Deloitte Touche Tohmatsu Limited, or Deloitte for short, is one of the ‘Big Four’ accounting firms and the world’s largest professional services firm. The company has over 244,000 employees and has its operational headquarters in New York City, US.
Like most other companies around the globe, Deloitte realised that performance management processes involving forced ranking, rigid rating systems and once-a-year appraisal processes are actually damaging employee engagement and alienating high performers.
What’s more, Deloitte calculated that the performance management processes (completing forms, holding meetings, and creating ratings) consumed close to 2 million hours each year! Instead of wasting time and money on ineffective and counterproductive performance management processes Deloitte decided to scrap the annual evaluation cycle and replace it with ongoing feedback and coaching.
The general principle of the new performance management system - and similar systems implemented by companies such as Accenture, Microsoft, Adobe, Gap, and others – are:
• Focus on the employee in his or her own role. They no longer try to rank employees against one another or compare performance to other employees.
• Provide feedback more often. Rather than a single review once a year, the new systems tend to provide feedback more often, at the end of each major project or every quarter, for example. Deloitte has also implemented weekly check-ins with team leaders to help fuel performance discussions.
• Require less time to complete. Deloitte is using only four questions, two of which require yes or no answers:
• 1. Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus [To measure the overall performance and unique value to the organization on a five-point scale from “strongly agree” to “strongly disagree”].
• 2. Given what I know of this person’s performance, I would always want him or her on my team [to measure the ability to work well with others on the same five-point scale].
• 3. This person is at risk for low performance [identifies problems that might harm the customer or the team on a yes-or-no basis].
• 4. This person is ready for promotion today [measures potential on a yes-or-no basis].
• Move from focusing on the past to focusing on the future. Rather than reviewing an entire year’s performance at one go, these shorter, more frequent reviews are designed to help employees move forward with their careers rather than look back on past accomplishments or failures.
• Take some of the subjectivity out of the process. One major problem with standard performance reviews is that a reviewer’s assessment of an employee’s skills says more about the reviewer than the employee. To combat this, Deloitte has changed their questions to ask what a manager would do with a person (promote them, incentivise them, etc.) rather than what they think of that person.
• Shift from a focus on employee management to a focus on fuelling employee performance. More frequent check-ins and reviews mean that a manager has more opportunities to steer an employee towards his or her best performance.
• Shift from trying for the simplest view of performance to the richest. Many review systems in the past were designed to try to simplify employee performance down to a single number — a rating or ranking. This new breed is more about generating a richer, nuanced view of every employee to facilitate better performance.
In a survey Deloitte itself conducted, it found that more than half of the executives surveyed did not believe their employee review systems drove employee performance or engagement. And they’re not alone. According to a different survey, six percent of Fortune 500 companies have already replaced traditional annual review performance rankings, and the number is growing.
Ideas and insights you can steal
Deloitte has replaced their one-a-year, rating-based performance management processes because it is damaging employee performance and disaffecting the best performers. Follow in their footsteps and create performance management processes that create regular discussions that focus on coaching and development.
Bernard Marr is a bestselling author, keynote speaker, and advisor to companies and governments. He has worked with and advised many of the world's best-known organisations. LinkedIn has recently ranked Bernard as one of the top 10 Business Influencers in the world (in fact, No 5 - just behind Bill Gates and Richard Branson). He writes on the topics of intelligent business performance for various publications including Forbes, HuffPost, and LinkedIn Pulse. His blogs and SlideShare presentation have millions of readers.
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