Goldman Sachs, one of the world's leading financial firms, is yet another Fortune 500 company to overhaul its performance management process. The company faced the blunt end of the financial crises, with the majority of the capital heavily invested in risky housing loans. As a result, the U.S government had to bail the company out. However, the level of problems ran deeper than the their ability to make sound financial judgments, and attract young talent. In recent years, the firm has been accused of simply chasing the green back to get ahead. In fact, a resignation letter penned by a previous employee, outlined just how bad the culture got at a place that was [sic] “built on teamwork, integrity and humility”.
A Culture in Crises
The letter went to say that it was Goldman Sachs’ culture that led the company to 143 years of success. According to Greg Smith “I look around today and see virtually no trace of the culture that made me love working for this firm for many years”. The work environment which was supposed to reflect innovation, trust and always putting the customer interests first, started to veer off course.
At the core of the challenge was the notorious system of stack ranking, which time and time again has shown to create disengaged employees and unhealthy internal competition. Goldman Sachs used a system of 360 degree reviews, which involved seniors from all layers of the organisation. Typically, an employee was rated by 15 people: 3 peers, 9 seniors, one junior and 2 ‘external reviewers’. These reviews were then communicated to each line manager. The problem was that these managers would then further discuss the employee's performance behind closed doors to determine the overall rating that each individual would get. Nine meant the employee outperformed and out shown their peers, while one essentially meant you were shown the door.
The numbers represented a forced-curve review system, where 40 percent were told they were doing ‘okay’, and the bottom 5 percent were fired every year. This review process, as it has shown from other countless examples, is entirely demotivating and does not reflect the fast paced nature of today’s generation. As Deloitte pointed out, the whole process takes an average of 28 hours per employee per year. It’s no surprise then that a number of other companies have started to remove this cumbersome process for a much more agile and continuous process.
Moving over to Continuous feedback
It turns out, not even those working in the the numbers game enjoy being reduced to a digit. Goldman Sachs conducted a company wide survey to understand how each employee perceived the current culture and the way each employee was reviewed. The response was unanimous. Employees wanted more frequent feedback that would support their professional development.
“We strive to create an environment where our people can perform to their fullest potential. ... Providing high-quality and ongoing feedback is at the heart of our culture, and is an important investment we make in our people," said the CEO, Lloyd Blankfein
Like other companies, Goldman is trying to streamline the laborious process of performance reviews and create a work culture that is once again focused on personal growth and development. The new platform the company will start using will reflect that of a growth mindset, where individuals are able to understand where they are going wrong and constantly realign their efforts to the company's vision.
The new platform allows employees to solicit feedback on a continuous basis whenever the opportunity arises. Starting in this year, the new platform will require managers to give a written summary of their employees, accompanied with a rating of either outstanding, good, or needs improvement. Ranking a year of employee performance on a numerical scale can be tough on all employees, however, it’s the younger generation that feel particularly moved to change it.
This Millennial generation is constantly looking to grow and improve their skills, and prove to the older generation that they are more than capable of fulfilling managerial roles. Furthermore, this generation is not worried about loyalty when it comes to employment. In fact, a PWC survey found that 75 percent of interviewed millennials believed that they will have between two and five employers during their lifetime. It’s no secret that the banking sector has been failing to attract new talent since the wake of the financial crises of 2008. MBAs from top business schools are increasingly choosing to go into technology roles over investment banking, despite the fact that financial services firms continue to offer the highest number of opportunities.
A greater focus on employee growth is important to a company's culture. Implementing a system that assists all aspects of the performance management cycle is vital to understanding the health of the organisation. Impraise 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 advancing, and what might be hindering their progress. 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 in. What’s more, gathering feedback from employees regularly, gives employees the ability to track their progress and see where their learning areas may lie . Rich data gives companies unique insights into the health of their organisations and easily determine which teams may need further coaching.
Image Credit: Arturo Pardavila III