Time to Ditch Annual Performance Reviews?

"When it comes to workplace events that produce resentment and anxiety, few score higher than the big annual performance review. Calls to end this time-consuming and often unproductive practice have gone unheeded — until now. Recently, Adobe, Kelly Services, GE, Deloitte and PwC have ended them, and the rippling out to smaller firms and other sectors appears to be underway. To which many say: good riddance."

"Other companies are rethinking their practices, too. Accenture’s 330,000 employees are undergoing what CEO Pierre Nanterme has called a “massive revolution” in which timely, personalized employee feedback is replacing annual evaluations and rankings. Whether you agree or disagree with UCLA researcher Samuel Culbert’s assessment that performance reviews are “a curse on corporate America,” it’s nonetheless clear that they’re falling out of favor."

"Companies such as Juniper and Adobe stopped giving people a one-to-five rating or evaluating employees on a “performance curve,” also known as the “forced ranking” approach. They were still differentiating performance in various ways, and still using a pay-for-performance approach, just not through a simple rating system. 

By early 2015, around 30 large companies, representing over 1.5 million employees, were following a similar path. No longer defining performance by a single number, these companies were emphasizing ongoing, quality conversations between managers and their teams."

"To my way of thinking, a one-side-accountable, boss-administered review is little more than a dysfunctional pretense. It's a negative to corporate performance, an obstacle to straight-talk relationships, and a prime cause of low morale at work. Even the mere knowledge that such an event will take place damages daily communications and teamwork."

"Once-a-year goals are too “batched” for a real-time world, and conversations about year-end ratings are generally less valuable than conversations conducted in the moment about actual performance. 

But the need for change didn’t crystallize until we decided to count things. Specifically, we tallied the number of hours the organization was spending on performance management—and found that completing the forms, holding the meetings, and creating the ratings consumed close to 2 million hours a year. As we studied how those hours were spent, we realized that many of them were eaten up by leaders’ discussions behind closed doors about the outcomes of the process. 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."

Buckingham, Marcus and Goodall, Ashley. (2015). Reinventing Performance Management. Harvard Business Review. Retrieved on March 8, 2017 from https://hbr.org/2015/04/reinventing-performance-management

Duggan, Kris. (2015). Why The Annual Performance Review Is Going Extinct. The Future of Work. Retrieved on March 8. 2017 from  https://www.fastcompany.com/3052135/the-future-of-work/why-the-annual-performance-review-is-going-extinct

Rock, David and Jones, Beth. (2015). Why More and More Companies Are Ditching Performance Ratings. Harvard Business Review. Retrieved on March 8, 2017 from https://hbr.org/2015/09/why-more-and-more-companies-are-ditching-performance-ratings

The End of Annual Performance Reviews: Are the Alternatives Any Better?. (2016). Knowledge@Wharton. Retrieved on March 8. 2017 from http://knowledge.wharton.upenn.edu/article/the-end-of-annual-performance-reviews/

Want to Raise Productivity? Let Employees Work From Home

"The results we saw at Ctrip blew me away. Ctrip was thinking that it could save money on space and furniture if people worked from home and that the savings would outweigh the productivity hit it would take when employees left the discipline of the office environment. Instead, we found that people working from home completed 13.5% more calls than the staff in the office did—meaning that Ctrip got almost an extra workday a week out of them. They also quit at half the rate of people in the office—way beyond what we anticipated. And predictably, at-home workers reported much higher job satisfaction."

"One-third of the productivity increase, we think, was due to having a quieter environment, which makes it easier to process calls. At home people don’t experience what we call the “cake in the break room” effect. Offices are actually incredibly distracting places. The other two-thirds can be attributed to the fact that the people at home worked more hours. They started earlier, took shorter breaks, and worked until the end of the day. They had no commute. They didn’t run errands at lunch. Sick days for employees working from home plummeted. Search “working remotely” on the web, and everything that comes up will be supernegative and say that telecommuters don’t work as hard as people in the office. But actually, it’s quite the opposite."

Bloom, Nicholas. (2014). To Raise Productivity, Let More Employees Work from Home. Harvard Business Review. Retrieved on March 2, 2017 from https://hbr.org/2014/01/to-raise-productivity-let-more-employees-work-from-home

Making Remote Work Work

"Hire the right people. Having remote team members requires that we hire people who can deliver technically while working independently. At the same time, the fact that we do not have to maintain physical offices leaves us room to pay higher wages than others and attract top talent."

"Focus on outcomes. After spending as much effort as we do in bringing the right people into the firm, it only makes sense to set them free. The first and most important step in doing this is to set expectations. We tell our new teammates exactly what outcomes matter to us, and reward them for achieving and exceeding those outcomes."

"Help employees choose, and be responsible for, their own adventure. By determining the right floor and not restricting the ceiling, and by paying for value (once they exceed their outcome, consultants are paid a commission proportional to the additional work they deliver), we put the choice of how hard to work in a consultant’s hands."

"Outside of client work, we allow teammates to invest in other areas, and even provide them resources when required. For instance, we often announce an innovation budget and invite applications to pilot ideas. As a result, our teammates voluntarily design new practice areas, conduct cutting-edge leadership research, and write books. We’ve noticed that our team members adopt a strong sense of commitment to the responsibilities they take on and do not abandon them when the going gets tough. They feel true ownership. Our leadership team ensures that this balance between choice and commitment, and the value of owning the outcome, is a respected, celebrated cultural attribute."

"Centralize thoughtfully. We focus on letting our team members be the “CEOs” of their professional lives, but we have learned over time that not every aspect of choice adds value. For example, we previously enabled consultants to choose their own health care plan providers, and even set up their home office the way they wanted, but have since moved to a company plan and standard IT package to launch our team. This makes their lives easier without taking away the choices that truly matter. While there are more instances of such centralization, our leadership team maintains a very high bar for such decisions because too much control can erode mutual trust."

Street, Randy, Wang, Dina, and Tetali, Vamsi. (2017). What 20 years as a Remote Organization Has Taught Us About Managing Remote Teams. Harvard Business Review. Retrieved on February 27, 2017 from https://hbr.org/2017/02/what-20-years-as-a-remote-organization-has-taught-us-about-managing-remote-teams

Learning to Learn

"The ability to learn faster than your competitors may be the only sustainable competitive advantage."

"Learning organizations are skilled at five main activities: systematic problem solving, experimentation with new approaches, learning from their own experience and past history, learning from the experiences and best practices of others, and transferring knowledge quickly and efficiently throughout the organization."

"Learning organizations are not built overnight. Most successful examples are the products of carefully cultivated attitudes, commitments, and management processes that have accrued slowly and steadily over time. Still, some changes can be made immediately. Any company that wishes to become a learning organization can begin by taking a few simple steps.

The first step is to foster an environment that is conducive to learning. There must be time for reflection and analysis, to think about strategic plans, dissect customer needs, assess current work systems, and invent new products. Learning is difficult when employees are harried or rushed; it tends to be driven out by the pressures of the moment. Only if top management explicitly frees up employees’ time for the purpose does learning occur with any frequency. That time will be doubly productive if employees possess the skills to use it wisely. Training in brainstorming, problem solving, evaluating experiments, and other core learning skills is therefore essential."

de Geus, Arie P. (1988). Planning as Learning. Harvard Business Review. Retrieved on February 19, 2017 from https://hbr.org/1988/03/planning-as-learning

Garvin, David A. (1993). Building a Learning Organization. Harvard Business Review. Retrieved on February 19, 2017 from https://hbr.org/1993/07/building-a-learning-organization

Knowledge-based View (KBV) of the Firm

The essential elements of the KBV can be summarized as follows:

• Knowledge is the most important resource and factor of production.
• Performance differences between firms exist because of differences in firms’ stock of knowledge and capabilities in using and developing knowledge.
• Organizations exist to create, transfer, and transform knowledge into competitive advantage.
• Knowledge is related to humans.
• Individuals are intentional and intelligent agents.
• Humans are bounded by cognitive limitations; how much and what they can know have cognitive limits, and therefore they have to specialize.
• Especially in complex issues which cannot be understood by any single individual, there is a need for integration and coordination of knowledge.
• Cognition and action are related: knowledge is both acquired by and demonstrated in action.
• Knowledge is demonstrated in many forms and located on many levels: it is situated in the minds and bodies of individuals, embedded in organizational routines and processes, as well as codified in databases and books etc.
• Some knowledge can be externalized into explicit form, while some knowledge will always remain tacit.
• The form of knowledge influences how it can be leveraged and transferred. 
• Shared tacit knowledge, demonstrated for example in capabilities, is the most important type of knowledge from the value creation point of view.
• Knowledge cannot be fully managed in the same sense as other types of resources; its management more resembles the creation of suitable contexts and cultivation.
• Knowledge is dynamic: it is continuously re-interpreted and modified, and related to learning and change. 

Blomqvist, Kirsimarja and Kianto, Aino. (2015).  Knowledge-based View of the Firm - Theoretical Notions and Implications for Management. Retrieved on February 1, 2017 from http://www.lut.fi/documents/10633/109602/tijo-valintakoeartikkeli-2015.pdf