If you are a manager, a director or anyone leading a team, you know the struggle. How can you make sure that you’re using your team members’ full potential, making the most out of their work time, and empowering them to be their very best?

These questions are especially applicable to remote companies or organizations offering “work-from-home” policies as one of their perks. I work for Groove, which is a 100% remote company, and I often get asked by other leaders “how do I measure the performance of my remote team?”

Just a few years ago, working from home seemed out of reach for many industries. Nowadays, 70% of all employees telecommute at least once per week, and 53% work remotely at least half the week. These numbers will continue to grow.

So how is that 72% of companies are still using Annual Performance Reviews? The way we work is obviously rapidly evolving so why is it that the way we manage the performance of our teams is not?

Through my career I have experienced large companies such as Google moving away from annual performance reviews to bi-annual, and have led smaller companies such as SimScale or Groove in adopting more modern approaches to performance management, specifically Agile Performance Management.

In this blog post, that is based on the presentation I delivered at the Support Driven Expo Europe 2019 in Belgrade, I will describe how by ditching Annual Performance Reviews and replacing them with Agile Performance Management, companies can make their teams better, faster and stronger. You can view my full slide deck here.

What’s wrong with Annual Performance Reviews?

The Majority of us have been through them, but I haven’t met anyone who actually looks forward to them or genuinely thinks that they are useful. Not only are annual performance reviews stressful for both the managers and the employees but they are also extremely ineffective.

According to the Society for Human Resource Management, “95% of employees are dissatisfied with the process, and as the People IQ survey shows, “87 percent of both managers and employees believe annual reviews are ineffective and not useful.” And the worst is, that the Adobe study showed that they have no effect on how people do their job.

In my first few years at Google, I had a chance to experience annual performance reviews. I remember the hours spent on writing feedback for my team mates. We could choose 3-5 peers who worked with us closely throughout the year to evaluate our performance. Imagine a person, like me, working on different 20% projects with different team members each quarter. At the end of the year I had a least 10-15 people to write detailed feedback for, and I wasn’t even managing anyone back then! This took at least 2 days of my time.

Later on, Google moved away from the annual reviews to bi-annual, and reduced the amount of required written feedback. This has substantially improved the process.

Why do 72% of companies keep annual reviews?

It’s mainly because they have always done them and performance reviews are accepted as a norm in the corporate culture.

Annual performance reviews were built in the 20th century for large organizations to help them with scaling growth. In the meantime, the rate of progress, and the speed with which technology and the markets are changing, have made yearly reviews useless. Using feedback once or twice a year to adjust the course of action is just not frequent enough.

Luckily, there is a better approach that aligns well with the pace of changes in today’s organizations and with the growing telecommuting trend.

What is Agile Performance Management?

Agile Performance Management, also known as Continuous Performance Management (CPM) is a set of per­for­mance man­age­ment processes­ that take place through­out the year on an ongo­ing basis. These process­es include near-term objec­tive set­ting, reg­u­lar one-to-ones , real-time feed­back, and regular recognition.

Annual Performance Review Agile Performance Management
Review-centric Goal-centric
Annual Feedback Ongoing Feedback
Directing Coaching
Time-consuming Effortless Evaluations
Weakness based Strength based
Prone to bias Fact driven
Rear-facing Forward-looking

Description: Traditional approach to performance management vs CPM

CPM increases alignment between employees’ personal goals and desired company outcomes, because instead of focusing on reviewing past results it focuses on the goals and how they can be achieved. By being forward-looking it empowers change and improvement. The way the feedback is delivered in CPM makes it more fact-driven and timely, and as such less prone to bias. Instead of focusing on “what went wrong” aka weakness the focus shifts toward strength and how to get the most out of it.

One of the best examples of how this can impact company’s results it the one from Adobe. In 2012, the Senior Vice President of People Resources at Adobe, Donna Morris, was feeling frustrated with annual performance reviews. The process was so complex, bureaucratic, and paperwork-heavy that it ate up thousands of hours of managers’ time. It also created barriers to teamwork and innovation, since the way it worked left many employees feeling undervalued. She suggested ditching annual reviews and replacing them with so called “check-ins”. Since the change, Adobe has seen a 30% decrease in the number of employees quitting. Most importantly, Adobe was able to save 80,000 hours spent by managers annually on reviews and redeploy them to more important business priorities.

When I joined SimScale, we didn’t have annual reviews or CPM processes in place. I introduced OKRs and regular 1:1s first for marketing and then later on helped to introduce them for the other departments. CPM has helped us to keep an ongoing quarterly growth and supported the teams in achieving ambitious goals. Within the marketing team, it has for example, enabled us to grow organic traffic by 2x.

I also mentioned before my experience with annual reviews at Google. And although Google decided to keep their bi-annual performance reviews, they were always using them on top of CPM processes that are deeply rooted within their company culture. And these processes, not the bi-annual performance reviews, are the ones that help Google reach their 10x goals which they are known for.

CPM processes

So let’s deep-dive into the CPM processes used by companies such as Google or Adobe:

Goals / OKRs

According to the 2016 Review by Deloitte, “No single factor has more impact on employee engagement than clearly defined goals that are written down and shared freely”. In CPM, setting up goals that are aligned throughout the organization and have clear deadlines and milestones is extremely important.

This is where Objectives and Key Results can help, OKRs are a collaborative goal-setting framework for companies, teams, and individuals. OKRs have been used by companies such as Google, Intel, Zendesk, Adobe, Twitter, Dropbox, and some of the other world’s top-performing companies to successfully grow their business and achieve ambitious goals.

OKRs help to:

    • Plan what individuals within the company are going to produce
    • Track individual and team progress vs. plan
    • Coordinate priorities and milestones between people and teams.
    • Improve focus on the most important goals reducing distractions by urgent but less important goals.
    • Bring transparency to the company. Everyone can see what others are working on, what drives more collaboration and better performance.
    • Make achieving ambitious / moonshot-style goals possible by breaking them down

When creating OKRs I encourage you to remember a simple rule:

  • Objectives = “Whats”
  • Key Results = ”Hows”

It means that objectives should express goals and intents. Make sure that they are tangible or measurable. At the end of the quarter is should be obvious to anyone whether and objective has been achieved.

Key results should express measurable milestones which, if achieved, will support achieving the objective. Make sure that they describe outcomes and not activities. A simple check is to see If your KRs include words like “consult,” “help,” “analyze,” or “participate,”. If yes, then they describe activities. Instead, describe the end-user impact of these activities.

Let’s look at an example to make it a bit more clear.

As we can see in example 1, objective “Improve customer satisfaction” is not specific enough. What will “improvement” look like and how will it be measured? By when is the improvement expected?

The supporting KRs, in this example, describe activities instead of end-results. For example, “analyze CSat survey responses”. It’s not clear what the outcome of the analysis should be. Also, “conduct weekly customer interviews to assess satisfaction” – does it mean 1 or 2 weekly interviews? What should be the outcome of these interviews and how will they help do drive improved customer satisfaction?

Now, let’s see how we could improve this OKR.

Objective “Assess overall customer satisfaction by end of Q2 2019” is a bit more specific. We know by when we should achieve what. The KRs are also expressed as measurable milestones which describe outcomes instead of activities. “Get 1000 survey responses to annual CSat survey” – we have a very specific result that is expected from us. KR3: “Develop and present an action plan with 10 improvements for increasing customer satisfaction by 20% over the next 12 months” states clearly how many improvements suggestions are expected and how these improvements should impact the results within a specified time-frame.

Properly defined OKRs should be ambitious and aspirational. This is the reason why at Google 70%-100% achievement is graded as green. The company usually aims towards a 70%-80% achievement on their OKRs. The assumption is that If the team consistently hits all of them (100%) then it means that they are probably not setting their OKRs aggressively enough.

OKRs grading at Google

CFRs

John Doerr, the author of “Measure what matters” has combined the other 3 processes that are part of CPM into one instrument called CFR. CFR stands for:

  • Conversations: an authentics, open, and regular exchange between manager and contributor, aimed at driving performance. Usually in a form of a weekly, recurring one-on-one meeting
  • Feedback: Timely and actionable feedback from the manager to evaluate progress and guide future improvement
  • Recognition: Regular recognition of employees’ achievements for contributions of all sizes.

Let’s go into more detail for each.

Conversations / 1:1s

“90 minutes of manager’s time can enhance the quality of his report’s work for two weeks” Andy Groove

That’s why at companies such as Intel (where OKRs were invented) or at Google (where OKRs gained their popularity), one-on-one meetings between managers and their direct reports are mandatory. Effective one-on-ones dig beneath the surface of day-to-day work. They empower mutual teaching and exchange of information, while at the same time help to build stronger trust and bond between the individual contributor and the manager.

  • Five elements of effective conversation between manager and contributor include:
    • Goal setting and reflection
    • Ongoing progress updates
    • Two-way coaching
    • Career growth
    • Lightweight performance reviews

Here is an example one-on-one agenda that includes all of the mentioned elements:

Anna / Tom 1:1 Meeting

Date:

Agenda:

  • OKRs Progress Review:
    • OKRs completion: X%
  • PPPs:
    • Progress: The top 1 thing I have completed last week:
    • Problems: Roadblocks, concerns, things I need help with?:
    • Plans: The top 1 thing I plan to complete by next week:
  • Personal Development (PD):
    • PD skill I’m working on:
    • PD progress / steps I took:
  • Feedback:
    • What I think I did well:
    • What I think I could have done better:
    • What manager thinks I did well or could improve: (Ask!)
    • What I think my manager did well or could improve:

Feedback

Today’s employees want to be empowered and inspired, not told what to do. They want to provide feedback to their managers and they don’t want to wait for a year to receive feedback from their managers. That’s why in organizations following CPM, feedback should be ad hoc, real-time, and multidirectional, an open dialogue between people anywhere in the organization.

Good feedback should be:

  • Receivable: My former manager David, who is the CEO at SimScale, used to call feedback a present. You would receive it and you could either take it or leave it.
  • Actionable: It should make it easier for the receiving person to act upon it. That’s why I liked it that at Google we were not using a word “weakness” but rather an “area for development”.
  • Balanced: Don’t throw a wave of negativity on the other person. Try to balance it out and explain how by acting upon the feedback things could improve.

I use a feedback preparation grid for preparing to share feedback with a teammate or manager. It consists of 4 elements:

  • Micro-yes means getting the buy-in from the person you want to give the feedback to. For example you could say something like : “Do you have 5 minutes to discuss the meeting we just had?”
  • Data point is a reminder for you to focus on the specific behavior. Make sure not to go in the direction of interpretations such as “I think you don’t like me because…”. Instead describe the specific situation eg “I noticed that during our meeting when I proposed an idea, you didn’t let me finish and immediately said that it will never work”
  • Impact statement helps you to convey your message by showing why this matters and how their behavior affects others. Eg. I mention it because I feel hesitant to share my ideas with you now and I don’t feel like you are listening to me.
  • Question serves the purpose of checking with the other person how they see it and helps to agree on an action plan how it can improve. Eg. What would be the best way in your opinion for everyone to get a chance to share their ideas during our meetings?

Recognition

The last part of CFR, recognition is probably the most underestimated component of the CFR. Continuous recognition should be an important part of every company’s culture. Why? Because it is proven to increase employee’s happiness, trust, and retention.

There are many ways how you can easily introduce recognition within your organization. It doesn’t have to be anything complex. For example at Groove, we celebrate weekly wins during our Friday huddles. We give a shout out to individual accomplishments both the work-related ones and personal. We also encourage the team to highlight outstanding players in our quarterly survey.

During my time at Google, I really liked their “peer bonus” and “kudos” recognition system. It allowed employees to recognize their peers for going an extra mile. For example if your colleague took the time to help you with your project you could nominate them for a peer bonus and they would get $300 bonus with their next payslip.

To summarize, I would like to assign 4 mini missions to you. They will help to make sure that you are implementing the described strategies into your life. You will have one week to complete them. Ready? Go!

  • Mini Mission 1: Draft an objective and 3 accompanying key results for your team
  • Mini Mission 2: Have a conversation with your direct reports or with your manager about the ideal one-on-one. Try to build an agenda template together.
  • Mini Mission 3: Ask at least one person for feedback this week
  • Mini Mission 4: Give a shout out to your peer, manager or direct report

About Agata: In September 2018, Agata left her VP of Marketing role at SimScale to join Groove as their Director of Growth. Prior to her career in marketing, she spent over 6 years at Google where she started as an Account Strategist and Community Manager on the Google AdWords team and worked her way up to leading global teams responsible for the growth of the 1:Many support channels.

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