IBM Is Shifting Performance Reviews to Real-Time Feedback

In the past few years, IBM has evolved from a hardware leader to an innovator in cloud-based software. Developing the talents of its more than 377,000 employees through this change is now a focus and starting last summer, the company set out to replace annual performance reviews with something better.

The existing system was in place for more than a decade, and was called Personal Business Commitments. In it, employees would set goals in January, do a mid-year check-in with their manager and finally be assessed and given a performance score in December. Diane Gherson, IBM’s chief human resource officer, told Fortune that final conversation would often be “irrelevant.” IBM is not alone here — 95 percent of managers are dissatisfied with the performance management approach at their company.

Changing the System

To replace annual reviews, IBM looked to employees. A post on the company’s internal social network got more than 2,000 comments, and after analyzing the text, human resources found a common theme was that employees wanted to receive feedback more frequently.

The new system, Checkpoint, was launched in February. It enables employees to shift goals during the year and managers to give more frequent feedback. At minimum, managers must provide feedback on progress once per quarter, and instead of a single assessment score, employees are scored on five dimensions: business results, impact on client success, innovation, personal responsibility to others and skills.

IBM’s New Application

Employees also have access to an app made by IBM called ACE, short for “Appreciation, Coaching, Evaluation.” The app allows for 360 feedback between managers, direct reports and peers, and also includes surveys. IBM recognizes that a shift from a formal performance appraisal to a more open, continuous approach requires soft skills, and also launched a learning tool to equip employees with best practices on giving and receiving feedback.

“We hear from a lot of people that they want feedback to grow and to improve, but providing constructive feedback is not always easy,” Colleen Murphy, who helped design the app for IBM, told Business Insider.

According to IBM, 70,000 employees are using the app — about a quarter of employees. Engaging employees with an app outside of their current workflow can be a challenge, so IBM will need to cue employees, perhaps at the end of a project cycle, to ensure they get the most out of a real-time feedback tool.

IBM joins GE, Adobe and Accenture in the shift from annual performance reviews. The trend goes beyond technology companies. The Gap reported that performance reviews cost $3 million each year and took 130,000 hours of worker time, and replaced the old system with regular ongoing feedback, Dan Henkle, then Gap’s human resources vice president, said.