Performance Reviews

KPMG Transforms Stack Ranking

KPMG, one of the largest accounting and financing firms, recently announced that it would pilot a new performance management program in its Indian division, in an effort to retain the quickly evaporating talent pool. The move comes as a number of firms ditch the annual review, replacing them with a more regular feedback process. After a series of mergers in the late 1980s, the firm was founded as Klynveld Kraayenhof & Co. (Netherlands), MccLintock Main LaFrentz (United Kingdom / United States), Deutsche Treuhandgesellschaft and Peat Marwick or KPMG for short. The company currently has 174 000 employees, providing financial, legal and tax advice to a number of global companies.

The challenge

Traditionally, like many of its consultancy rivals, KPMG used a bell curve evaluation system to determine and rank the performance of their employees. The approach ensured that the performance of each employee was relative and comparable, making certain that only a certain % of the population (‘top performers’) gained top notch scores. While on the other end of the spectrum, a similar % of professionals were rated as underperforming. The bell curve approach has great implications for the wallets of accountants and consultants, as both pay and bonuses are typically linked to scores. Shalina Pillay, Head of People, Performance and Culture at KPMG said that:

“the bell curve, the way it is understood and implemented, is wrong sometimes, making it a forced normalisation and forced rating. It cannot be a rigid curve. It could be a steep curve, flat curve depending on the business performance.”

The Indian job market saw an overall increase in demand for skilled employees by 17%, with the banking services and insurance industry leading the growth. As a result, companies risk losing their highly skilled talent to other competitors in the same sector. KPMG India, which has roughly 8000 employees, had to revisit its engagement policies, performance management processes, and hiring strategies to prevent its key employees from joining their rivals.

The limitation of the bell curve has been widely discussed by a number of HR experts, citing the internal competitive nature and widespread disengagement. KPMG knew that in order to remain competitive, it had to do away with the performance ratings of all partners and employees, including the system of bell curving its workers

Instead of spending thousands of hours each year on the administration of ratings, the focus would shift to more frequent and constructive “in-the-moment” performance conversations with the goal to provide more specific, timely and meaningful feedback. Pillay went on to say:

"We want to encourage a collaborative work culture and take away the internal competition between employees, thus encouraging qualitative discussions on performance," [...] "We do believe this will help support and drive a high performance culture."

The new practice

The new performance practice will include further employee training and development, and incentives for employees to ask for and take full advantage of feedback, including feedback from their peers. KPMG realised that, when employees receive feedback on a regular basis it leads to higher employee engagement, and lowers the risk of employees leaving.

Success today requires more than just focusing on making a profit. Companies need to look further than the bottom line and engage with employees to get the most out of their productivity. When employees are not actively engaged, it has detrimental effects on the organisation. Tower Perrins found a direct correlation between employee engagement and business success. Companies with low engagement scores earn an operating income of 32.7 percent less than companies with engaged employees. A thirty year study conducted in 2012, found that companies with enthusiastic employees consistently outproduce and outperform their less satisfied counterparts. The engagement process is, in essence a partnership, whereby employees and leaders must mutually engage to grow the business.

How Impraise can help

Today’s work environment creates the need for a much more agile process of employee performance management. Having communication channels open and as transparent as possible, gives way to a transparent work culture, in which the employee feels heard and appreciated. Impraise, a company that focuses on bringing the employee focus back to companies, has created a platform whereby employees can give and receive feedback on a continuous basis. What's more, this platform allows organisations to easily understand where their key employees strengths are and where weak employees may need training.

Knowing how the bell curve rating scale can create a disillusioned workforce, KPMG hope that implementing a new continuous feedback system will halt any employees looking for greener pastures. With Impraise, users are enabled to provide in-depth feedback on immediate performance to each other.

Whether between an employee and an immediate team leader or between co-workers, feedback cycles are open and uninhibited. The feedback gathered over the course of a year can be used to provide analytics on the learning and development process of a specific employee. This enables managers to quantitatively see how much an employee has improved over time. The data can then be used to give compensation-related decisions, which are much more precise and fair.

The next challenge that KPMG and the world of performance management face is factoring in many facets of someone’s performance in a way that is understandable and scalable. According to Impraise, big data should not be regarded as a way to oversimplify someone’s performance. Instead, providing the richest possible snapshot of someone’s performance should be the next frontier.

Photo credit: waterman75