SHRM

Employee Performance Management

Competitive landscape and never-ending pressure on business objectives and high demands on productivity have rapidly changed the way organizations measure and manage employee performance. Nowadays, managing employee performance is one of the critically significant tasks in any organization. According to Kuchinke, Correthers, and Cecil (2008) effectively managing employee performance contributes to improved employee satisfaction, job retention, and engagement, which plays an important role in achieving organization goals and objectives. In this regard, organizations are now expected to radically redesign the methods used to evaluate, measure, and recognize employee performance (Devarajan, Maheshwari, and Vohra, , 2016). Organizations now prefer to work with initial experimentation and deploy continuous performance management practices, which are clearer and more standardized than the earlier methods. The redesign of performance management is picking speed and organization capabilities to reinvent and implement performance management have improved. Consistently, we analyze employee performance management, with a critical bias on Deloitte’s redesigned performance management system based on the article “Reinventing performance management” at Harvard Review. Further, we compare Deloitte’s new design approach to performance management followed in Amazon as informed by an article published by the New York Times. The, based on the comparison, we will recommend the best approach for Amazon in their performance management. 

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A Critical Analysis of the Deloitte’s Redesigned Performance Management System

Deloitte, a global company set out to reinvent their approach to employee performance management. The company highlighted two reasons as the basis for their decision to implement a complete overhaul of their current performance management. According to an article posted in Harvard Business Review, the company realized that their current process for evaluating the performance, training, promoting, and paying employees was not in line with the objectives of the organization. In fact, Deloitte admitted in a public survey that their current performance management approaches did not match the employee engagement or high performance. Ideally, the performance management system at Deloitte was designed in a way that each manager was assigned a group of people and expected to rate the individuals depending on how well they met the preset objectives. The managers were also expected to write comments on areas the person failed to excel, and the evaluations discussed in consensus meetings. At first, the process was fair until the company realized the method was not fit for a real-time world. Unfortunately, the change did not come about until the organization decided to tally the number of hours spent on performance management and found they consumed an astounding 2 million hours a year on performance management, with no substantial results. Deloitte’s case is not a loner and as Marr (2009) notes, a majority of the organizations spend too much time measuring everything that is easy to measure. The organizations spend more time with meaningless and irrelevant performance indicators, instead of focusing on turning performance data into meaningful insights and learning. 

The other factor that led to the company reframing and identifying new goals for performance management was the realization that the current rating system produced data that was more reliant on the evaluator than on the employees being evaluated. Ideally, Maier (2016) elaborates that an effective performance management system is founded on objectivity. Consistent with the findings at Deloitte, Maier noted in his article that employee rating is often based on the judgment of the rater and not the rate. Unfortunately, when a person’s unconscious bias gets in the way of performance management, it can lead to inaccuracy, favoritism, or even unfair misrepresentation of employees. The same correlates with a study published in the Journal of Applied Psychology, which found 62 percent of the variance in the ratings reflected the raters’ peculiarities of perception and only 21 percent of the variance accounted for actual performance. Practically, although the ratings are intended to measure the performance of the rate, most of the results presented represent the unique rating tendencies of the rater. In essence, the science of rating at Deloitte tended to reveal more about the rater and not the rate. Additionally, the organization understood that the person who was best suited to understand and make the right judgment on employees’ performance at the individual level was the immediate team leader. However, the company had to make sure they first capture the leader’s view on performance without falling into the idiosyncratic rater effects. Thus, and in a dramatic paradigm shift, Deloitte undertook to implement a complete overhaul of their employee performance management to match the current organization needs, goals, and objectives. 

Deloitte under the Microscope

After the revelation that their performance management was not working, Deloitte performed an empirical study on some of their high-performing teams. It was revealed that the defining characteristic of the best teams was based on strength. Members felt they had an obligation to serve the organization and committed all their strength into their work every day. The empirical study was informed by a previous research conducted in late 1990 on high-performing teams. According to Buckingham, and Goodall (2015), the study results indicated that a large number of high performing teams were driven by the fact that the workplace gave them the opportunity to use their strength every day. The same study was then applied to Deloitte and the results matched as a large number claimed the workplace gave them the chance to use their strength every day. Put together, Deloitte used the evidence to focus on the problem they were trying to solve with the proposal of a new design. 

The Solution

Moving forward, Deloitte decided to focus more on what a leader would do with members and not how they would rate them based on their past work. The decision was founded on three new goals – recognize performance, see it clearly, and fuel performance. Notably, recognizing performance and seeing it clearly work hand-in-hand. Deloitte understood the importance of achieving both without relying on their previous rating system. Thus, they proposed, instead of asking team leaders about the skills of each member, they would ask about the leaders’ future actions regarding the individual. By moving from a system of evaluating people skills, the company received feedback that is more accurate. Thus, at the end of every company project, the company designed four future-focused statements and requested team leaders to respond to them, which were them used to rate the performance of the individual employees. The final objective was to fuel performance. Deloitte accomplished this through weekly check-ins with the leaders, a strategy that had a direct impact on performance. 

The redesigned performance management process that Deloitte adopted focused less on employees weaknesses, and instead was more interested in building their strengths by recognizing and seeing their performance and fueling performance. The new performance management system represents a dramatic paradigm shift that aligns with the current organization trends and demands. Additionally, it is important to note that the new performance management system has eliminated any cascading objectives and annual reviews. Instead, the model is now more efficient, agile, and fits all, while supporting the collection of reliable performance data. 

Amazon.Inc

When Jeff Bezos founded Amazon in 1994, he operated his small business from a home garage. Over the years, Amazon has grown into one of the largest global online retailers, surpassing Wal-mart and other e-commerce retailers. The growth was enabled by Bezo’s ambition and vision, which turned the company into an innovation hub developing its own products. Currently, Amazon has offices in 32 countries, with 15,000 employees. In 2014, the company recorded a whopping 89 billion dollars in total revenue. Added to that, Amazon has been planning to expand its headquarters in Seattle to enable them to accommodate at least 50,000 employees (Kantor, & Streitfeld, 2015). Unfortunately, for Amazon, such a huge employee population requires careful management and strict adherence to organizational values to enable continued organization success. 

Current Performance Management at Amazon

According to a recent article posted in New York Times, the people management at Amazon applies the feedback culture (Kantor, & Streitfeld, 2015). Ideally, every employee is required to abide by the 14 principles of leadership including customer obsession as one way to commit to serving its customers. It is claimed that the feedback culture encourages employees to harshly criticize their coworkers’ ideas and send feedback to the managers secretly.   The feedback system is designed to push the employee limits and is often described as the intricate machine that propels them to achieve the organization’s ever-expanding ambitions. The feedback system allowing employees to send praise or criticism concerning coworkers only reveals the name of the provider to the manager receiving the feedback. Alongside the feedback system, Amazon also holds weekly and sometimes monthly business reviews, where every employee is accountable for a number of metrics. The reviews are used to test the knowledge of the employees on the metrics. Just like the former performance management system for Deloitte, the reviews are often long and exhaustive eating into a substantial amount of working hours. Another claim is that the use of the feedback system is used to create a list of bottom performers, which is used by the organization to terminate low performers. 

Unfortunately, looking critically at the current performance management system at Amazon, the system is unfair. Employees harboring malicious intentions against their coworkers might misuse the system and give damaging feedback about employees. In fact, this has already happened in the past and managers have been forced to present proof to defend their employees against unfair accusations. Compared to Deloitte that has been aiming for a comprehensive way of managing employee performance and accounts for individual performance, at Amazon, the system is based on unfair ratings. In fact, the system is similar to the former system at Deloitte that was based on the rater and not the ratee.  Employees at Amazon are at the mercy of their coworkers and often suffer unfair judgment, which may compromise their performance. The harsh nature of the feedback system is different from that of the other companies such as Adobe, Google, or Facebook. Unlike Deloitte’s performance management system that creates a teamwork culture, the philosophy of the performance management system puts more pressure on the link between individuals performance and the overall success. Instead of owning the company’s culture, employees are overwhelmed by the responsibilities, which play a major role in employee morale. Another downside of the Amazon feedback system is that employees cannot see the feedback and can only hear it from their managers. The system beats the logic of the whole performance management system, whose purpose is to help employees grow. At Deloitte, this is different in that, after receiving the feedback from team leaders, the company organizes weekly check-ins to discuss their near-term work. The check-in also allows team members to discuss the recent work, review priorities, set expectations for the upcoming work, and provide a course of correction or any important information that might help improve the employee performance. Another issue with the feedback system at Amazon is the complete anonymity of the feedback. The fact that the employee does not know who rated them makes it easy for other to sabotage their coworkers. At Deloitte, the feedback is not anonymous and team members understand that team leaders give feedback concerning their previous performance at work. While the system at Amazon may encourage unfair feedback, Deloitte believes in a transparent system where employees and managers can view feedback and even offers a chance to settle any conflicts through weekly or monthly check-ins. 

Recommendations

Employee performance management is the backbone of any organization’s management (Kandula, 2005). Organization leaders and managers often measure employee performance by assessing how much contribution the employee has made to the growth of the company. Usually, this is conveyed during the employee performance appraisal, to provide them with feedback and create a positive influence on future performance. The performance management process also ensures that employees’ goals, objectives, and outcomes correlated with goals of the organization. Notably, the performance management process is not a one-time affair, but a fully-fledged affair focused on linking the employee objectives to the corporate goals. 

Amazon is one of the leading giant retailers with a 150,000 workforce in all their 32 offices all over the world. Like many organizations, Amazon has a performance management system in place designed to act as a guiding principle to push employees to achieve organization goals. Unfortunately, reports indicate that the company’s feedback system has several loopholes and is not suited for the organization. For instance, the system is more likely to encourage unfair judgment, employee sabotage, and cause demoralization among its workers. The Amazon feedback system has several shortcomings and does not current with the current trends. The redesigned performance management systems do not focus on remediating their employees’ weaknesses, but on building their strength. Consistently, we recommend that Amazon should do a complete overhaul of their current performance management system. The company should make a dramatic paradigm shift to support the daily needs of their teams and team leaders and not relying on feedback from coworkers. Adopting a similar performance management like the one at Deloitte will enhance transparency in the reporting system, where employees can learn the source of the feedback regarding their performance and eliminate any malicious claims. Additionally, the lack of a strong performance culture is a significant competitive disadvantage, because it might be a barrier to change. Redesigning their performance management model will help Amazon to create a performance culture because employees can be rated based on their performance and receive feedback on areas they need to improve. By adopting this performance management approach, Amazon will be able to pivot their focus towards the future rather than making the past into a big deal and as the basis for assessing employee performance.

Performance management is an integral part of any organization management. The process is designed to improve employee performance and gear the organization towards achieving its goals and objectives. An effective performance management system should align with business strategies and help the company achieve competitive advantage in its industry. In the beginning, Deloitte used a performance management system that relied on employee rating by the team leaders. Unfortunately, the company realized the ineffectiveness of the model because it ate too much of the company’s time as managers spent longer hours in lengthy consensus meetings discussing hundreds of employees. The process also had a rating system that allowed team leaders to rate their team members depending on their perceived skills. However, the company realized that the rating system often produced inconsistent data that often led to misleading conclusions. In particular, the company realized their approach did not drive employee engagement or high-performance setting in motion their dramatic paradigm shift. After a comprehensive assessment and deliberations on the most appropriate performance management model, Deloitte settled for a system that allowed team leaders to rate employees based on their past work. Compared to the Amazon feedback system, Deloitte system meets the current global trends and the need for a new performance management model. Amazon’s feedback system had several shortcomings that made it inappropriate for the company. Moving forward, we recommended that the company should adopt a similar model to that of Deloitte to manage their employee performance. 

References

Kuchinke, K. P., Correthers, G., & Cecil, K. (2008). Managing performance in extension: Redesigning the performance evaluation system at Illinois. Journal of Extension, 46(4), 1-7.

Maier, S. (2016). 4 Unconscious Biases That Distort Performance Reviews. Entrepreneur. Retrieved from: https://www.entrepreneur.com/article/281919

Marr, B. (2009). Managing and delivering performance. Amsterdam: Butterworth-Heinemann.

Kantor, J., & Streitfeld, D. (2015). Inside Amazon: Wrestling Big Ideas in a Bruising Workplace. New York Times. Retrieved from: https://www.nytimes.com/2015/08/16/technology/inside-amazon-wrestling-big-ideas-in-a-bruising-workplace.html?smid=tw-bna#story-continues-18

Kandula, S. R. (2005). Human resource management in practice: With 300 models, techniques and tools. New Delhi: Prentice Hall Of India.Devarajan, R., Maheshwari, S., & Vohra, V. (2016). Implementing New Age Performance Management System in IT MNC: Leveraging Communication and Training. South Asian Journal of Business and Management Cases, 5(2), 189-197.

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