Reinventing Performance Management

Like many other companies, Deloitte realized that its system for evaluating the work of employees—and then training them, promoting them, and paying them accordingly—was increasingly out of step with its objectives. It searched for something nimbler, real-time, and more individualized—something squarely focused on fueling performance in the future rather than assessing it in the past. The new system will have no cascading objectives, no once-a-year reviews, and no 360-degree-feedback tools. Its hallmarks are speed, agility, one-size-fits-one, and constant learning, all underpinned by a new way of collecting reliable performance data.

To arrive at this design, Deloitte drew on three pieces of evidence: a simple counting of hours, a review of research in the science of ratings, and a carefully controlled study of its own organization. It discovered that the organization was spending close to 2 million hours a year on performance management, and that “idiosyncratic rater effects” led to ratings that revealed more about team leaders than about the people they were rating. From an empirical study of its own high-performing teams, the company learned that three items correlated best with high performance for a team: “My coworkers are committed to doing quality work,” “The mission of our company inspires me,” and “I have the chance to use my strengths every day.” Of these, the third was the most powerful across the organization.

With all this evidence in hand, the company set about designing a radical new performance management system, which the authors describe in this article.

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Idea in Brief

The Problem

Not just employees but their managers and even HR departments are by now questioning the conventional wisdom of performance management, including its common reliance on cascading objectives, backward-looking assessments, once-a-year rankings and reviews, and 360-degree-feedback tools.

The Goal

Some companies have ditched the rankings and even annual reviews, but they haven’t found better solutions. Deloitte resolved to design a system that would fairly recognize varying performance, have a clear view into performance anytime, and boost performance in the future.

The Solution

Deloitte’s new approach separates compensation decisions from day-to-day performance management, produces better insight through quarterly or per-project “performance snapshots,” and relies on weekly check-ins with managers to keep performance on course.

At Deloitte we’re redesigning our performance management system. This may not surprise you. Like many other companies, we realize that our current process for evaluating the work of our people—and then training them, promoting them, and paying them accordingly—is increasingly out of step with our objectives.

Marcus Buckingham is a researcher of high performance at work, co-creator of StrengthsFinder and StandOut, and a coauthor of Nine Lies About Work: A Freethinking Leader’s Guide to the Real World (Harvard Business Review Press). His most recent book is Love + Work: How to Find What You Love, Love What You Do, and Do It for the Rest of Your Life (Harvard Business Review Press).

Ashley Goodall is a leadership expert who has spent his career exploring large organizations from the inside, most recently as an executive at Cisco. He is the coauthor of Nine Lies About Work, which was selected as the best management book of 2019 by Strategy + Business and as one of Amazon’s best business and leadership books of 2019. Prior to Cisco, he spent fourteen years at Deloitte as a consultant and as the Chief Learning Officer for Leadership and Professional Development. His latest book, The Problem with Change, is available now.

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