How Deloitte is reinventing performance management

about-deloitte-iconThe April edition of the Harvard Business Review details how Deloitte, one of this country’s largest talent-dependent organizations, is completely transforming its performance management system. In the end Deloitte is discovering what a performance evaluation is actually for.

Deloitte determined that their performance management system was not delivering their desired results. In a recent survey by Deloitte, 58% of their executives believed that their current performance management approach drove neither their employee engagement nor high performance. They came to understand that the majority (62%) of performance ratings were due to the individual raters “peculiarities of perception”. They then discovered that the amount of time they were consuming each year on performance management was 2 million hours, many of those hours eaten up by the leaders’ discussions behind closed doors about the outcomes of the process.

They boiled their problem down to three elements – two of which they’ve addressed. Along the way they gained a better understanding that Deloitte is strengths-oriented. Their people feel that their work demands their very best as individuals.

Their study was built off one done by Gallop in the 90s. Gallop asked both high and low performing teams about mission and purpose as well as pay and career opportunities. By isolating questions in which the high performing teams agreed and the rest did not, the difference in performance ended up bing determined by a very small group of items.

  • My co-workers are committed to doing quality work
  • The mission of our company inspires me
  • I have a chance to use my strengths every day (This was the most powerful and influential of the three)

Deloitte discovered the problem they were trying to solve with their new design. They wanted to spend more time helping people use their strengths in teams characterized by great clarity of purpose and expectations while developing quick, reliable and differentiated data. To do that, they needed to clearly see each employee’s performance and do so in a streamlined fashion.

They ended up creating four future focused statements:

  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 [measures 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 [measures 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].

The not-so subtle shift in thinking is in asking their team leaders what they would do with each team member rather than what they think of that individual. Very practical and more concrete.

So, Deloitte was able to clearly see performance and then to recognize it. But they wanted one more attribute: to fuel it. Deloitte began to conduct regular check-ins, brief conversations, with each team member about near-term work. These conversations provide clarity regarding what is expected of each team member and why, what great work looks like, and how each can do his or her best work in the upcoming days—in other words, exactly the trinity of purpose, expectations, and strengths that characterizes their best teams.

Deloitte doesn’t not consider these conversations to be in addition to the team leader’s work; they are the work of the team leader.

The old way was to boil an individual’s performance down to a simple single number. Deloitte, however, began to realize that one cannot express the infinite variety and nuance of a human being in a single number. Instead they created conversations between the team leader and the person being evaluated which created several rich data points, not just one. “If we want to do our best to tell you where you stand, we must capture as much of your diversity as we can and then talk about it.” A side benefit of this new understanding and process was transparency. Rather than keep the evaluation score secret from the team member – believing that keeping the results from the team member encouraged a more honest and less sugarcoated rating by the leader – Deloitte has created open conversations between team leaders and members.

To their credit, Deloitte admits they haven’t yet found the perfect means to measure the richest view of the individual rather than merely the simplest. That search has brought about questions like: What’s the most detailed view of you that we can gather and share? How does that data support a conversation about your performance? How can we equip our leaders to have insightful conversations?

In the end, Deloitte is moving the debate about performance management from one merely about ratings to a conversation about measuring the whole person. It’s not so much that ratings fail to convey what the organization knows about each person but that as presented, that knowledge is sadly one-dimensional. In the end, it’s not the particular number we assign to a person that’s the problem; rather, it’s the fact that there is a single number. With the technology now available Deloitte believes they can transition from a small data version of their people to a big data version.

About Mike Lake

Mike is the Senior Vice President of Marketing for Evergreen Trading. When not playing jazz trombone he is probably obsessing about writing content that will capture the attention and interest of business people and fellow learning junkies everywhere.

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