Baseball playoffs. Pre-season hockey and basketball. Fantasy football discussions in the office. Pumpkins everywhere. Must be fall with end of the year right around the corner. Q4 also happens to be performance review season when entire organizations come to a standstill as employees spend countless hours filling out required paperwork.
Ever since Juniper Networks and Adobe announced a few years ago that they are dumping annual performance reviews, there has been a steady drumbeat of others (Accenture, Deloitte and GE being the most recent ones) following suit. This got me thinking, in today’s millennial, mobile, cloud world, what should a performance system look like if designed from scratch?
Before jumping into the details, it is important to understand how the millennial, mobile and cloud era is different and why we need to adapt.
- Millennials, who are now the largest share of the US workforce according to Pew Research, want more feedback than any other generation of workers (source: https://hbr.org/2015/02/millennials-want-to-be-coached-at-work).
- Mobile and cloud-enabled businesses move at rapid pace so the notion of once- or twice-a-year performance reviews is no longer in line with the way they operate.
- Work is increasingly accomplished in cross-functional teams and in matrix organizations so getting feedback from all the people an employee works with is more critical.
The main goal of any “performance system” should be to help employees develop to their fullest potential (employee development) and be compensated fairly (employee evaluation). It should not be a discussion about how an individual performed in the past but instead focus on helping individuals continuously learn and develop. Here are the key components of a performance system built for the 21st century.
Separating compensation from development
There is a fundamental problem when development and compensation discussions are conducted at the same time and on the same cadence. When both are done together, the focus ends up being more on compensation and the rating given to the employee (extrinsic motivators). Any feedback or discussion about development (intrinsic motivators) is largely ignored as employees are more eager to find out about the pay raise. So companies (Google, VMware, for example) are now separating development and compensation discussions and often spacing them out by at least a month. Chapter 7 in Laszlo Bock’s book is a great read to understand the research behind separating these two events.
Making feedback & development continuous
As millennials make up more than 50% of the American workforce, we need to adopt our systems and processes to be more in line with what works for them. Research has shown that millennials want more feedback. Further, the MCM (mobile, cloud, millennial) world we live in is moving at breakneck speed so the notion of waiting for a year or 6 months or even 3 months for feedback seems archaic. Much like our development teams have adopted agile methodologies where they continuously develop, integrate, test and ship, feedback must be continuous as well. What agile is to waterfall, continuous feedback is to annual performance reviews. Much the daily standup, giving feedback should be made simple and easy. By making feedback more continuous and focusing it on development, employees can course correct much sooner and as Jeff Lawson, CEO of Twilio, says, giving and receiving feedback won’t become a confrontational event.
Collecting comprehensive 360° feedback
The people an employee works with on a daily basis have a much better feel for that employee’s strengths and development areas. This is especially true since many of us work in cross-functional and matrixed teams so often times, managers may not have a chance to see an employee in action. Further, co-workers may see a different side of the employee than the manager. So it is critical to get feedback from all the people employees work with and not just the 3 or so that the employee nominates for peer feedback. It should be everyone’s responsibility to help each other grow and develop.
Empowering employees to own development
The following happens in 1:1s too often for comfort:
Employee: Hey, boss, how am I doing?
Manager: Yeah, you’re doing great! Just keep doing what you are doing.
Huh? What does that mean? It basically means that the manager hasn’t had the time to think about your development. Rather than expecting managers to collect and share feedback, what if we flipped the model by collecting and sharing 360-degree feedback with the employee directly and putting the onus on them to develop? It is their career after all and everyone wants to improve so they should own it and be proactive.
Imagine this conversation in a 1:1:
Employee: Hey, boss, I’ve been looking at the continuous feedback from my peers and I’m seeing some trends that I’d like to discuss with you. Can we talk about (topic x) so I can pick your brains on doing y or z?
Manager: (probably thinks, ‘ah, crap! This is much harder to dance around…’) Sure, I would love to help you.
Or, if the employee doesn’t bring it up, the manager could ask, “Hey, what kind of feedback are you receiving from your co-workers? How can I help you?”
The bottom line is that frequent and honest conversations between employees and managers are essential with employees proactively driving development discussions based on the continuous feedback they are receiving. The key is to seed these conversations with content (feedback) to drive the discussion.
Perhaps the toughest part of overhauling the existing performance review process is the compensation component. It is impossible to implement pay-for-performance policy without evaluating and comparing employees. No two ways about it so the best thing to do then is to have a well-defined and transparent system.
The key to identifying your best people in a fair and unbiased manner is to organize calibration meetings where you bring your managers together to identify the best people based on their achievements. The scope of these calibration meetings could vary based on your needs — for example, you could calibrate an entire engineering organization or perhaps the engineering team in one business unit, etc. In these meetings companies could group their employees into top, good and under-performing buckets without any guidance on the size of each bucket and use that info in compensation decisions. Because a collection of folks are responsible for evaluating employees, this system is more consistent, creates more alignment around what a company values (and rewards), and helps ensure the right set of people land in the right bucket.
Any changes to a system that has been around for decades will cause a lot of questions and angst but we know we need to adapt our processes for the MCM era. Any new direction will require executive sponsorship, tools, processes, and training to ensure its success. No matter what system is implemented, it is absolutely critical for employees and managers to have an ongoing dialogue about development. Continuous feedback, continuous learning and continuous development has to become the norm.
A system like this means we don’t endure “performance review season” where entire companies come to a standstill while everyone fills out paperwork.