Performance Navigators at GAP

A - Z Characteristics of High Achieving Organizations

In 2002 the idea of abandoning the traditional employee appraisal process emerged at a major corporation. Since 2002 an estimated one-third of U.S. Companies have dumped the annual performance review in favor of more innovative processes that involve less administrative drudgery, less discomfort for appraisers and appraisees, less reliance on subjective number ratings, more frequent communications, and more emphasis on team performance as opposed to individual performance. Technology leaders like Adobe, Juniper Systems, Dell, Microsoft, and IBM revamped their performance systems. Professional services firms like Deloitte, Accenture, and PwC came next, followed by other industries including Gap, Lear, OppenheimerFunds, and General Electric.

There are three reasons companies are abandoning performance appraisals: the return of people development, the need for agility, and the centrality of teamwork.

In corporations that deal with knowledge services, companies want to develop skilled advisors. Structured training produces skilled advisors by allowing employees to be in charge of their own development, not by competitive pressure to gain managerial excellence. The need for agility exists because a company’s future needs are constantly evolving and employees no longer need to keep doing the same things. In this light, it doesn’t make sense to hang on to a system that’s built mainly to assess and hold people accountable for past or current practices.

Moving away from ranking, stacking, and numerically defining people and moving away from appraisals that target individual accountability has pushed performance measurements toward the teamwork. Companies like Gap became early innovators in appraisals that enhance performance at the team level and help track collaboration. In 2012, Gap fell significantly short of market expectations and was being accused of treating its workers unfairly. At the time Gap Inc. used what Rob Ollander-Krane, Senior Director, Organizational Performance Effectiveness, refers to as a “traditional” performance management process. The process set goals at the beginning of the year and convened a single end-of-year review meeting that ended with performance ratings. Gap’s review system grew out of a 1970s ideology that believed employees were money-driven opportunists needing command and control management.

Gap realized that the old annual performance review was ineffective at engaging and developing employees. The process did not produce improved business performance for Gap Inc. because it was expensive, complicated, and time-consuming. At headquarters alone people were spending 130,000 hours a year and significant payroll resources sustaining the system.

Ollander-Krane and his colleagues spent 2013 developing a new performance management framework which they called GPS: Grow, Perform, and Succeed. With the GPS approach, the company modified its previous goal-setting process allowing employees to have no more than eight goals that were considered outcomes as opposed to tasks. Ollander-Krane and his team created training modules explaining the distinction between task-based goals and outcome-based goals complete with examples of each. Employees learned to see tasks as a means, a step, toward accomplishing a greater definable and measurable outcome, an outcome that tied into overarching corporate goals.

Under GPS, Managers were trained to be collaborative, set measurable outcomes, and hold regular coaching sessions with employees. This meant eliminating ratings and year-end reviews. Regular and frequent conversations became central to the process. Employees set performance goals every two months, and managers would guide employees to accomplish their goals. The new system was like a car’s GPS navigation system showing the driver the right direction. As Rob Ollander-Krane, explains:

“A GPS system doesn’t wait until the end of the trip to tell you all the wrong turns you made.We didn’t want to handcuff our managers and make them wait until the end of the year to give performance feedback. We wanted them to give performance feedback all along the route, so employees didn’t get too far off the correct path during the journey.”

The GPS system separated rewards from performance. The reward discussion happened annually but the conversation was a recap of how the business did, how the team did, and how the individual contributed to the success of both. Managers using a detailed model of an excellent performer received a budget which they could allocate to employees whose outcome accomplishments qualified their excellence.

Today’s workplace is knowledge-based and requires a performance review process that reflects this. Employees need on-ongoing feedback with regular check-ins, managers must regularly engage with their employees to understand how they are reaching their goals. With advanced technology employees, managers, and teams can give and receive feedback to one another on a continuous basis thereby promoting professional growth and development.

• After two years of implementing GPS, 89% of Gap employees were having regular conversations with their managers.
• On a five-point scale, the company received an average of 4.2 regarding the quality of conversations between managers and employees.
• In 2014 Gap achieved an overall employee engagement score of 86%.

Overhauling an organization's approach to performance management can have a profound impact on performance, engagement, productivity, culture, and the role of Human Resources. Companies can benefit from ongoing performance review data. Companies can collate data over time to holistically understand team performance. From here HR departments can design and pilot customized training and coaching initiatives.

The traditional appraisal process is failing. The process, probably dating from the 1930s, comes from outdated models involving top-down thinking, command and control leadership, and viewing employees as replaceable work units. A new system such as the one initiated at GAP matches emerging trends in work cultures with its new emphasis on development, agility, and teamwork.

Articles in this Series: A - Z Characteristics of High Achieving Organizations

1. Agility Thinkers at Facebook
2. Boundary Spanners at Juniper Networks
3. Change Agents at IBM
4. Decision Drivers at Cisco
5. Execution Experts at Caterpillar
6. Future Scenario Planners at Shell
7. Gritty Explorers at SpaceX
8. Honest Culture Creators at GE
9. Innovation Masters at W. L. Gore
10. Justice Ambassadors at General Grain
11. Knowledge Management Champions at Xerox
12. Loyalty Partners at Starbucks
13. Motivation Maximizers at Trader Joe's
14. Nurturing Leaders at FedEx
15. Optimistic Visionaries at Intel
16. Performance Navigators at Gap
17. Quality Virtual Instructors at Boeing
18. Resilient Re-inventors at Barnes & Noble
19. Servant-Leader Heroes at Southwest Airlines

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Sandhya Johnson, PhD is a leader in HR optimization, leadership development, team performance, and organization effectiveness. She has a proven track record of developing innovative talent management strategies for a diverse group of leading organizations. Sandhya is the founder and Managing Director at Ingenium Global, a Dallas-based consulting firm that is committed to co-creating talent-driven organizations. Connect with her on Twitter @IngeniumGlobal