This is why Adobe killed off the annual performance review - (and more people quit)

11 May 2018 -

AdobeAdobe was ahead of the curve when it swapped annual performance reviews for regular employee check-ups. The approach is still a success – here’s why

Guest blogger Robert I. Sutton

Renowned American novelist Ernest Hemingway said that the most essential gift for a good writer is the ability to spot bad or unnecessary text, the skill to fix what is salvageable, and the will to throw away what is beyond repair or unnecessary. Leaders and teams that spread excellence act the same way, ruthlessly spotting and removing crummy or useless rules, traditions, tools, and roles that clog up the works and cloud people’s minds.

One of my favourite examples of such subtraction was implemented by Adobe’s senior leaders in 2012 – a change that affected all 11,000 employees. Most readers know that Adobe produces software including Photoshop, Acrobat, Creative Cloud, and the Digital Marketing Suite. Adobe killed one of the most sacred of corporate cows: traditional yearly performance reviews. Management experts have questioned the value of such reviews for decades. Quality guru W. Edwards Deming blasted away: “It nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, nourishes rivalry and politics.”

WHAT THE NEW ADOBE PERFORMANCE REVIEW LOOKS LIKE

Despite such blistering critiques, Adobe has been one of the few companies with the guts and gumption to abandon them: in 2012, they moved from yearly performance rankings to frequent “check-ins” where managers provide employees targeted coaching and advice. There is no prescribed format or frequency for these conversations, and managers don’t complete any forms or use any technologies to guide or document what happens during such conversations. They are simply expected to have regular check-ins to convey what is expected of employees, give and get feedback, and help employees with their growth and development plans. The aim is to give people information when they need it rather than months after teachable moments have passed.

Once a year, managers make adjustments in employee compensation. Managers have far more discretion over such decisions than in the past: they have nearly complete authority to allocate their budget among their charges as they see fit. In addition, employees are now compensated based on how well they have met their goals – forced rankings have been abolished. As part of the rollout, managers were trained in the nuances of giving and receiving feedback and other difficult conversations through lectures and role playing, where they practiced challenging scenarios.

Read more: What happened when tech firm Cloudreach tested weekly performance reviews

WHY ADOBE SWITCHED FROM ANNUAL REVIEWS

Donna Morris, Adobe’s EVP of customer and employee experience, explained the motivation for these changes. Adobe’s leaders decided that the all-too-familiar drawbacks of their old evaluation system just weren’t acceptable. The complex infrastructure required for supporting the system and the time it extracted from Adobe’s busy people every January and February were bad enough. Morris’ team calculated that annual reviews required 80,000 hours of time from the 2000 managers at Adobe each year, the equivalent of 40 full-time employees. After all that effort, internal surveys revealed that employees felt less inspired and motivated afterwards—and turnover increased. Morris and her colleagues decided it was time for a disruptive change. She emphasised that the new “check-in” system where managers and direct reports have regular conversations about performance and other issues (instead of going through a formal process once a year) is part of a broader initiative to instil stronger accountability throughout Adobe.

Managers, for example, are now given far more say in their people’s salaries and merit increases. Adobe’s aim is to give managers the skills, authority, and responsibility so they can act much as if they were running their own businesses. Accountability is amplified by an ongoing “pulse survey” given to a random sample of Adobe employees: it includes measures of how well each manager sets expectations, gives and receives feedback, and helps people with their growth and development. In addition, Morris emphasised that one of her main goals was to subtract technology from the feedback process—she didn’t want managers to hide behind forms and computers. Instead, she wanted managers to have candid conversations with the people they led.

Read more: The two questions you must ask when managing a performance review

THE OUTCOME

Morris gave us [Sutton and fellow author Huggy Rao] an update just before [our book] Scaling Up Excellence was published. Adobe’s bold move seems to be working. One employee reported to Morris’s team that a feeling of relief has spread throughout the company because the old annual review system was “a soul-less and soul crushing exercise.” The pulse survey indicates that most Adobe managers and employees find the new system to be less cumbersome and more effective than the old stack-ranking system. For example, 78% of employees report that their manager is open to feedback from them, a sizeable improvement over past surveys.

As Morris and her team had hoped, by eliminating a system that required managers to discuss performance issues with employees only once a year, and moving to one that involves regular check-ins, strong managers are honing their skills. Equally important, many weak managers have learned how to talk with their direct reports about what is expected of them, how they are performing, and what they can do to become more effective.

Read more: five more tips for the perfect performance review

WARNING: IT WILL INCREASE FIRING AND RESIGNATIONS

The shift in Adobe’s attrition is especially telling. Since the new system was implemented, involuntary departures have increased by 50%: this is because, as Morris explained, the new system requires executives and managers to have regular “tough discussions” with employees who are struggling with performance issues—rather than putting them off until the next performance review cycle comes around. In contrast, voluntary attrition at Adobe has dropped 30% since the “check-ins” were introduced; not only that, of those employees who opt to leave the company, a higher percentage of them are “non-regrettable” departures.

In short, Adobe’s subtraction experiment appears to be having the desired effect. It is reducing unnecessary cognitive load, while at the same time, nudging managers to engage more often and more candidly with direct reports to help them develop their skills and plan their careers. The new system amplifies also the feeling that “I own the place, and the place owns me” – because it places the onus on managers and their employees to make regular adjustments that improve individual and team performance, It also bolsters accountability because managers have far more responsibility for setting employee compensation than under the old system. As Morris explained, the old excuse that “you deserve a bigger raise, but HR wouldn’t let me” doesn’t work any longer.

Despite this promising start, even if this experiment does not succeed, we applaud Morris and her colleagues for summoning the courage to kill this maligned—yet somehow still sacred—practice. In the end, check-ins may prove worse than traditional reviews. But without trying subtraction experiments such as this, organisations risk becoming imprisoned by faulty assumptions and destructive practices even when there is a better way.

This is an edited excerpt from Scaling Up Excellence by Robert I. Sutton and Huggy Rao. Robert ‘Bob’ Sutton is an author and professor of management science and engineering at Harvard University

Image: Shutterstock