Reference no: EM133107464

PERFORMANCE MANAGEMENT

Transforming Performance Management: The Case of Deloitte

Among companies that have made major changes in their approach to performance management, the multinational consulting firm Deloitte provides an interesting example. In 2013, Deloitte conducted an internal study that revealed it was spending around 2 million hours on performance management-related activities. Performance management consisted of annual evaluations in which managers and employees set goals at the beginning of the year and then rated progress made at the end of the year. Despite the time spent on them, the system did not provide adequate or timely feedback to employees, nor did it provide organizational decision makers with sufficiently accurate performance data to be used in important decisions such as incentive pay. The company decided to give the system a makeover but also to change the company's view of what performance management is and how to approach it.

This transformation effort began with identifying what Deloitte needed the system to be able to accomplish. Erica Bank, performance management leader at Deloitte, describes the objectives as threefold: fuel performance, see performance, and recognize performance. To fuel performance, a key tool in the revamped system is frequent meetings in which the employee and the manager have future-oriented conversations, called "check-ins" or "one-on-ones." Managers and employees are encouraged to briefly meet weekly or biweekly to discuss ongoing work and employee career development. To get the employees and managers started, HR gave them ideas of what to talk about and sent weekly e-mails asking whether they had met (i.e., rather than force compliance, they simply nudged). The frequency and regularity of these meetings would ensure that the feedback received would be timely.

To see performance, managers are now asked to rate each employee they work with at the end of each project using a simple, four-question survey:

• Given what I know of this person's performance, I would always want him/her on my team. (Responses reported on a 5-point scale ranging from strongly disagree to strongly agree.)
• This person is at risk for low performance (yes/no).
• Given what I know of this person's performance, and if it were my own money, I would award this person the highest possible compensation increase. (Responses reported on a 5-point scale ranging from strongly disagree to strongly agree.)
• This person is ready for promotion today (yes/no).

At a minimum, each employee is rated every quarter. Deloitte made the initial decision not to share each rating from individual managers with the employees, opting to share annual aggregated ratings with the rationale that this would allow managers to be more honest.

To recognize performance, Deloitte decided to use the performance ratings as a starting point. Chief Learning Officer Jeff Orlando notes that every "people decision" will be data informed but not data driven. HR and business leaders could use this information to decide whom to promote and whose performance needed intervention. The system is meant to help support (but not replace) decision makers in their efforts to recognize employee contributions.

Is the system working? Deloitte invested heavily in training managers on how the system would work and encouraged adoption by allowing them to opt in. Deloitte will, no doubt, continue to change and shape the system in keeping with evolving demands. The initial reactions of its own employees have been positive. In 2016, ALM Intelligence named Deloitte a global leader in performance management consulting, indicating that the company is a thought leader in this arena and shares its performance management experience with its clients as well.

Case Discussion Questions

1. Which aspects of Deloitte's new performance management system do you find most radical?
2. If you were a manager at Deloitte, how would you have reacted to such a system? Would your answer change if you were an employee?
3. What are your thoughts regarding measuring performance with four simple questions? Do you think these are the right questions? How would you know if a particular question is effective?
4. How would you motivate managers to conduct frequent check-in meetings with employees? How would you counter the argument that these meetings take a lot of time?
5. How transparent is this system? Do you think Deloitte's decision not to share individual ratings with employees is warranted?