies to this day.
Instead, data informs all of its decisions. By adopting this scientific approach to its processes — from improving employee retention, workplace collaboration, diversity, to hiring algorithms which indicate which prospective candidate has the highest probability to succeed at Google — nothing is left to chance.
“All people decisions at Google are based on data and analytics.” The goal is to … “bring the same level of rigor to people-decisions that we do to engineering decisions.”
Much of Google’s performance management strategy success is rooted in its focus on, and investment in, its managers. Google launched "Project Oxygen" to assess how its managers were doing, and to suggest future training and coaching when inadequacies were uncovered by the performance management process.
Google recognized that effective managers do not require a lot of training infrastructure. Project Oxygen, uncovered eight traits that Google managers, ranked in order of importance, must possess:
- Be a good coach
- Empower your team and don’t micromanage
- Express interest in team members’ success and personal well-being
- Don’t be a sissy: Be productive and results-oriented
- Be a good communicator and listen to your team
- Help your employees with career development
- Have a clear vision and strategy for the team
- Have key technical skills so you can help advise the team
Importantly, Google’s system of accountability also means the ‘buck stops with the manager’ — so if an initiative falls on its head, instead of an individual employee being blamed, it's seen as a failure of management.
In addition to its focus on managers, Google uses a system of OKRs or ‘Objectives and Key Results’ to make goals and track progress. OKRs are used at every stage in the company. Even the CEO Larry Page, makes overall OKRs for Google as a company.
OKRs are ambitious, but measurable objectives. Once the OKRs for an employee are picked, they must next select ‘key results’ that can be used like milestones along the path towards the objective. This is a simple but effective way to track performance and measure the success of Google employees.
With what results?
This is difficult to tell in the case of Google. While no glaring problems were found in Google’s previous performance management practices, its continued success is certainly indicative of the effectiveness of its current performance management system.
Google is very aware that having happier employees benefits the company greatly too. When compared to other leading multinationals, Google’s employees outrank employees from every other company in terms of monetary value of their productivity and profit generation. The average Google employee generates more than $1.2 million in revenue each year.
Yahoo currently produces just $449,000 per employee, and Microsoft $783,000. “This level of productivity has pushed Google stock into the stratosphere, with share prices recently topping $1000 — no small feat, given that Google only went public in August 2004 at a price of $85.”
Adobe: Learning From a Failed Experiment
Adobe is an interesting performance management case study. Adobe famously removed all formal performance management from the company, citing the labor-intensive nature of annual reviews and the copious time performance management takes as the reasons for its decision.
The experiment failed. Adobe realized no performance management was not working and it needed some kind of solution.
Adobe introduced “Check-in,” its performance management system, to enable seamless performance reviews and to transform the employee experience within the company. How did Adobe input these changes? It founded a special taskforce, led by Adobe’s then-senior vice president of people resources, Donna Morris.
This taskforce partnered closely with Adobe’s executive team. They were keenly aware that the ‘check-in’ model needed to be role-modeled from the top for employees to learn by example.
Similar to Google’s Project Oxygen, Adobe made training management a priority within the company. Communication became key. Adobe employees from all levels of the company were included in the decision making process before the implementation of ‘check-in.’ Adobe created a centralized Employee Resource Center to help scale the program.
With what results?
Following Adobe’s successful reintroduction of performance management, the company received confirmation that regular check-ins and a culture of more continuous feedback was working. The company was able to cut voluntary turnover of employees by over 30 percent. Additionally, ‘involuntary departures’ have risen since the introduction of Adobe’s continuous feedback solution.
While from the outside this might look like a warning signal, this was viewed by the Adobe team as a success: because it prompted regular, difficult discussions between managers and reports and meant that employees who were not meeting performance management targets were let go rather than waiting for the next cycle of performance management reviews (which previously could have been a year).
In this sense, Adobe has boosted its efficiency and productivity as it culled ineffective employees from the company and retained only the better performing employees.
Cargill: 'Everyday Performance Management'
Following research by advisory service CEB, which concluded that 80 percent of organizations were considering a major change to their performance management systems, and that 95 percent of managers were dissatisfied with their performance management systems, Cargill, the global agricultural producer and distributor, knew it was time to make a change.
Cargill implemented “Everyday Performance Management” to instigate this change. “Everyday Performance Management” was based on four principles.
- Cargill decided that effective performance management needs to be a continuous process: out with the old school document-heavy annual review.
- Daily activity and practices were now to be used as predictors of performance management quality.
- Employee-manager relationships were also to become central to their performance management.
- The company acknowledged the need of performance management systems to be flexible and agile to meet business needs.
Cargill implemented these principles with the following actions: Consistent recognition of outstanding performances from managers who exemplify the qualities of good day-to-day performance management practices.
Recording the experiences and best practices of effective managers.
Making teams responsible for the daily operation of performance management.
Building key skills and competencies necessary to succeed at "Everyday Performance Management," including effective two-way communications, feedback delivery and coaching.
With what results?
Everyday Performance Management received overwhelmingly positive results, with 69 percent of employees saying they received feedback that was useful for their professional development. In addition, 70 precent felt valued as a result of the continuous performance discussions with their manager.
Not only did the new system of performance management have a positive effect on employees from a psychological perspective, but its benefits were also felt in terms of efficiency. Everyday Performance Management was deemed much simpler and more straightforward than previous performance management approaches. It freed employees to “spend time on things that mattered” most.
Instead of spending hours on the tedious paperwork associated with annual reviews, employees could focus on goal accomplishment, future plans and having fruitful conversations with colleagues.