Case Study

How Deloitte reinvented their performance management

Deloitte is the largest professional services network in the world in both revenue and number of professionals. In 2013-14, they earned a record of $34.2 billion USD in revenue.

Old vs. new approach to performance management

Deloitte found that their current approach to performance management, annual 360 feedback, was wasting a shocking 2 million hours per year. Even more significant, they realized that their system wasn't engaging employees at all. Performance levels were also dropping drastically. In an effort to combat this, Deloitte built something much more nimble, real-time, and individualized. They wanted something that was focused on fueling performance in the present rather than assessing it in the past. First, let's look at how Deloitte needed to change. You will find some of your own problems there. You should identify any issues. This is the first step to towards a useful solution. With 360 feedback, goals were set once a year and reviewed once a year. The problem with this approach is that annual goals are too "batched" for real-time situations and a lot of time is wasted on performance ratings. Instead, this time should be spent on talking to people about their performance and careers consistently. "Shift your performance evaluation focus from the past to the future". Their next realization was that assessing someone's skills is always subjective. The process says much more about the evaluator instead of the person being evaluated. This is called an idiosyncratic rater effect. The discovery left Deloitte puzzled. They knew that in order to get the best feedback, it needs to come from a team leader. But how do you deal with the idiosyncratic rater effect?. "Ratings reveal more about the rater than they usually do about the ratee." Before deciding how to deal with biased assessments, let's take a look at another insight Deloitte discovered. They used the Gallup 1.4 million employee study to see what thesimilarities are between high and low performing teams. The most powerful characteristic was that the high-performing team members felt they were doing their best to accomplish meaningful goals. On that basis, Deloitte identified 60 high-performing teams from their own ranks. Using these teams, they conducted a six-item survey to find out what their own high-performing teams had in common. When the results came back, the most common trend was that their own high performing team members felt that they had the chance to use their strengths every day. So, what can we learn from these results? Deloitte set out a clear goal: "We want to spend more time helping people use their strengths." So, for a quick recap: Deloitte was able to recognize the strengths in performance. The concern came with evaluating it. They also now knew that the best insight comes from the immediate team leader, but how can they do provide it without the idiosyncratic effect getting in the way? That's the million (or even a billion) dollar question. "The key is that people rate other people skills inconsistently, but they are highly consistent when rating their own". We also know that everyone rates other peoples' skills inconsistently. To combat this Deloitte did not ask team members what they think of each team member. Instead, they asked team leaders to rate their own future actions regarding each team member. Thismeasures potential on a yes-or-no basis. In orderto overcomethe idiosyncratic effect. In effect, they are asking what the team leaders would do, not what they think. This evaluation is called "process performance snapshot." The big difference is that it evaluates performance in real-time. Now they had the system to measure the performance. The question next became - how can we improve it?

Identify the weaknesses of the current performance management system and how they replaced it with the real-time performance management system?

Did they devise an effective strategy to finish the idiosyncratic effect? Explain.