Reinventing Performance Management: A Deloitte Case Study

Introduction & Background

It’s no secret that the age-old practice of yearly performance reviews is on its way out. From
astounding statistics correlating the traditional yearly review to less-than-positive results for
major companies, it’s safe to say that yearly performance reviews are largely becoming defunct.
But how should it be replaced? Surely, we still need a system to both measure the performance
of our teams and create a roadmap of growth and engagement for them, right? So, what other
models are out there?
Deloitte conducted a survey and found out that 58% employees felt that their system wasn’t
driving performance or engagement as the way it meant to. To address the problem in their own
company, Deloitte started by looking at the time spent on performance reviews, like many
companies it was setting the objectives at the beginning of the year, rating people after every
project, and convening at every year’s end to compare ratings and boil every employees
contribution down into a single performance number. That whole process took a lot of time, the
grand total was 200 million hours a year, that includes completing the forms of 65000 employees
and holding countless meetings, and most of that is the outcome of the process instead of
performance.
There was another problem, Deloitte’s needs were evolving so quickly that the annual goals
couldn’t keep up to them. Managers found that real time discussions were much more valuable.
Their other challenge was inconsistency in skill ratings from one reviewer to another. In 2000,
study showed that ratings reveal more about the people who give them then the people who are
rated. This made the executives at Deloitte question the value of ratings method all together.
They wanted a new system which will give more consistent and accurate ratings, generate timely
tailored discussions and get everyone focused on fueling future performance instead of assessing
the past.

Case Analysis: What Sets High Performance Apart?

They studied what things separate a high and low performing teams and found out three things
matter the most.
- Coworkers’ commitment to quality of work
- An inspiring mission
- Chance to use one’s strength everyday
Among all, the chance to use one’s strength was the most powerful across the organization.
Deloitte’s executives realized they needed to spend more time helping people use their strengths.
To do so effectively they need to collect better data on performance. With that in mind they sat
down to find three main goals to their new system.

1. Reward good performance (tie it to pay): Allow the organization to award high
performance with raises and bonuses.
2. See performance clearly: Most performance management systems reward high
performance, but to do a better job of rewarding performance one should see the
performance clearly. Executives realized that the person with the best view was an
employee’s immediate team leader. So they stopped asking multiple people for feedback
on each employee, input from the team leader was enough.
Deloitte was still concerned with the idiosyncratic ways that people judge others, so it
stopped asking them to assess skills all together instead it focused on something that
people tend to judge much more accurately their own feelings and intentions towards an
employee.

Now after every project the firm essentially surveys its leaders about what action the will
take with each team member. Deloitte does this by having the leaders’ response for four
future focus statements

1. They were asked how much they agree with the statement “I would award this person
with highest possible increase and bonus.” This captures views of the employee’s
overall performance and value.
2. Next leader say how much they agree with the statement “I would always want this
person on my team.” This gets out of an employee’s ability to work with others.
3. Then leaders answer Yes/No for “This person is at risk for low performance”.
4. And a Yes/No for “This person is ready for promotion today.”

The responses to these statements provide a snapshot of employee’s performance at a certain

point in time. Each snapshot is weighted according to the project’s duration. The snapshot
data becomes a starting point for decisions about salary increases and bonuses. Deloitte
also factors in how challenging assignments are and the employee’s other contribution for
the organization. Deloitte uses the snapshot data to help leaders make development and
succession plans and study performance patterns.

Fig. 1
 For example, above Fig. 1 shows a graph of a small team. Three people are flagged as
ready for promotion today and one is thought to be at risk of low performance. One
Deloitte unit put one thousand employee on a grid like this, color coding the data by job
level and they set up the grid so when you click on the dot you can see the details of that
person’s performance snapshot. It can be seen that this gives a manager a lot of useful
and important information.

Fig. 2
In contrast here is an example of a 30000 foot view, as shown in Fig. 2, you get with
forced ranking systems that all familiar bell curve, it’s not nearly as helpful. Here
everyone is reduced to one number, a 1,2,3,4 or 5 and often workers are forced fit in the
categories to meet arbitrary quarters for each rankings.

3. Fuel performance: Deloitte wanted to do more than just measure and reward
performance, it wanted to improve performance. For ideas on how to reach that final
objective the firm looked at the practices of its best team leaders. The best leaders have
regular check-ins with team members about current projects. So, Deloitte wanted to
decide this weakly conversations across the organization. Leaders use them to clarify to
what’s expected, what great work looks like, and how each person can excel. The check-
ins are not considered additional work, they are the team leaders work.
Why make the check-ins weekly? So their priorities don’t become vague and merely
aspirational and so that coaching stays focused on the near term not on past performance.
Deloitte research shows a direct correlation between the frequency of conversations and
the engagement of team members. Because leaders have many demands on their time,
team members are responsible for initiating the check-ins. To help get conversations
rolling, Deloitte has created a self-assessment tool that allows employees to explore their
strengths and present them to their leaders.

To recap Deloitte believes that the purpose of the performance management system is to see
performance accurately, to reward it accordingly and to inspire even better performance in the
future.
The Purpose of Performance Management

To support these goals a firm has created new evaluations and coaching rituals by using frequent
immediate conversations about performance. Deloitte has shifted from the focus on the past to
the focus on the future.
The new system is radical because it does away with some long cherished elements of
performance management like:

- Cascading goals
- Annual reviews
- 360 degree feedback (also known as multi-rater feedback, multi-source feedback, or
multi source assessment) is a process through which feedback from an employee's
subordinates, colleagues, and supervisor(s), as well as a self-evaluation by the employee
themselves is gathered.

Instead, it focuses on speed, agility and constant learning.

Deloitte’s new approach overcomes one of the bigger problems of traditional rating systems,
they are one dimensional. To understand performance we need to look at many factors, we want
our organizations to know us, and we want to know ourselves at work, and that information can’t
be compressed into a single number. A question is not ‘what is the simplest view of you’, it is
‘what is the richest view’.

Recommendations

In near future, workers would want to work as independent contractors and not to be tied to one
workplace. Deloitte should begin looking past implementation and move towards optimization.
This will require shifts beyond “what is the process?” to “how do I optimize my role inside the
model?” How do I position team members, team leaders, coaches, and business leaders to take
best advantage of the tools included in this model to do their jobs better? Optimization puts a
focus on creating a new generation, with a new strengths mindset, and new skills and insights to
fuel the performance and engagement of their people and teams.
Finally, we must realize the operational effects of this current EPM system adopted by Deloitte.
This work is not just changing how people and their leaders operate, but also how HR enables
them. The integrated nature of this design is breaking down silos between previously distinct HR
disciplines of performance management, talent management, leadership development, and
employee engagement by generating a new set of analytics that we can consume about our
people and teams that integrates them all. This work demands sophistication, but can also create
amazing opportunity to deliver ongoing insights that will change the way the leaders think about
leadership.
References

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utm_campaign=Socialflow&utm_source=Socialflow&utm_medium=Tweet
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6. https://en.wikipedia.org/wiki/360-degree_feedback