What GE, Adobe, and Google are doing to redefine performance management and how to apply their strategies to your business
The Annual Performance Review is widely loathed. Josh Bersin, an HR analyst and Founder of Bersin by Deloitte, says, «Our research shows that more than 70% of all organizations dislike the process they have, and I have yet to talk with an employee or manager who likes it at all…» As more companies move to an agile business model, HR must move to toward a continuous performance management strategy that provides employees with ongoing, actionable feedback.
This article covers what three companies have done to redefine their HR performance management strategies and the results they have seen. We’ll also show how you can use what these other companies have done to help you redefine the performance management strategy for your business.
3 Companies that are Redefining Performance Management
General Electric, Adobe Systems, and Google are redefining performance management with innovative strategies that genuinely align employee and corporate goals. All three companies use some version of continuous performance management, with each showing marked improvement in key areas, including business growth, employee morale, and employee retention.
1. General Electric — Over 30 years ago, then-CEO Jack Welch championed what was formally known as the vitality curve (aka rank and yank), a system based on the annual performance review. GE was widely known for reducing an employee’s performance evaluation down to a number, with the bottom 10 percent getting terminated. In a February 2012 article for the Harvard Business Review, Susan Peters, head of HR at GE, wrote that the results of the 2012 GE Global Innovation Barometer study found a more «collegial and personal view of leadership now rising through the workforce.» During the following month, Peters began replacing GE’s annual performance review with a new performance management process based on feedback from Millennials employed by the company at that time. The result: a much less formal performance management process with the PD@GE mobile app at its core.
PD@GE: The app at the heart of GE’s new performance management strategy
«PD@GE» stands for «Performance Development at GE», and is an apt name for the mobile app at the center of GE’s HR performance management strategy. Frequent feedback is submitted via the app, which is then accessed by management. Short-term goals are set for employees, with the ability to submit and/or receive feedback. The most notable difference in this approach to performance management is that the employee isn’t graded on how well he is doing; rather, it is focused on continuous employee improvement. Since its implementation, GE has seen a significant boost in morale among managers and employees, along with higher employee retention.
2. Adobe Systems — Like many other large corporations, Adobe used a stack ranking system for evaluating employee performance. Like GE, it was based on an annual performance review which also included a 360-degree evaluation for each employee. There were four levels of employee performance: High Performer, Strong Performer, Solid Performer, and Low Performer, and only up to 15 percent of a manager’s team could be designated as High Performers. This performance management system cost Adobe in more ways than one. Not only did they spend an estimated 80,000 hours of manager’s time to conduct annual performance reviews, Adobe experienced a spike in ‘voluntary attrition’ as employees left after they received disappointing reviews.
During a trip to India in March 2012, Donna Morris, then senior VP of Human Resources, announced that Adobe was going to abolish the annual performance review. Upon her return to the US, she had the communications team distribute a call for change in an article published on Adobe’s intranet, in which she stated that there were three things that needed to be accomplished: review contributions, reward accomplishments, and give and receive feedback. By fall 2012, Adobe’s performance management system was completely redesigned, replacing the annual review with a more frequent, informal check-in process. Morris found that employee and manager morale dramatically improved. Since implementing the new, feedback-based system, Adobe has seen a 30 percent decrease in voluntary employee attrition.
3. Google — When compared to GE and Adobe Systems, the performance review process is a little different at Google. Reviews are semi-annual, with a group of peer reviewers for each employee. Each employee is rated on a five-point scale that ranges from ‘needs improvement’ to ‘superb’. During feedback for employee reviews, peer reviewers are asked to submit one thing the employee should do more of and one thing that the employee can do differently. With managers, the focus is on providing objective feedback. To this end, managers confer with each other to decide upon the final evaluation for an employee. Compensation is discussed separately and is based on providing the right amount of motivation to the employee to continue to grow and participate in Google’s continued success.
Google is particularly attuned to what kinds of motivation lead to achieving goals. When a manager uses verbal reinforcement and positive feedback, employee motivation increases. When an employee is merely offered an increase in compensation, employee motivation tends to decrease. Google’s success with employee retention has largely been due to its managers understanding and using what truly motivates their employees.
Redefining Your Performance Management Strategy
The details in how each company redefined its performance management strategy can be distilled into a few fundamentals:
- Keep it simple — The complex processes behind formal annual performance reviews can be eliminated. Replace them with simple, straightforward processes that are easy for managers to maintain.
- Use frequent feedback — Employees generally like frequent feedback, especially when it’s specific and positive. If you have an employee that isn’t performing to expectations, take the time to understand what that employee is struggling with, and help that employee to set goals that address the substandard performance.
- Coach your employees — Identify the skill that the employee needs to improve, then help the employee figure out how to address it and set a goal that results in the employee attaining the minimum competency necessary to perform that task.
Continuous performance review strategies that are based on frequent, meaningful feedback an employee can act on right away outperform the annual review. Continuous performance is easier to manage, not to mention it costs a lot less than annual performance reviews. Companies that have implemented continuous performance benefit in numerous ways including increased business growth, higher employee retention, and much higher employee satisfaction with their jobs. As businesses become agile to maintain a competitive edge, those that adopt a continuous performance strategy will gain a competitive edge over businesses still using the annual review process.