Organization Development
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Perspectives | POINT | COUNTERPOINT
Riding the Performance Management Rollercoaster
One topic that consistently draws strong interest among conference participants is best practices and innovation in per- formance management (PM). At the HR People + Strateg y annual con- ference in April, Perspectives Editor Anna Tavis hosted a keynote panel on the main stage, leading a vibrant, thought-provoking discussion of how this area is evolving and what factors are driving significant change.
With this installment of Perspec- tives, we bring to you a slice of that energy and experience, with the lead perspective laying out the ways performance management is being reinvented. Panelists each share a synopsis of their own experience and how their companies are experiment- ing and adapting the process.
The panel members, which includ- ed Deborah Becker of Eli Lilly, Jenni- fer Beihl of GE, and Jeffrey Orlando of Deloitte, each share their company experiences as well as viewpoints on the subject. Contributions from Julie Gravallese, Priscila Metzgar, and Dan Ward of MITRE and Holly Engler, Joe Kutter, and Don Moretti of Sears Holdings round out these perspectives.
If you believe performance man- agement should be improved or even entirely overhauled at your company, or you just want to learn more about what other companies are pioneer- ing at theirs, then this Perspectives is for you. After reading the lead Perspectives and commentaries that follow, you can contact the authors to ask a question or share how you are approaching this issue in your com- pany. Or, contact Anna to find out more about what factors are shaping the future of PM and what other changes we can expect to see in the near future.
POINT
When the Performance Management Bubble Burst By Anna A. Tavis
When the full story of the ongoing performance management transforma- tion is finally told, the years 2014 and 2015 will go down in history as the time when the annual performance appraisal bubble finally burst. After decades of increasingly loud signals of discontent and mounting evidence that the legacy process was not delivering on its intend- ed value, a few pioneering companies broke out of the mold and were able to face the urgency for change. Adobe, Medtronic, Juniper Networks, and Kelly Services, to name just the first few, made news with their radical departure from
the heavily administrative annual em- ployee performance evaluation exercise. The traditional annual performance review finally met its end.
Dropping performance ratings and replacing the once-per-year appraisal process with regular “check-ins” became business’s battle cry for change. The first “rateless” performance management cases unsettled the behemoth of HR bureaucracy, built on top of a single rating. From then on, the monolith process that used to be known as perfor- mance management split into multiple manager–employee conversations, often blending informal touch points with “shadow” ratings and talent calibrations on the backend.
Every one of these pioneering compa- nies would admit that it was not about the ratings for them to begin with. Every part of the legacy performance system had to undergo a review. With the rate- less idea being novel and benchmarking scarce, the original science was called upon to help review the underlying assumptions about employee motiva-
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tion, engagement, and overall work experience.
The new language of progress, mas- tery, and purpose emerged to replace appraisal reports. “Check-ins” and “pay for contribution” became the preferred vocabulary of the day, leading the reeval- uation of the entire performance system to start with purpose and goals and to back into the larger systems for talent and rewards. As the new growth mindset toward managing and assessing perfor- mance began to gradually replace the ratings fetish, ditching ratings became the trigger event that got everyone’s attention.
The Media Factor The change might have taken its mea- sured evolutionary course, were it not for the media. The performance man- agement revolution owes its meteoric ascendance to gaining status as the hot- test business news item partly due to the enormous amount of media attention it received.
Take Adobe’s story that set pace for the trend worldwide. It all started with the Economic Times of India getting an interview with Donna Morris, then Ado- be’s chief people and places officer, who admitted that “the performance review was an antiquated, painful, and unpro- ductive HR process that had outlived its time.” Her revelation made the front pages in India, with the headline, “Ado- be Set to Scrap Performance Review.” Furthermore, the news got worldwide coverage before it was vetted with Ado- be’s CEO, and Donna’s peers. Luckily, the organization was ready for the change and got behind the new perfor- mance management agenda. Hundreds more interviews and thousands more citations followed, marking the end of the “quiet” phase in the performance revolution.
Media for Months to Come From there, performance management became the hot topic to capture the headlines of every important business publication in the United States and beyond. Harvard Business Review covered “the performance revolution” extensive- ly with Deloitte’s milestone story, “Rein- venting Performance Management,” co- authored by Ashley Goodall and Marcus
Buckingham. Strategy+Business featured David Rock’s eye-catching feature, “Kill Your Performance Ratings.” The New York Times followed suit with the head- lines such as, “10 Reasons Performance Reviews Do Not Work,” and Forbes joined in with its own, “Let’s Kill Performance Reviews.” In 2015, the Washington Post, called PM the “corporate Kabuki” and Vanity Fair went as far as to blame Microsoft’s PM for the company’s sliding market performance.
What the Media Got Wrong The media helped bring attention to the issue, but it did not always ask the right questions and did not have the answers to bring to the table to help get the right decisions made. If you were wondering why the complex issues of measuring, incentivizing, and rewarding employee performance came down to the simple question of ratings, and ratings only, it has to do with the choices that the media made for us.
Performance appraisals have always been everyone’s dreaded workplace experience, which is why the headlines got public attention in the first place. We brought the story of “ratings” back from the media. Some lessons need to be learned here. The power of (social) media needs to be faced up to even if lived behind the tallest corporate fire- walls. Now is the time for HR to reclaim performance back again from the legacy of the past and from the media hype of the present. The actual story of perfor- mance management transformation still needs to be told in full, as we are settling in with a distinctive new pattern for man- aging performance in the 21st century.
The Next Practice and the Best Practice As HR professionals, we have learned a great deal from walking the path of per- formance management transformation in just these last few years. There seem to be two distinct directions to take when joining the performance transfor- mation movement: • The innovator path has opened up
to many more companies than ever before. These bold companies broke away from the past early and set themselves up to discover solutions aligned with their own unique
purpose (Adobe, Juniper, Gap, and the companies represented in the Perspectives that follow: GE, Deloitte, Eli Lilly, Sears, and MITRE). Facing the unknown, the innovators turned to science, analytics, and technology to look for guidance in designing their singular future.
• The second cohort of companies has been more circumspect. These com- panies have been looking for more evidence and more compelling prac- tices around them before starting on their own change journey.
Both approaches are legitimate, both ultimately lead to desired change. The difference has been in the role that the HR function has played. The innova- tors boldly took on strategic leadership roles in their businesses. In the second scenario, the HR function gained more internal confidence but remained to be the “partner” to the business it has been up until then.
Looking ahead, it has become even clearer that the future of HR will be more with the innovators and pathfind- ers among us. Reinventing performance management is the first step in giving HR its strategic mission it is beginning to embrace. It will most likely take a few more rounds of these types of “revolu- tions” to move the function solidly to the new role of organizational inno- vators and talent leaders in their own businesses.
Where Do We Go From Here? By mid–2016, the new practice has matured enough to be learned from and applied in organizations looking for more guidance. The new norms have been settling in, presenting an achiev- able standard for those catching up on the trend.
Despite the attention it initially has gotten, the “ratingless” process now is one of the options to follow, but definite- ly is not the universal rule on how to do performance management going forward.
With or without ratings, most com- panies already now follow much shorter evaluation cycles, decentralize goal setting, and determine quantitative and qualitative measurement of “contribu- tion,” “impact,” and “value.” Managers
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are expected to play the coaching role and own key decisions on employee performance standing, rewards, and development needs.
The performance management revolution started as a trend launched around 2011 by a few bold detractors. It reached its peak in 2014 and 2015, and now it is a global phenomenon, usher- ing in a massive shift in organizational cultures and challenging HR functions to step up to innovator roles in moving their business forward through people.
As the cases of GE, Deloitte, Eli Lilly. MITRE, and Sears Holdings presented here show, each company’s innovation scenario is a solution that could be learned from and inspired by, but it could not be imitated.
Anna A. Tavis, Ph.D., is Perspectives editor and a faculty member at New York Univer- sity and Columbia University. She can be reached at aatavis@gmail.com.
COUNTERPOINT
GE: Staying True to Its DNA By Jennifer Beihl, Janice Semper, and Valerie Van den Keybus
At GE, evolution and change have been part of our DNA for 130 years. Today, GE’s transforming itself as the leading digital industrial company. By pairing digital technology with deep expertise in building powerful machines—from jet engines to gas turbines to health care imaging equipment—GE is transform- ing industry with software-defined ma- chines and solutions that are connected, responsive, and predictive.
As part of this transformation, we recognized the need to infuse new ways of working in a company that had developed an intrinsic bias toward com- plexity and process perfection, when in fact the world and our employees were expecting us to act more simply and nimbly. We responded in three ways: • We introduced FastWorks, our ver-
sion of a stronger and more entre- preneurial focus on our customers
and competency in experimentation working with Eric Ries of Lean Start- up and other Silicon Valley advisors, married with the work of thought leaders in the company.
• We took a strong position that the go-forward leadership and per- formance expectations are very different from our long-held and often-tweaked values and introduced a new set of aspirational GE Beliefs to guide us.
• We then reexamined at our per- formance management approach, which did not support or help build these new behaviors described by GE Beliefs and FastWorks.
The New Approach In 2014, we introduced performance development, a more personalized, real-time, and flexible approach to per- formance and development. It empha- sizes coaching and continuous dialogue (touch points) between manager and employee, instead of heavy, once-a-year evaluations. “The world isn’t really on an annual cycle anymore for anything,” said Susan Peters, GE’s senior vice presi- dent of human resources.
The approach reflects the mindset and behaviors that are driving GE’s culture forward: • Strengthening our muscle in sharing
real-time, contextual feedback with both our manager and colleagues to increase self-awareness about behaviors that support our effective- ness and impact and that minimize the same
• Becoming much more connected and dialoging early and often with our customers to understand what work we need to prioritize to get to outcomes important to them
• Completing a simple annual sum- mary narrative about the employ- ee’s impact and behaviors which is co-created by the manager and employee together
Replacing a backward-looking yearly assessment on a long form, performance development focuses on real-time con- versations—facilitated and supported by a simple, digital app that functions as a notebook to capture key comments, serves as an aid to alignment and mem- ory, and simplifies the year-end process.
Finally, we are testing a no ratings approach to find alternative ways to motivate and build performance, as a subset pilot of the overall performance development approach.
Where Are We? We are about two years into the perfor- mance development journey. Through a phased approach of testing and learn- ing (FastWorks), we started by intensive- ly dialoguing with our customer groups (employees, managers and senior lead- ers) to understand their most important needs, then testing components of the approach with several dozen employees to validate (or invalidate) our assump- tions. We transitioned around 6,000 employees to a “wing to wing” approach developed based on those learnings. Since the beginning of 2015, we have continued to scale and increase adop- tion amongst larger populations. We have tested, learned about the impact, and iterated along the way to increase that impact. We will continue to do so.
We have learned that when employ- ees and managers actively engage in performance development behaviors, it has significant positive impact on the outcomes that are important to them in- dividually and us collectively as an evolv- ing organization. And we know from the data we have collected that there are some who are still trying to make sense of it. It is where we are now focusing our efforts and testing new ways to acceler- ate adoption that will in turn accelerate our ability to deliver on the future for GE—the digital industrial.
Advice • Validate assumptions early with small
tests. If something does not work for 10 customers, it won’t work for 200,000.
• Calibrate for a marathon. Changing mindset and behavior to evolve a company culture does not happen overnight. But it is very possible. And
Performance development focuses on real-time conversations— facilitated and supported by a simple, digital app.
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