Reinventing Performance Appraisal by Delloite
In a well-researched HRB article, Deloitte discusses how they now perform performance appraisals.
Summary:
Deloitte is fundamentally redesigning its performance management system to address growing dissatisfaction with traditional methods, which the company found to be outdated, time-consuming, and misaligned with its objectives. Deloitte’s new system aims to foster real-time feedback, focus on individual strengths, and prioritize future performance. The move follows a Deloitte survey where 58% of executives reported that their current performance management processes neither engaged employees nor promoted high performance, highlighting the need for a more agile, personalized approach to performance management.
The previous system required setting annual goals for each employee, which were evaluated through structured, year-end ratings. These ratings consumed nearly 2 million hours annually, mainly in form-filling, meetings, and time-consuming evaluations. Deloitte found that this traditional system, while predictable and fair, no longer met its evolving needs. Once-a-year assessments and batched goals were too inflexible for the dynamic, real-time demands of today’s work environment, and year-end conversations often held less value than in-the-moment discussions about immediate performance.
Through internal studies, Deloitte learned that top-performing teams were characterized by their strengths orientation, meaning that members felt empowered to do their best work daily. Deloitte also reviewed research that revealed significant inconsistencies in rating outcomes—62% of rating variance could be attributed to the unique biases of individual raters, while only 21% actually reflected the employee’s performance. To overcome these “idiosyncratic rater effects,” Deloitte focused on simplifying the rating process, shifting from subjective skill assessments to asking team leaders future-oriented questions about their actions toward each team member.
Under the new system, team leaders will complete a brief assessment for each team member after every project or quarterly for long-term projects. These assessments will ask leaders four questions designed to indicate overall performance, teamwork, potential risk for low performance, and readiness for promotion. By focusing on these action-oriented, future-directed questions, Deloitte aims to capture clearer, more consistent performance data that bypasses the subjective bias seen in traditional ratings.
In essence, Deloitte’s new performance management system represents a shift from static, past-oriented reviews to a dynamic, strengths-based model focused on fueling future performance, supporting real-time feedback, and fostering a richer, data-driven understanding of employee contributions. This new approach aims not only to measure performance but also to actively cultivate it, reflecting Deloitte’s commitment to aligning its performance management system with the needs of a modern, fast-paced work environment.
Key Takeaways
Here are key takeaways from Deloitte's new approach to performance management for managers:
1. Frequent Feedback Replaces annual reviews with ongoing check-ins to improve alignment and future focus.
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2. Strengths-Based Approach: Emphasizes developing employees' strengths for team engagement and productivity.
3. Simplified Evaluation: Measures future-focused questions (e.g., promotion readiness) instead of past skills.
4. Team Leader-Centric: Team leaders rate based on actions they'd take, not opinions, to minimize bias.
5. Transparent and Rich Data: Uses detailed, big-data insights rather than single rating numbers for nuanced understanding.
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