IBM is Revamping its Performance Reviews

Ginni Rometty, the Chairman and CEO of IBM, lives by the motto "never protect your past". This motto reflects the new approach IBM will be taking to its performance reviews. The company recently announced it would be replacing its ten year old performance management system for a system known as 'checkpoints’. Diane Herson, IBM's Chief Human Resource officer, told Fortune that annual performance reviews assumed employees would only be doing a specific task throughout the year. However, in reality, employees were not working toward what they had originally listed as an annual objective. At the end of the year, employees would have to have an irrelevant discussion with their managers about projects they had already completed months prior to the review. As a result, employees felt that this discussion was a waste of time and was not conducive to professional growth. The new system was implemented to match the ongoing tasks employees had to undertake at IBM. What’s more, employees are now able to adjust their goals as and when they felt it is necessary.

The Problem with IBM

IBM’s performance assessment framework was based on a project by the name of PBC (Personal Business Commitments). The framework was built according to performance management targets or, as IBM called it, ‘Value principles’. These performance management targets were labeled as ‘drive to win’, ‘execute quickly’ and ‘team spirit’. Employee targets were set according to the company’s overall goals with the help of a department manager. The manager would list the actions the employee would need to take to realize these goals. At the end of the year, the department manager would give feedback on how the employee had performed and rate them on a scale of one to four.

The flaw in the process was that employees were ranked and put into ‘buckets’. During periods when the company was not reaching expected revenue growth, the PBC system, (or more commonly known as stack ranking), helped IBM identify the bottom 5 percent ‘underperforming employees” and subsequently remove them. What was worse was that employees were subjected to ‘band’ categorization structure. According to Pritesh Dubey, a previous employee at the company, “if you were an entrant and joined IBM straight out of university, you were given a band six rating”. This classification level went up to nine and ten for the most senior executives, sector leaders and partners. What this effectively meant was that employees in lower bands were more likely to end up at the bottom 5 percent, simply because they were not in senior roles. This encouraged managers to suppress any form of ambition to improve or encourage professional growth. One employee said that:

“In the groups where I worked, there were explicit efforts (stated by management) to reduce the need for and presence of “heroes”. The idea is that the “value” within the company is not within its people, but rather within process definitions and intellectual capital. People were intended to be nothing more than replaceable parts — “resources” that can be changed out and swapped at will.

The stack-ranking system, which was popularized by the then CEO of General Electric, Jack Welch, would create an environment where employees would have to compete against each other. This system would inadvertently stunt any form of creativity, growth and innovation. In early 2015, IBM went through a period of mass layoffs. According to a Forbes article, the company reduced its work force by 26 percent, potentially putting more than 100,000 people at risk. Employees felt uncertain about their performance and had to constantly be fearful of how they were perceived by their managers, which was determined by how well you could rub shoulders with their department heads (as well as other supervisors).

IBM thinks about performance management.

IBM knew it had to overhaul its performance management system in order to keep employees engaged and motivated. The company therefore conducted a company wide survey amongst its 380,000 employees to understand the best way to go about the new performance review process. The result was not what IBM expected. Diane Gherson, IBM’s Chief Human Resource Officer, told Fortune “Employees didn’t want to do self assessments or be ranked against others”. The survey showed that employees wanted to know how they were doing on a regular basis and where they could improve.

In the new system, feedback would be solicited at least once a month by a manager from each department, and at the end of a each year, employees would be judged according to five criteria, which were labeled as: business results, impact on client success, innovation, personal responsibility to teammates, and skills. There now would be no single measure of an employee's performance. Gherson explained that:

“In the old PCB System there was one score[...]Employees became obsessed by getting that one point” [...] “The new system leads to a much richer, and balanced discussion”

The new app-based system known as ‘checkpoint’ focuses on short term goals and employee satisfaction. Employees will now be able to give and receive feedback when they feel it's necessary. Going forward, managers will have to play a much more active role in the professional development of their employees. Regular check-ins make sure the team is on the right track and team goals can be realised quicker and on a more ongoing basis.

Conclusions

As company after company realise the importance of employee engagement and retention, so too do they realise the old system of stack-ranking does not meet their company culture. Stack ranking leads to employees focusing on competing with each other rather than competing with other companies, leaving no motivation to work together to create an agile team. IBM understands the importance of continuous feedback and that it provides employees with the opportunity to learn, grow and improve. Impraise helps companies focus on employee growth and assists companies in all aspects of the performance management cycle. The platform helps companies move from the annual performance review to continuous feedback. Managers can regularly check in with their team members, to understand how they are progressing, and what might be hindering their progress. Ultimately, the main goal of a performance management system should be always aimed at retaining a talented workforce. IBM has started to get it right with its new performance management process focused on five points instead of one. Through regular feedback, employees will be able to correct their problem areas in a much more agile and constant basis. A vital part of the performance management process is the fact that it creates a transparent relationship between manager and employee. Creating transparency nurtures a deeper sense of trust between employer and employee. Yet, information on the company’s activities alone is not enough. As employees are essential to the ongoing activities of the organisation, it's imperative they are allowed to have a say on the direction the company is going. As IBM goes through a restructuring process, it’s important that employees feel secure about their future at the company. By implementing solutions similar to Impraise, IBM can create a work environment that complements its employees’ professional growth.  

 

Photo by Patrick