When human capital was plentiful, the focus was on which people to let go, which to keep, and which to reward—and for those purposes, traditional appraisals (with their emphasis on individual accountability) worked pretty well. But when talent was in shorter supply, as it is now, developing people became a greater concern—and organizations had to find new ways of meeting that need.
– Peter Cappelli and Anna Tavis, writing for Harvard Business Review (October 2016)
Too many managers still approach employee talent reviews with a checklist of pluses and minuses to grade employee performance like a school report card. As long as the assessments represent little effort more than that, the reviews waste everyone’s time.
But, the organizations that make lists like Fortune’s 500 or Forbes’ Most Beloved Businesses have reimagined Talent Reviews as a strategic cultural move. In brief, well-assessed talent strengthens and retains the talent.
In the past, business executives met to assess individual talents and their fit for respective positions to determine who would stay and who would go in a layoff. They worked with matrixes, rankings, checklists, and weighted percentages. It was impersonal and margin-driven.
In a talent culture, senior leaders meet periodically to discuss their mutual and inter-disciplinary interests in talent employed and talent needed. They assess and dissect performance criteria to describe the knowledge, skills, abilities, and behaviors of value to the business future. And, they seek to align those values with corporate initiatives and goals.
There’s a temptation to approach this loosely with bias and assumptions, so it takes top leadership to model the integrity necessary to produce workable results. The members must at times reposition a person they otherwise like and admire. Or, they may be called upon to eliminate a talent the business no longer needs or that does not align with strategies in the works.
This is especially true of Critical Roles, the positions which, if empty, would stop the business in its tracks. The most successful businesses are dynamic organisms where the Critical Roles change, evolve, and even disappear as the company moves forward. So, the Talent Review team must identify those roles, assess the role holder, and determine the talent needed to grow into that role.
It’s necessary to understand that Critical Role has no direct connection with a hierarchical position. A gifted lathe operator may be more indispensable than the CFO. The field engineer may be vital to business survival than the HR VP.
Nonetheless, in large, complex, and global organizations, getting this done well challenges strategic thinking. And, meeting that challenge requires the reinvention of Human Resources. General Electric, Netflix, and Cigna started by eliminating individual employee performance assessments.
Using technology – Best Practice at General Electric
The legendary GE CEO Jack Welch insisted on a universal system of employee ranking. An employee’s annual performance evaluation was reduced to a number. After the ranking, GE fired the lowest 10%. Welch drove the system to treat everyone the same. Of course, everyone ranked below the top 10% hated the system.
GE dropped rankings a decade ago. Making a shift in such a complex organization with almost 300,000 employees worldwide proved hugely challenging. Cultural sensitivities and value systems across the globe and business silos present a major hurdle to making any change, let alone a substantive change in employee performance assessment, talent definition, and leadership development.
Overseeing this shift is Susan P. Peters, GE’s Senior Vice President of Human Resources, promoted from Executive VP of Executive Development and Chief Learning Officer. A 34-year veteran at GE, Peres well knows the Welch legacy. In interviews and speeches for HBR, HRE Online, TedMag, Aspen Ideas, and more, Peters has changed and managed much of the cultural transition.
- As a step towards reinventing its talent discovery, assessment, and development, GE introduced PD@GE (Performance Development at GE). Partly as a concession to millennial proclivities and expectations, General Electric commissioned this user-friendly mobile app to assess, manage, and acknowledge employees’ daily work.
A real-time instant communication tool working on any web-accessed platform, PD@GE provides instant and constant communication. Managers can coach, employees can feed up the line, and colleagues can acknowledge colleague achievement.
But, lest that contact becomes just another chat room, users share insights, prioritize tasks, and establish touchpoints. In time, this data will replace the periodic manager-employee formal assessments, making contact immediate and direct, constant and satisfying, and convenient and process-free.
PD@GE continues to roll out to include more personnel, and GE works to revise its compensation system and detach it from the PD. Employees and managers continue to meet annually as part of the EMS (Employee Management System), but those sessions focus on linking demonstrated performance with needed performance goals.
- This more diverse data feeds GE’s identification of Critical Roles. Leaders meet to inventory the number and nature of key jobs. Necessary to deliver business goals, talent at risk, high impact competencies, these define “key.”
Having inventoried the roles, the participating leaders revisit the value of these performance metrics considering current, evolving, and future needs. For example, they may identify CIO as Critical Role, but there is no future in assessing that role as defined by a now aged job description.
- Eschewing the numerical rankings of performance, the Talent Team looks for potential and remains open to redesigning roles to fit the talent.
“Potential” means what it takes to take over today, in the next year, or somewhere in the next three to five years. The Team needs a grasp of the company dynamic and flow. It understands that growth does not happen horizontally. Growth has its own calendar and seasons, and planning for talent succession must align with those rhythms. In this mindset, assessment becomes more fluid, immediate, and relevant.
- GE spends a billion plus dollars annually on employee learning. So, it has the infrastructure to serve the talent identified.
The training culture enables creation of courses and curricula for groups and individuals in anticipation of next level needs. And, this feeds back to the EMS system of goal setting and fulfilment and feeding GE’s leadership talent pipeline.
A report at GE Capital (2012) asserted, “GE is well known for its exhaustive and systematic approach to identifying and cultivating its business leaders. Yet it’s not just the CEO and Chairman whose roles are important to the success of the company.”
To simplify the Talent Team work, they employ a matrix using five growth values:
- External Focus: In tune with customers and the environment, connects with stakeholders, and educated on global issues.
- Clear Thinker: Embraces and adapts to uncertainty, connects strategy to purpose in a way that inspires, uses knowledge and instincts decisively, and meets commitments.
- Imagination & Courage: Generates innovative ideas, takes risks, learns from both success and failure, and challenges bureaucracy.
- Inclusiveness: Welcomes ideas, listens, humbly and respectfully collaborates with respect to individuals and cultures, and drives engagement.
- Expertise: Has domain expertise, continuously develops self and others, while leveraging technology.
In a scholarly article for Sloan Management Review (2012), Gunter Stahl and colleagues wrote, “Although GE executives are probably the most actively headhunted group in the world, HR leaders worry that almost all of those recruited were from the ‘the highly valued 70%’—the group regarded as the backbone of the company—rather than the ‘top 20%’ that represents headhunters’ normal targets. Turnover at GE remains well below the U.S. industrial average, but retaining valued employees at all levels of the organization also is a top priority, and key challenge, for GE.”
GE is several years into its new strategic rollout, and results have not been published.
Culture of expendability – Best Practice at Netflix
Much has been made of the departure of Netflix’s Chief Talent Officer Patty McCord who created the Netflix Culture Document (NCD), innovative and disruptive then and now. The NCD remains so central it has cost Ms. McCord her job after 14 plus years.
Since its start, Netflix has radically affected how the world accesses content in film and television. They have engaged talent that has proven exceptional in its ability to disrupt standard perceptions and operations, not to mention organizational structure.
Its 3,100 full- and part-time employees serve 93-million members across the globe. A consumer-driven concept, the Netflix vision focuses obsessively on its content and delivery systems with an eye open to next generation technology potential.
The Netflix culture only hires A-players and pays them at the top of the market. They base the compensation on what the labor market shows, what a replacement would cost, and what they would pay to retain the person if they had an offer from another employer.
They thrive on an apparently unstructured organizational chart that looks more like a ball team’s play book. Lacking apparent hierarchy, it depends on internal and external collaboration favoring an asymmetrical and improvisational dynamic, what McCord described in the NCD as “Highly aligned, Loosely coupled.” One wonders if there is a breakpoint in that setup if its own market and membership should outgrow its ability to respond. But, they have more than managed their singular success since a slump following 9/11.
According to Patty McCord’s exceptional NCD, Netflix sets metrics for high alignment.
- Clear, specific, and broadly understood goals
- Team focus on goals and strategies, not tactics
- Large investment in management time
And, it describes loose coupling.
- Minimal cross-functional meetings except to get aligned on goals and strategies
- Trust in groups on tactics without preview and approval
- Pro-active leaders reach out with ad hoc coordination and perspective
- Occasional post-mortems on tactics necessary to keeping alignment
These values and metrics are contemporary with the millennial labor market. Coupled with Netflix’s extraordinary record and its definition of new markets and technology, this attracts the best talent.
Vivian Giang, a contributor to FastCompany, credits McCord with articulating the Netflix “pioneering approach to culture, like not needing permission to take time off or its policy of no employee annual reviews, is meant to attract ‘fully formed adults’ who are OK with the business being run like a pro-sports team rather than a family.”
Feisty, outspoken, and prophetic, Parry McCord left Netflix as the result of its own value system. Like players on a pro ball team, sometimes they change positions, and sometimes they get cut.
Netflix doesn’t do performance assessments, and it does not do progressive warnings leading to termination. They set goals, and they terminate those who do not or cannot meet the ever-stretching and morphing goals. Absent satisfaction, Netflix offers honest feedback, a reference, and paid time off to find a job.
Moreover, as Team Reviews determine present and future needs, they terminate employees who, despite contributions, no longer provide resources for new evolving strategies. That’s how Patty McCord worked herself out of work. And, it is a bit reminiscent of the Jack Welch thinking.
Netflix has effectively destroyed administrative Human Resources trusting in its mission, “At Netflix, everyone gets the freedom to do their best work and the responsibility to achieve excellence. We value candor, transparency, and courage. We embrace context and avoid control, seeking insight and understanding to make sound decisions.”
It’s worth mentioning that the company outsources or subcontracts much of its work in inventory, shipping, and handling. In doing so, they relieve themselves of managing base labor skills and cultures. But, given that millennials in technology expect to move on, they may have hit on the cultural mix to maximize talent and performance in their unique sector; it remains to see how scalable it proves.
Connect for Growth – Best Practice at Cigna
CIGNA has 15 million medical customers worldwide. The corporation serves 96,000 healthcare professionals across 12,500 facilities and clinics and 70,000 pharmacies. 39,000 employees contribute to its $38-million in revenues. Cigna is complex and big to its core.
Cigna is also among the major corporations that have dropped traditional employee performance evaluation processes. It does not take much imagination to see how complicated the administration had become. As it did, the employee and employer interest waned, and the process became wasteful, meaningless, and counter-productive.
Laura Garnett, a contributor to Forbes, published an interview with Karen Kocher, Chief Learning Officer at Cigna. According to Kocher, “Historically, Cigna was similar to other companies, where a performance rating was provided in the middle and at the end of a year. We also used to have an annual goal-setting meeting. Now we don’t have any of those components. We have ongoing manager and employee coaching, and we have fluid and flexible goals. It’s much more about engagement and conversation.”
Wanting “to help people connect, grow, and energize our global community to achieve our growth for the future,” Cigna turned away from a process meant to increase organizational performance towards increased and sustained manager-employee coaching.
This represents a shift that favors engagement and conversation, relationship-building and aligned interest and efforts. Kocher says, “We’ve seen managers really embrace the expectations of being a coach. We’ve also seen employees taking more responsibility. They’re setting up conversations and putting together their own goals and soliciting manager support. We’re starting to hear that the employees are taking the initiative to be the co-owner and driving their energy and involvement.”
Karla Shores, Cigna Learning Manager, described their Connect for Growth program to Best Practice Institute as an On Track/Off Track system. Instead of paper-based assessments, employees have conversation “Check-ins” at any time. The Check-ins focus on goals, progress, and growth. Kocher and Shores both report increased manager and employee engagement.
Mark McGraw, writing for HReonline, gives credit for the Cigna shift to the input of David Rock, CEO of the NeuroLeadership Institute. That leaves managers asking two questions at the end of employee “Check-ins:”
- What insights did you have during the conversation?
- What are your takeaways?
Rock and Kocher made use of the Institute’s SCARF model (Status, Certainty, Autonomy, Relatedness, and Fairness). And, they recognized the historical performance system had routinely diminished employee status.
John Murabito, VP Human Resources (2009 HR Executive of the Year), confirms Cigna’s focus on recruiting individuals “who want to be a part of making a difference.” He sees Connect for Growth as a way to develop and promote an ongoing growth mindset. Interestingly, while the managers may take notes on their Check-in conversations, no results go to HR because of the results, other than occurrence is not a metric.
For Talent Review, Murabito’s General Manager Talent Pool identifies people in terms of readiness: now, mid-term, and long-term. They mark Critical Roles in each department according to future business requirements. They identify high-potential staff whom they will prepare for significant positions. The Cigna University, then, enrolls employees throughout the organization for a continuing learning opportunity that filters and channels talent.
On Human Resources Executive Online, Paul Wagner quoted H. Edward Hanway, the Chairman, and CEO who hired Murabito: “the head of HR is not the sole individual responsible for the attraction, development, and retention of the best people…That’s the role that I have and that our business leaders have, but that John should be viewed as the primary partner in accomplishing that objective.”
And, Murabito has embraced that philosophy saying, “HR must move to be a ‘small and critical’ function, not one that is viewed as bureaucratic and inflexible.”
In the new culture of talent, senior leaders meet periodically instead of once a year with long performance reviews to discuss their mutual and inter-disciplinary interests in talent employed and talent needed. They assess and dissect performance criteria to describe the knowledge, skills, abilities, and behaviors of value to the business future. And, they seek to align those values with corporate initiatives and goals. The new normal for corporations is to treat talent less like a problem and more human. For if you treat talent like a math problem, you may win or you may lose, but if you treat them like human beings, you will always win.