For years, employees from a number of Fortune 500 companies have been subjected to the tyranny of the annual review. According to the Human Capital Institute, the annual performance review is the second most disliked work activity by managers, after firing employees. Morgan Stanley, the American multinational financial services corporation, announced that it would be removing the long used 5 point scale to determine employee performance, and replacing it with a system whereby supervisors will be asked to pick words that describe each employee. This comes at a time when banks are attempting to make big changes to accommodate the professional desires of the millennial generation, who are increasingly seeing Silicon Valley, as increasingly prestigious career options.
The Wall Street Challenge
For decades, success on Wall Street followed a simple formula: Grind out 90 hour marathon work weeks, and complete menial tasks in exchange for a shot at the leadership helm. Today, millennials, who make up as much as 40% of the job market, realise that a job in finance is not as lucrative as it once was. With its cutting edge innovation, Silicon Valley is quickly replacing Wall Street as the center of the job market.
In part, the problem lies with the over bearing and bureaucratic hierarchical structures of yesteryear. Employees simply feel that the very traditional financial industry does not offer the same opportunities to grow, learn and develop their all round talents in the workplace. In fact, a chart by Business Insider shows that the headcount in a number of investment banks has dropped by 21% over the past five years. It seems, no matter what banks offer as a new workplace incentive, whether it’s faster promotions, more money, more time off, more free food, or even more opportunities to go surfing. The fact remains that big banks simply do not possess the creativity that startups bring to the world. Young people want many different experiences throughout their careers, and this means new college grads will use their first jobs as stepping stones to their second jobs, their second jobs as stepping stones to their third jobs, and their third jobs, etc., into job-hopping infinity. In fact, the average tenure in a job across all industries is now less than three years.
Morgan Stanley, which has been ranked as the third best bank to work for on Wall Street, has been attempting to update the way in which performance evaluations have been done for the past decade. However, instead of focusing on how attractive the company can be, the main objective should be to provide a stepping stone toward another career. An article in the economist outlined how some consulting firms, such as McKinsey, make it easy for big firms to poach their people, by putting potential employers directly in touch with consultants who tick the right boxes for a vacancy. The idea is that this will make McKinsey a more attractive place for millennial employees to work, constantly refreshing the firm's intellectual capacity.
Holistic performance management
In the past annual reviews based on a five point scale helped Morgan Stanley determine how their employees performed. But the system needed a change. Going forward, instead of assigning numbers to employees, evaluators will now be asked to come up with a list of adjectives that describe each employee. The aim is to give more direct feedback and better steer staff members toward areas of improvement. Peg Sullivan, Morgan Stanley's Global Head of Talent Management said:
“It's about giving people more information and something they can do more with” [..] “It's more candid and memorable”.
The company will also be putting in place a dashboard that compiles all the information needed by supervisors to evaluate employees. This will allow Morgan Stanley to get insightful analytics into the performance of individuals in their company, and predict when employees are likely to leave.
The timeline for the reviews will also change. Instead of having yearly reviews, managers will sit down with each one of their employees on a bi annual basis. At the beginning of each quarter, team members will do full 360 degree reviews with their closest colleagues and managers. From this, managers will then decide on promotions and compensation. Employees will be evaluated not just on how much money they bring to the firm, but rather on a broad array of factors meant to measure their overall contribution. Sullivan said:
“We don’t just think about what they’ve contributed commercially... We think more holistically: their risk management, their leadership skills and what they’ve contributed to our culture.”
The need to build transparency
As Morgan Stanley tussles with the fact that their millenials will leave for the tech pastures, moving away from the annual performance review to continuous feedback may help the Wall Street bank understand how they can improve their work environment.
Today, employees crave ongoing feedback, and see it as a vital part of their daily lives. Impraise helps companies move over to continuous feedback by facilitating the need for millennials to constantly know and understand how they are performing in the workplace, and where they may need improvement. Managers can regularly check in with their team members, to understand how they are progressing, and what might be hindering their progress. Through regular feedback, employees will be able to correct their problem areas in a much more agile and constant basis. Ultimately, the main goal of a performance management system should be always aimed at retaining a talented workforce. Morgan Stanley has started to get it right with its new performance management process.
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 Millennials jump ship, it’s important keep them in the loop with any company activity. By implementing solutions similar to Impraise, Morgan Stanley can create an open work environment that facilitates its employees’ professional growth.
Photo credit: Alan Wu