Saturday, December 15, 2012

A Systems Thinking Alternative to Performance Reviews

I tried something new based on the concerns and research around annual performance reviews. I'm not qualified enough to make categorical claims about the typical annual performance review process, but I can say that by trying something different I enjoyed the performance review process more than any other year and I had some great conversations with my co-workers. Here is a quick report of some of the concerns, what I tried, and what I learned.

The concerns:
W. Edwards Deming is often quoted when expressing concerns over annual performance reviews. Deming's 85-15 rule implies that 85% of any employee's performance is based on the system they are working in rather than their own individual actions. If this is true, then any significant performance increases or decreases are not under the employee's control but rather those who control the system (i.e. management). This means that if employees are under-performing we should look to the system first and not the individual.

As a parent, coach and change agent, I have noticed one consistent trend with respect to individual improvements. If I try to push improvements on people then they will tend to resist the change. However, if I try to pull improvements from them (ask them what they want to learn/improve) I encounter much less resistance and more actual improvements. How might this influence the annual performance review process?

The experiment:

Note: At Protegra we have a flat structure so we don't receive feedback from managers but rather from the people we've worked with over the last year. As a company we've tried various approaches and are still experimenting to uncover better ways. The experiment I tried this year was based on the concerns above and also conversations with co-workers. In the end I came up with five questions to augment my involvement in our yearly process. After receiving permission from each person, I sat down with them and had a conversation that centered around the following questions:

a) What are you proud of? (Pull)
b) What do you want to learn or improve this year? (Pull)
c) What part of our team's system is preventing you from doing your job better? What should we improve or change? (Systems Thinking)
d) How is the company enabling or inhibiting you from achieving your best? (Systems Thinking)
e) What do you need from me? How can I help? (Pull)

The results:

I had fantastic conversations with several of my fellow employees on what they love about their job, what they are proud of, and the things they are doing to try and make their work environment better. I discovered some common interests and swapped ideas for personal improvement and growth. I learned more about what makes each person 'tick' and how I can support that. In the conversations I had with each person I left feeling inspired, listened to, and encouraged. I think we all felt a greater sense of ownership over our improvement plans for the year.

Just as importantly, I learned more about the value of Deming's 85-15 rule and its impact on performance. We had discussions about our system and the things we could (and did) change. In more than one case it became clear how powerful a simple systems change could be. Our conversations were slanted towards being a performance review of the system instead of a performance review of the individual.

This experiment was a lot of fun and I plan on doing it again. In fact, I have added an item to my backlog to extend this conversation to other people on the team throughout the year.

Some final thoughts:
After reading this some of you may be asking questions like "how does this help us address those individuals that actually have 'performance' problems?", or "how does this help us set salary?". I'm not sure it does in the way you might like. For the former, please don't wait until the annual review to deal with the issue (short feedback loops please!) and make sure to look at the system first. For the latter I'll leave that to other experts to discuss (see the TLCLabs blog below for one example). However, I'd guess that taking this approach nudges a group of people towards having a better system, being a more effective team, and becoming a more effective organization.

System Thinking References
- Demings 85/15 rule
- If Ackoff had given a Ted Talk
- It's not a behavioural problem its the system

Performance Review References
- Why performance reviews don't improve performance
- Why we don't do forced ranking and performance reviews - TLCLabs
- The Elephant in the Room: Appraisals and Compensation - Mary Poppendieck
- Get Rid of the Performance Review! (and some info on Performance Previews)

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