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Taking on a thorny issue in human resources, executives from three companies detailed different ways to manage employee performance and split on the use of scaled ratings for workers.
New York Life Insurance Co., SRAM LLC and TranSystems Corp. all use SAP SuccessFactors cloud-based performance review software, but during a panel at the HR Technology Conference and Exposition, they portrayed it as a flexible tool that accommodates contrasting programs to appraise the work of employees.
The panel occurred in the wake of General Electric's high-profile decision to scrap employee ratings this year for 180,000 salaried employees around the world. In a growing human capital management trend, GE, Accenture, Deloitte and many other companies have begun using performance review software for continuous coaching and feedback.
SRAM, which designs and manufactures bicycle components, does not use ratings to evaluate employees, while New York Life ended its use of an overall rating for each employee and started a more narrative annual review. TranSystems, an engineering consulting firm, uses employee ratings and emphasizes calibration of performance ratings. Both New York Life and TranSystems also use table graphs to assess employees on performance and potential.
Scaled ratings criticized
Elizabeth Walter, HR manager of global business processes for Chicago-based SRAM, said the company is focused on sharing feedback and building a feedback culture, but it does not care about ratings. The company uses SuccessFactors for a narrative annual review, but it has never used ratings, she said.
"We just don't believe that rating someone a 3.5 and someone else a four makes any difference to what they are doing in terms of a contribution," she said.
Performance management is based on one-on-one conversations between a manager and employee, including weekly or biweekly meetings that can be 20 to 30 minutes long.
"We are all about feedback, [and] we are all about the conversation," Walter said. "Employees expect and demand feedback when they are not getting it."
SRAM went live with SuccessFactors Performance and Goals and Compensation in April of 2015, and then Employee Central, or core HR, in January of this year. The company purchased the full SAP cloud-based suite and is currently implementing the learning management system, ahead of other modules such as recruiting, onboarding, workforce planning and analytics.
New SAP app captures continuous feedback
The company's global HR team just had a demonstration of the new SAP continuous performance management application, and SRAM will likely have a pilot in the next few weeks, she said.
Among other functions, the SAP mobile performance review software captures feedback and would provide a way for SRAM to formally document continuous coaching and conversations.
The four-question annual review at SRAM is "100% narrative" and is initiated by the employee, she said. About 1,500 employees receive an annual review.
The review includes sections for an employee and manager to comment on performance and goals, and it concludes by asking the employee what the company can do to support the employee's growth.
New York Life overhauls system
Paul Karavis, corporate vice president of organizational effectiveness at New York Life, said in 2011, the company eliminated an overall rating for each employee and also stopped using a distribution system for performance management that ranked employees relative to each other and placed a certain percentage of workers in each rating category.
A redesigned performance management system, which covers 8,500 to 9,000 employees, ensures accurate feedback is delivered from the manager directly to the employee, he said.
"We did that by structuring it around specific goals. We did that by ensuring that all performance reviews are finished and delivered by managers to employees before compensation decisions get made higher up by the organization."
Ratings on behaviors for each position
In the performance review software, each employee is rated on specific goals on a scale of one to three, with a one meaning exceeded, followed by met and fell short. Four goals are the standard for each employee, but the number could be eight to 10, he said.
On a review form, managers write a sentence for each strength and opportunity for improvement, and they also write a summary of overall performance. In some units, employees are also appraised on a "behavioral-anchored rating scale," which includes ratings on certain behaviors pertaining to each position in the company.
At New York Life, roughly one-third of employees, including vice presidents, directors and senior associates, are segmented in a nine-box grid, a tool within SuccessFactors that allows for rating employees based on their potential and performance.
Nine-box grid is popular
The nine-box grid "is very user-friendly" and a popular tool, he said. Specific management strategies are attached to each box. If an employee is placed into a box for an underperformer with high potential, for example, a manager would get some ideas on how to develop and engage the person.
He said the annual review isn't the only time for feedback. Managers and employees meet at least four times a year, and managers are encouraged to give feedback every time they interact with an employee, he said.
At TranSystems, Shawn Richardson, assistant vice president for human resources, accentuated the use of calibration at his company, headquartered in Kansas City. He said the company started using calibration in 2011, and the performance management system improved.
TranSystems launched SuccessFactors in 2010, and it is integrated with Ceridian core HR.
Engineers calibrate performance management
Calibration meetings are held to ensure managers use similar standards in rating and evaluating employees. "It is very consistent and reliable," he said. "Our teams love it, and it improves performance."
Managers at TranSystems hold calibration sessions in January and February of each year after annual reviews in the SAP performance review software, including ratings on certain goals and competencies, are completed for about 1,000 employees.
The calibration sessions determine an overall final rating for an employee. The sessions allow vetting by multiple managers and help determine merit raises and bonuses for employees. Different managers know each employee because employees work on multiple projects at any given time.
Two levels of calibration meetings
TranSystems uses a 15-box grid during the calibration sessions, with five ratings for overall performance and three areas of potential, ranging from solid to high potential.
There are two levels of calibration meetings, one for staff and another for managers.
Managers drill into every form and every metric, including goals, objectives and competencies. They talk about retention risk, career development and growth, and an employee's overall performance for the year.
After the start of calibration, employee engagement scores steadily improved since 2012, the voluntary turnover rate dropped and the number of people promoted to partner sharply increased, he said.
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