The Trouble with 360 (and Other Forms of Performance Review)

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 - Measurement

If you’ve ever wondered if your current methodology for managing performance review is effective, you are not alone. More than half of the executives surveyed by Deloitte believed that their current approach to performance management was lacking. When Deloitte started digging into the question at its own organization, it turned up some truths disturbing enough to launch an initiative to reinvent performance management at the company, outlined in the current issue of Harvard Business Review.1

At the outset, Deloitte counted the hours it spent setting objectives for the company’s 65,000-plus employees and then assessing whether they met them and discovered that the process consumed nearly 2 million hours annually, many of which were spent behind closed doors as managers hashed out individual employee performance ratings.

“We wondered if we could somehow shift our investment of time from talking to ourselves about ratings to talking to our people about their performance and careers—from a focus on the past to a focus on the future,” the authors wrote.

The organization also spent time researching the process of performance assessment and discovered research that indicated that the exercise was a better measure of the assessor’s “peculiarities of perception” rather than an individual’s ability to perform.

In assessing its own performance, Deloitte learned that the strongest teams hold themselves to high standards each day.

“All this evidence helped bring into focus the problem we were trying to solve with our new design,” the authors wrote. “We wanted to spend more time helping our people use their strengths—in teams characterized by great clarity of purpose and expectations—and we wanted a quick way to collect reliable and differentiated performance data. With this in mind, we set to work.”

Three objectives

Deloitte identified three objectives for its redesigned system. The first was straightforward and something most systems, including its previous one, do: Recognize performance through variable compensation.

The second was trickier, and that was the ability to see each person’s performance clearly—rather than through the subjective filter of the employee’s manager—in an efficient way. Understanding that people are far more consistent when rating their own feelings and intentions than when rating other people’s skills, Deloitte came up with a unique approach: It would ask team leaders about how the manager intended to use that person moving forward at the end of each project.

To accomplish this, managers are asked to respond to four different statements using a five-point scale from “strongly agree” to “strongly disagree” given what they know about the person’s performance:

  • I would award this person the highest possible compensation.
  • I would always want him or her on my team.
  • This person is at risk for low performance.
  • This person is ready for promotion today.

In shifting the emphasis from what the manager thinks about an employee to what they would do with the employee, Deloitte is producing a body of data that can be a starting point for discussions around everything from succession planning, to development paths, performance-pattern analysis and compensation and promotions. For its relative speed and in-the-moment aspect, the technique is called performance snapshot.

The third objective was to add a prospective intention to a process that is typically very much retrospective, and that is the ability to improve performance in real time, or fuel performance. In its research, the company discovered that the best team leaders check in often with team members, so Deloitte requires the manager to check in with each team member once a week, initiated by the team member, a frequency selected to enable managers to help people do their best work in the near future.

“To support both people in these conversations, our system will allow individual members to understand and explore their strengths using a self-assessment tool and then to present those strengths to their teammates, their team leader, and the rest of the organization,” the authors explain.

The reasons for this is the company’s recognition that people’s individual strengths and their willingness exercise them are what drive performance and deserve to be central; and the added recognition that because people are consistently interested in themselves, a system designed to explore what is best about them is likely to generate frequent use.

The final hurdle

With its new