As the previous company I co-founded – GlobalLogic got relatively big (>1,000 employees), we instituted an annual performance review process. We had hired an HR head from the industry and this was the natural thing to do. I remember having a very uneasy feeling while we were discussing it but I went with it. It was a complete disaster. Until before the annual performance review, we are all buddies. We liked to hang out. However, right after the reviews, pretty much everybody was unhappy. The top 15% performers felt they were so outstanding; they should have got better raises. The next 20% couldn’t really believe that they are not top 15% and lamented about that. The next 50% – the thick middle, were extremely unhappy since they thought they were the bottom of the pile and just not important to the company. In reality, they were all good performers and crucial to the company. The bottom 10% hung on for dear jobs till we put them in Performance Improvement Plans and took years to let them go.
This became an annual nightmare thereafter year after year. It bred mediocrity, fiefdom, haves vs. have not’s, difficulties in budget allocations and rate increases, I can keep going. Before I left in 09, I had tried to start a major reform process, but I couldn’t see it to completion.
Thank you Accenture for abolishing this practice. You are big and well known and hopefully the new breed of Performance strategists that you will grow will come up with much better systems that will percolate through the industry. The curtains of gloom will lift; the golden sparrow will sing its sweet melodies.
I am certain that Accenture, you have thought out plans of what you will replace it with, but here are 2 key thoughts that I will put in anyway.
- Salary is a function of business value delivered (results) and market dynamics. Just the way stock prices go up and down without seeming rational, salaries are like that. There shouldn’t be any concept of automatic raises and it has to be solved bottom up rather than top-down.
- Performance Appraisal should be de-linked with salary and looked at as a growth and long-term promotion mechanism. It’s a way to identify people who follow the right way and nudge the people in that direction. It should happen informally and formally through the year, driven by self and to some extent by manager.
In 2×2 parlance, it’s about producing the right results the right way. The right results deliver salaries and bonus and the right way delivers long-term growth path in the company.
I am watching this space with interest.