Performance Reviews are Getting a Makeover in Many Large Companies: Is it Time for Law Firms to Follow Suit?

Is your firm’s performance management system helping to achieve your organisation’s goals and priorities? Or is it creating anxiety and fostering disengagement? Many companies have determined that in order to better manage performance and match the heightened pace and changing demographics of the workplace, they may need to overhaul their performance management systems.

Ah, the annual performance review, a longstanding subject of controversy and anxiety. In recent years, criticism of forced rankings and annual reviews has escalated, with reports that not only is it cumbersome, time consuming, and expensive for companies to administer, but also that it may actually be counterproductive in that it can inhibit collaboration and damage morale. Some neuroscientists claim performance reviews and associated rankings trigger a “fight or flight” response in employees, preventing them from truly hearing or reflecting on the feedback. In addition, the business world has sped up to the extent that nothing happens on an annual cycle anymore, there is a need to develop people faster, and waiting a year to provide feedback designed to improve an employee’s performance now is “too little, too late.” This is especially true for Millennials who desire ongoing feedback and coaching to help them advance in their careers.

Detractors of the annual performance review will be pleased to learn that over 70 percent of companies, including Accenture, Deloitte, Gap, Adobe, and the company most known for its “rank and yank” forced rankings system, GE, are reconsidering or have overhauled their performance review and rating systems to address many of these criticisms and concerns. Now that these and other large companies have moved towards ongoing feedback, conversations, and coaching in lieu of the annual performance review, more companies are expected to follow in their wake.

Although an informal survey of large law firms didn’t indicate that law firms are following suit in a big way yet by ditching annual reviews and rankings, there appears to be some movement in that direction, and many firms are encouraging more frequent check-ins with employees, and providing feedback “as it happens,” as opposed to holding it for an annual review. Salina Hanson, Head of Talent Development at Morrison & Foerster, reports:

“We are starting our path of transforming performance management by laying the foundation of coaching as a critical skill. We are training every manager in the firm on how to have a performance coaching conversation. Building this competency into our culture will be essential for evolving our current performance management process.”

A goal common to many of the new evaluation and feedback systems is to use the tool to foster teamwork and collaboration rather than contribute to the zero-sum competition that was believed to be a byproduct of the stacked rankings type of system of the past. Goal-oriented teamwork and collaboration have become increasingly important in the workplace due to the increase in project-based work requiring teams to collaborate on tight deadlines across geographies and time zones. In addition, technology has enabled real-time feedback in every aspect of our lives, from rating Uber drivers to reviewing restaurants via Yelp. Workers today are comfortable interacting with technology in this way, including providing and receiving feedback on a variety of colleagues, not just their immediate supervisors. Companies that have created or adopted apps and other technologies designed to provide real-time feedback assert that these systems enable them to get a more rounded and less biased view of an employee, and assess his or her actual value rather than limiting feedback to the one-dimensional lens of a single manager’s perception.

There is widespread agreement that the human resources function will become more data-driven over time, fueled by feedback tools developed by a growing number of companies. Kanjoya produces a tool called Perception used to understand emotion and intent in email and other workplace communication. BetterWorks, a Silicon Valley start-up, has created a programme that enables employees to post their goals publicly and also to “nudge” or “cheer” their coworkers. Workday has developed a feedback and communication tool called Collaborative Anytime Feedback. These tools are designed to improve efficiency and transparency, in part by regularly measuring the pulse of teams, mirroring fitness trackers and other technology tools that have become a part of our daily lives. Given the trend toward flatter company structures with fewer managers, these technologies can help to leverage management time and resources. The faster the feedback, the more impact it can have on improving performance, and electronic data facilitates immediate feedback.

Of course there are risks and potential dangers associated with relying on real-time apps for feedback, including “feedback fatigue,” or even the potential to use the tool to sabotage other employees, as was reported in a recent New York Times article about Amazon.com. On a related note, a number of companies have started using feedback technology to practice “radical candor,” or “front stabbing” when providing employee feedback. The rationale is that it’s better to create hurt feelings than allow poor performance or projects that don’t get done. Recipients are expected to either defend their actions or change them going forward.

Neuroscientists would argue that an effective performance management system must go further than implementing an app. It requires moving away from a mindset that talent is fixed or innate, and helping employees to develop “self-efficacy” or the belief in one’s abilities to succeed at something. To develop resilient workers with a growth mindset, managers and employees should participate in ongoing conversations that praise effort vs. innate talent, and focus on growth and learning rather than just output. According to researchers at the NeuroLeadership Institute, the fact that social threats and rewards involving status and perceptions of fairness activate intense reaction networks in the brain, explains employee reactions to being assessed on a ratings scale, and points to ways of designing better systems. These researchers recommend that companies replace a ranking system with either structured conversations about employee performance, focused on themes like collaboration or innovation, or guided conversations focused on realistic goals, in order to encourage development of a growth mindset. Reportedly, after companies removed rankings, communication regarding development increased.

Case Studies: GE and Deloitte

GE strongly identified with “rank and yank” ratings in which the lowest 10 percent of the workforce was routinely terminated under Jack Welch’s leadership. It is one of the leaders in the change away from traditional performance reviews and stacked rankings. The company has transitioned from annual reviews to an app called PD@GE, which stands for “performance development at GE.” As noted by Susan Peters, GE’s head of human resources, “The world isn’t really on an annual cycle anymore for anything.” Each employee has near term goals or “priorities,” and managers are expected to have frequent discussions, or “touch points,” on progress toward those goals. Employees can provide or request feedback, even beyond their group or division, using a feature called “insights.” The focus is on coaching and constant improvement, and the app forces users to categorise feedback according to whether the recipient should keep doing something or consider changing something. Despite GE’s transition to the PD@GE app and its commitment to providing more frequent feedback, Peters says that GE “will maintain our culture of meritocracy and differentiation.”

Deloitte is another company which is transforming its performance management system, saying that in spite of the fact that it was spending 2 million hours a year on evaluations, the company realised that the process did not align with the objectives of driving employee engagement and high performance. Management realised the need to move to a nimbler, real-time, and more individualised approach that prioritises direct conversations with employees about their performance and careers. Under the new system, team leaders are expected to check in with each team member once a week to talk about workload and manage priorities. These conversations are often initiated by the team member rather than the team leader. In addition, team members use a self-assessment tool which enables them to explore their strengths and present them to others on their team and in the organisation.

Deloitte distilled employee assessment, called a performance snapshot, down to four future-focused statements, which team leaders make at the end of every project. These are designed to identify what they would do with a team member rather than what they think of that individual.

It seems clear that “more feedback more often” is the trend that is replacing the often dreaded performance review, and technology tools are helping to facilitate that transition. It is important for performance systems to be dynamic in order to reflect changing demographics and what the company wants to achieve. Systems that worked well in the past may grow stale and need to be refreshed or overhauled over time. Is it time for law firms to join the trend and embrace new ways of managing employee performance? Salina Hanson, Senior Firmwide Staff Recruiter at Morrison & Foerster, recommends that law firms considering a move away from rankings and annual performance reviews consider the following:

  • Do your homework and use the research available to design a customised system. Share this data with your firm to get the organisation ready for a change. (Recommended reading: Mindset by Dr. Carol Dweck)
  • Build a strategy for encouraging frequent and effective coaching between a leader and his or her direct reports in your firm. This may require improving the coaching skills of those leading others.
  • Rebrand your performance management system to reflect the outcomes you are looking to achieve.

This article originally appeared in Practice Innovations, a newsletter published by Thomson Reuters that communicates best practices and innovations in law firm information and knowledge management to legal professionals. To subscribe, please visit http://info.legalsolutions.thomsonreuters.com/signup/newsletters/practic....

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Director of Research Services, Morrison & Foerster LLP (San Francisco, CA)