A number of Fortune 500 companies have moved away from the traditional annual review model, but what approaches have they taken to revamp the process? For the most part, the changes have focused on development instead of evaluation. Rather than simply rating an employee’s past performance, they want to chart a course to successful future performance.
Let’s focus on a few companies to see what specific changes they’ve made.
CEO Pierre Nanterme believes that successful performance management begins with the right hire. He describes his philosophy in a Washington Post interview: “The art of leadership is not to spend your time measuring, evaluating. It’s all about selecting the right person. And if you believe you selected the right person, then you give that person the freedom, the authority, the delegation to innovate and to lead with some very simple measure.”The art of leadership is not to spend your time measuring, evaluating. Click To Tweet
So, the company has gotten rid of 90% of their old performance management system, which was based on annual reviews and employee rankings. Now the focus is on instant feedback and coaching. Nanterme says, “Performance is an ongoing activity…. It’s much more fluid. People want to know on an ongoing basis, am I doing right? Am I moving in the right direction? Do you think I’m progressing? Nobody’s going to wait for an annual cycle to get that feedback.”
The software giant no longer uses formal ratings, questionnaires, or written reviews. They encourage managers to engage in regular feedback and check-ins, based on three principles: Managers should set clear expectations for their reports, all employees are expected to give and receive constructive feedback, and ongoing check-ins should be a platform to discuss professional and personal development.Adobe no longer uses formal ratings, questionnaires, or written reviews. Click To Tweet
Since making these changes, Adobe has seen a 30% reduction in voluntary employee turnover, and involuntary departures have actually increased by 50%. Donna Morris, EVP Customer & Employee Experience, says that Adobe’s new performance management system “requires executives and managers to have regular ‘tough discussions’ with employees who are struggling with performance issues—rather than putting them off until the next performance review cycle comes around.”
Facebook conducts biannual 360 reviews, focused on development. Reviews are guided by two questions: What impact did the employee have since the last review? And how they can increase their impact moving forward?
A major development focus is also identifying in-house employees who are the best candidates for management positions. These employees are put on the management promotion path, while other employees are put on the non-manager path. Both paths allow employees to continue growing with the company while ensuring that everyone is in the right role for their personality and skillset.
Netflix’s culture deck is famous by now, but one of the most groundbreaking changes at the time was that Netflix ended formal annual reviews. The company shifted to 360 reviews where “people were asked to identify things that colleagues should stop, start, or continue,” says Patty McCord, former Chief Talent Officer and co-author of the culture deck.
Peer feedback is no longer anonymous, and 360 reviews are separate from compensation discussions. One of the strongest indicators of performance is the “keeper test”, which Netflix describes as, “If one of the members of the team was thinking of leaving for another firm, would the manager try hard to keep them from leaving?” The goal is to create a dream team.Peer feedback is no longer anonymous at Netflix. Click To Tweet
McCord goes on to say, “If you talk simply and honestly about performance on a regular basis, you can get good results—probably better ones than a company that grades everyone on a five-point scale.”
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