Deloitte, the largest professional services network in the world, has recently decided to revamp its performance review cycle for a process with a special focus on fueling performance in the future rather than evaluating the past. Founded in UK and headquartered in New York, the company currently boasts 200,000 professionals in over 150 countries, providing audit, tax, consulting, enterprise risk and financial advisory services.
Deloitte Joins the Change
Deloitte made the headlines in the April 2015 issue of Harvard Business Review with an article penned by Marcus Buckingham and Ashley Goodall, both specialized in performance management and leadership development. Similar to the visionary Adobe and Accenture dumping and redesigning annual performance reviews, Deloitte long knew that their old performance management approach neither boosted employee engagement nor high performance. Deloitte conducted a public survey to find out what managers thought of performance reviews, and 58 percent of managers stated that traditional performance reviews did not serve its purpose. Considering that performance reviews did not go through any palpable transformation since its inception, the number does not take most professionals by surprise.
This is not to say that performance management is seen as redundant among managers and employees. The current workplace environment has an ever-increasing focus on growth and learning as key areas of job satisfaction. According to a study by Intelligence Group, 72 percent of millennials want to be their own bosses at work. If they do have a boss, 79 percent of them state that they want their bosses to serve as a coach or a mentor. The research explains that there is a need for a performance management system designed to guide employees into being more equipped experts in their line of business.
Revisiting the Old
With these observations in mind, Deloitte went on to go through their own performance review cycle. With the old system, objectives would be set for each employee across the whole organization at the beginning of a year. Then employees would be rated on how well they have met their objectives after the end of a project. Moreover, managers would also identify where they thought their employees improved. These evaluations would form the basis for annual ratings, where counselors would represent employees to discuss where each one stood compared to their coworkers.
People at Deloitte thought that their process was fair in terms of its predictability. However, Deloitte management was convinced that they needed conversations that were realized right after a certain project instead of at the end of the fiscal year. Besides, it was discovered that the whole performance review cycle – filling in forms, holding meetings and doing the actual ratings – consumed around 2 million hours a year. Most of this time was apparently spent discussing ratings instead of actually talking to employees about their performance.
One of the most important observations that Deloitte made with their old performance reviews was the implied subjectivity of ratings. To give an example, if you are rating someone on their ability to engage with their coworkers, you are rating that person based on how important you think engagement is. In other words, when you are rating someone on a skill without any provided context of that person’s specific performance, you are actually revealing more about yourself rather than about the employee. This is called the ‘idiosyncratic rater effect’.
Every company needs to design and develop their own performance reviews in order to get the best efficiency out of it. At Deloitte, this meant identifying three ways of addressing performance: Recognizing, seeing and fueling performance.
Performance is variably tied to compensation for many organizations, and this increases the importance of performance measurement. According to a survey conducted by Sibson Consulting, 66 percent of respondents stated that the main objective of performance reviews is to decide on compensation. Of these respondents, only 46 percent saw talent management as the primary goal.
The survey, conducted among multiple countries across a wide range of industries, revealed that there was a widespread lack of trust in performance management. According to Stanford University Professors Jeffrey Pfeffer and Robert Sutton, compensation for performance are generally ineffective when tasks are complex or require collaboration. Let alone the already delicate nature of assessing someone’s performance accurately, tying it to compensation increases the importance of handling the issue with utmost care.
For Deloitte, seeing performance means getting an accurate picture of someone’s performance, thus eliminating the idiosyncratic rater effect and streamlining the review process beginning from evaluation to the final rating. The solution to the first problem is to redesign how Deloitte constructs feedback questions and to whom these questions were directed. Deloitte decided that it is best if the feedback is provided between the immediate team leader and the team member to increase the efficiency of feedback.
The most important action that Deloitte has taken is to ask immediate team leaders to evaluate their future intentions with team members instead of their skills. The nuance lies in the fact that, with the new structure, team leaders rate themselves on their intentions with the given employee. The new feedback structure included questions such as “Given what I know of this person’s performance, I would always want him or her on my team”. The phrasing of the question allows the team leader to base his judgement solely on his available knowledge.
Language is of vital importance when handling the sensitive topic of performance reviews. Words such as ‘rating’ comes with a negative connotation and does not fully represent the new system applied at Deloitte. That’s why the new performance review process was named ‘performance snapshot’ – giving the message that performance is evaluated at a single moment in time rather than in a given quarter or per year.
Fueling performance emphasizes the essence of performance reviews; that is, to help improve one’s performance in the future. For this, Deloitte decided to implement regular Check-in conversations, à la Adobe.
Deloitte actually looked up to the trailblazer digital services giant in implementing regular Check-in’s. In a report on the future of performance management, Deloitte provides insight into how well Adobe’s new system has been working three years into its invention. Engagement surveys at Adobe prove that employees have a much more positive outlook on performance reviews and report receiving better, actionable feedback. Despite the highly competitive market that Adobe operates in, voluntary leaves at the company have been gradually declining.
Inspired by Adobe’s success, Deloitte has constructed their Check-in conversations to be a key part of team leaders’ work. Required to have it once every week to review latest projects, team leaders are instructed to set expectations for their employees and provide coaching for the upcoming week(s). In order to help team leaders save more time, check-in conversations are initiated by team members. This way, employees are also given ownership of their own course of development.
What’s the solution?
By recognizing, seeing and fueling performance, people at Deloitte hope that they will be able to support their annual compensation, quarterly performance reviews and frequent feedback processes. With Impraise, users are enabled to provide in-depth feedback on immediate performance to each other.
Whether between an employee and an immediate team leader or between co-workers, feedback cycles can be structured in any way. The feedback gathered over the course of a year can be used to provide analytics on the learning and development process of a specific employee. This enables managers to quantitatively see how much an employee has improved themselves. The data could then be used to give compensation-related decisions, which are much more precise and fair.
The feedback platform on Impraise allows any employee to see their performance data real-time. This level of transparency is also the last point that is important to Deloitte – enabling employees to know where they stand.
The next challenge that Deloitte and the world of performance management face is factoring in many facets of someone’s performance in a way that is understandable and scalable. According to Deloitte, big data should not be regarded as a way to oversimplify someone’s performance. Instead, providing the richest possible snapshot of someone’s performance should be the next frontier.
To read more about other major companies that have revolutionized their annual performance reviews, download our free white paper.