Dreaded by most employees, performance reviews may be one of the most criticised aspects of working life. Recently, a flurry of leading global organisations have replaced the traditional performance review process, with a system that is agile, nimble and based in real time. Gap, one of the world leaders in apparel, announced in early 2014 that it would be replacing its militaristic review process. The company pledged to develop its employees, and managers, in areas that would complement their future careers. The announcement was hailed by President Barack Obama as ‘one of the best in class examples of a company committed to investing in America’s workforce’. In a press release published by Gap, the company stated that:
“The new system implemented at Gap will focus on integration and collaboration, while at the same time ramp up the company’s existing career advancement and management programs, creating opportunities for hundreds of emerging leaders in the years ahead.”
The Gap between executives and employees
Despite releasing impressive results in 2012, Gap had lost significant market share to H&M. Failing to keep up with the latest trends, and being accused of treating its workers unfairly, Gap fell short of market expectations. But when push came to shove, nothing mattered more than impressing (and protecting) shareholders. This was the position the then CEO Glenn Murphy took when being questioned by media. Gap’s executives were clear, focus on profits, and drive the cost of labour as low as possible.
The review system Gap used, was inspired by a 1970s Chicago school ideology, that believed employees were solely financially driven opportunists who needed to be kept in check. According to Susana Mercedes, a previous manager at Gap, the company would give each employee a questionnaire of a hundred performance statements, such as:
Within your team, how many associates did you develop in the given year?
How did you influence your department to meet the monthly, weekly, yearly goals?
Did you develop any new ways of improving areas of challenges?
The above questions would form part of an evaluation process that was reviewed on an annual basis. In addition to this, employees were encouraged to keep a performance log and track daily activities throughout the year. Employees would then have to justify their answers in the questionnaire, based on their yearly daily activity logs. Managers would then discuss the questionnaire with the employee to confirm or query their answers. This system was flawed, however, because managers were not required to keep any year long logs themselves. As an article in Forbes revealed, managers very rarely remember every employee's performance over a year, let alone a month. In fact, research shows that in a system which is meant to “catch” employees, managers are more likely to only remember the negative performances. Traditional performance reviews, such as the one used by Gap, are counter-productive when helping employees improve and instead drive them away. Or worse, they remain at the company, but their heart and passion have been extinguished from their work. This makes employees unengaged and despondent, which ultimately leads to uninspired products and disappointing financial announcements.
Closing the Gap
Gap realised that the old annual performance review was ineffective at engaging and developing its employees. Managers had to be more collaborative with their workforce. In February 2014, Gap announced that it would be reviewing its performance management approach with a focus on simplifying the process and enabling regular performance discussions to drive more company-wide engagement. To do this, Gap needed to eliminate ratings and year-end reviews while shifting to regular conversations.
Gap introduces GPS
After the announcement, Gap implemented a system known as Grow. Perform. Succeed. (GPS). This system, which was based on the latest psychological findings, would mark the beginning of a much more fluid employee/manager relationship. Now, employees would set their own performance goals every two months, and managers would guide employees so that they were able to reach their goals. Effectively, this new system would be similar to a GPS system that directs a driver in the right direction. Rob Ollander-Krane, the Senior Director of Organisation performance effectiveness at Gap, says:
“A GPS system doesn’t wait until the end of the trip to tell you all the wrong turns you made”. “We didn’t want to handcuff our managers and make them wait until the end of the year to give performance feedback We wanted them to give performance feedback all along the route, so employees didn’t get too far off the correct path during the journey”
By continually revisiting goals, employees have something tangible and realistic to work towards. As a result, managers can actively guide their employees along the correct paths, making the workforce agile and proactive to changes in the industry.
What’s more, Gap separated rewards from performance. According to the management research report conducted by Blessingwhite, the reward discussion would happen on an annual basis. The conversation would simply recap how the business did, how the team had done and how the individual contributed to the success of the team. Prior to this implementation, leaders would get together to discuss how the business had performed, and what could be directed towards bonus spending. Managers were then given an outline of what a ‘stellar’ performance looked like, and a budget was then allocated accordingly. With the new process, Managers are each given a budget, that they can allocate to each employee based on how the manager feels goals were met.
As the workplace has evolved from a simple system of a supervisor measuring worker output to a knowledge-based workforce, it calls for a performance review process that reflects this multifaceted organisation. As there have been technological advances in employees craving feedback in their own private capacity, so has there been an overflow into organisation life. Employees now want to know how they are doing on an ongoing basis. Impraise allows companies to facilitate this need. With regular check-ins, managers can regularly engage with their employees to understand how they are reaching their goals. Employees have the opportunity to give feedback to their managers and their team members on a continuous basis, making it possible for professional growth and development.
After just two years of implementing the new performance review process, 89% of Gap employees, reportedly say that they are having regular conversations with their managers. Gap is starting to see evidence that the company is making progress toward the growth mindset. On a five-point scale, the company received an average of 4.2 regarding the quality of conversations between manager and employee. What's more, in 2014 Gap achieved an overall employee engagement score of 86%.
Overhauling an organisation's approach to performance management can have a profound impact on performance, engagement and culture. Companies can benefit from the rich data that results from ongoing performance reviews. Dash, an analytics platform developed by Impraise, allows companies to collate data over time to holistically understand how each team is performing. From here, companies can choose to remedy the situation by implementing training and coaching.
Photo by: Mike Mozart