A Blog by Jonathan Low


May 30, 2016

Why John Deere Measures Employee Morale Every Two Weeks And Goldman Sachs Stopped Rating Employees With Numbers

Employees at those companies - and many others, as the following articles explain - have requested 'more frequent and meaningful feedback.' Executives are listening because operational and financial competitive advantage demands not just a skilled, but an engaged, workforce. JL

Brad Power reports in Harvard Business Review and Lindsay Gellman and Justin Baer report in the Wall Street Journal :

Employee engagement is now one of the top three concerns of professionals. Studies linked stronger employee engagement to higher customer satisfaction and profits. The changes are part of a bigger shift among companies in the way they track and grade workers’ performance. Accenture scrapped annual performance reviews in favor of more-frequent check-ins, while GE. is testing a similar system. Gap, Adobe Systems and Microsoft have abolished numerical ratings, which executives say can grind down employee morale

Many companies go to great lengths every year or two to determine just how motivated their work force really is. Traditionally, they might get vendors such as Gallup to survey employee engagement. More recently, online sites such as Glassdoor and Vault let HR managers view anonymized praises and complaints about their company from employees and former employees – comments the whole world can see.
Why do they do this? Employee engagement is now one of the top three concerns of most HR professionals. Studies have linked stronger employee engagement to higher customer satisfaction and profits. But it’s important to remember what comes between the motivated employee and the satisfied customer: the innovative product or service that the employee creates and the company sells. How do these things connect?
Consider John Deere, the agricultural equipment manufacturer. With the rapid development of the Internet of Things, incorporating up-to-the-minute digital technology has become critical to its product innovation. Many large and successful manufacturing companies are feeling the threat from software and online competitors, both big companies like Google or Amazon as well as startups allying with longstanding manufacturing competitors. So they want to accelerate new product introductions and feature releases, and quickly get them into the hands of customers to get their feedback. They do this with methods proven useful in accelerating software development, such as “Agile,” and which are increasingly being used for hardware product development, too.
But it turns out these methods don’t just have to do with technology and operations. I’ve found few organizations go to the lengths of Deere & Company in taking regular pulse checks of the morale of their employees. Deere’s Enterprise Advanced Marketing Group – which is tasked with identifying unarticulated, unmet customer needs, representing opportunities for innovation and growth – has created a system for surveying the motivation of its employees every two weeks. Several groups, covering about 100 employees, have adopted this system. These future-oriented Deere managers believe that frequent monitoring of motivation has become as essential to understanding the health and functioning of their teams as operational and financial metrics are to understanding whether the business is firing on all cylinders.As mentioned above, most large companies conduct an extensive employee survey every year or two to measure motivation or engagement. But this is not nearly frequent enough for Deere and companies facing fierce competition for rare technical talent from venture-funded startups and big software and services competitors like Amazon and Google. Increasingly, such companies need daily or weekly data on employee motivation to identify and fix motivational issues at the individual, team, and unit level.
Impact: From Lagging to Leading Indicator on Performance and Motivation
Deere’s marketing group has found such check-ins vital to staying competitive in its industry. George Tome, a manager of the rapid development methodology in the Enterprise Advanced Marketing group at Deere, told me that continuous improvement is built into the product development process: at the end of every two-week development cycle, teams review what went well and didn’t go well, and what should change. But as part of the retrospective, leaders also ask team members to answer this telling question on a 10-point scale: “How do you feel about the value you were able to contribute in the last cycle?” While this question is ostensibly about each employee’s concrete contribution, it importantly tests how they are feeling about their work. Deere managers call it a “motivation metric” or even a “happiness metric.”
By tracking the element of motivation, alongside such metrics as development speed and quality, teams have achieved between a four- and eight-fold increase in the amount of product development work they deliver every two weeks (a metric called “velocity”). And, in turn, that means this can significantly reduce the time it takes to bring new products and new features to market.
It makes a kind of basic sense: as product development and other project work cycles have changed and become faster and more continuous, so too must the measurement of how the people involved in those cycles are feeling. Systems like the one Deere uses let managers identify and take immediate action to correct both process and motivational problems with people and teams, rather than letting them fester undetected to become much bigger problems later.
Here’s an example Tome shared with me: In one cycle, a high-performing employee scored his motivation lower than normal. There were no visible signs of problems: the employee was still highly productive, engaged, and a pleasure to work with. However, in the next cycle his motivational score dropped even more. Although there was still with no visible change in his performance, the survey raised a red flag and prompted a manager to understand the employee’s issue. It turned out the employee had concerns about his career development, which the manager was able to resolve. By paying attention to the motivation metric, the issue was caught quickly before there were any performance problems, and there was no need for any formal corrective actions.
Without regular, frequent updates on the state of morale, most managers become aware of issues only when they show up in employee performance – e.g., a missed deadline or botched effort – or when the employee quits. At that point it is often too late or too difficult to address the motivation problem because then there are actually two problems that must be solved: the performance issue and the motivation issue. The early warning provided by motivation data changes the conversation from, “We need to address your performance issue” to “Help me understand why you are feeling the way you are.”
The biweekly engagement survey is also useful for assessing team health. For example, whenever a new person joins the team or others leave it, the team dynamics change. The motivation metric is key to understanding the impact on the team and what might need to change or be adjusted. In these cases, the motivation metric can be used to monitor a team’s morale, starting from the sometimes rough formation stage and aiding its progress toward smooth and effective coordination. Frequent measures of motivation, velocity, and quality let managers know how the team is progressing and whether they must make adjustments or take corrective actions. Much can happen to a team in the space of a month, a week, or even a day that can knock it off course. Companies like Deere that have a system for checking on motivation regularly can greatly reduce the chances of that happening.
With all the evidence pointing to the importance of engagement, on the one hand, and the need for continuous innovation, on the other, companies need to understand the deep connection between the two dynamics and to ensure that their systems for measuring and improving both are aligned.   

The Wall Street Journal - Goldman Sachs Group Inc. is shaking up performance reviews for its roughly 36,500 workers.
Starting next month, the Wall Street bank will no longer rate staff each on a scale of one to nine. And this fall, the firm will experiment with an online system through which employees can give and receive continuous feedback on their performance.
Goldman’s changes are part of a bigger shift among large companies in the way they track and grade workers’ performance. Accenture PLC recently scrapped annual performance reviews in favor of more-frequent check-ins between managers and employees, while General Electric Co. is testing a similar system with some employees. Gap Inc., Adobe Systems Inc. and Microsoft Corp. have abolished numerical ratings, which executives say can grind down employee morale
While subtle, the changes at Goldman mark a softening of Wall Street’s typically tough, numbers-driven management culture, and is the latest in a wave of changes at big banks intended to make finance jobs more welcoming to younger employees.
Goldman, which announced the changes in a pair of companywide memos, isn’t doing away with annual performance reviews. Instead, the bank will focus on giving employees specific directives on improving their work rather than grading performance for the previous year, said Edith Cooper, the bank’s global head of human capital management.Bank employees want “more direction with respect to how they can improve,” Ms. Cooper said. In internal surveys, Goldman staffers requested “more frequent and constructive feedback,” according to one of the memos.
New regulations have crimped profits, forcing banks to retreat from certain businesses and cut staff. More electronic trading in many markets has made large numbers of traders and salespeople expendable. Annual bonuses ebb and flow, but they are well below where they were in the years before the financial crisis.
Goldman has outperformed nearly all of its peers since the crisis, yet it hasn’t been immune from the pressures facing an industry still finding its role in the new era. Goldman has been shrinking its senior staff, in part by limiting the size of its biennial partnership classes, and hiring more people in lower-cost offices such as in Salt Lake City and Bangalore.

All that has made the relative happiness of junior bankers more important. The drive has picked up in the past year as investors and corporate executives show flagging confidence in the global economy.
Ranking a year of employee performance on a numerical scale can be tough on all workers, and particularly young ones, who are hungry for more-constant feedback from bosses, surveys show. More firms are eliminating numerical ratings for workers as bosses realize “the person receiving the rating is now stuck with the number for an entire year that labels them,” said Josh Bersin, a principal at Deloitte Consulting LLP who advises companies on talent management.
Goldman will keep its 360-degree annual review, in which an employee solicits feedback from his or her manager and a select group of colleagues, including peers and reports.
Ryan Frankel, who was an analyst in Goldman’s special-situations group from 2006 until 2010, said providing employees with more-frequent feedback is a natural move at an organization with a famously competitive internal culture.
Additional assessments will allow employees to “course-correct and elevate their own performance,” said Mr. Frankel, who since leaving the bank founded a language-translation startup, VerbalizeIt, which was recently sold.
To be sure, many Wall Street workers look beyond performance reviews to their annual bonuses as a gauge of how well—or poorly—they are doing.
“As the industry shrinks, firms need to gain a larger piece of a smaller pie; it becomes increasingly critical for firms to employ top professionals,” said Michael Karp, chief executive of Wall Street search firm Options Group. “Bonuses represent their accomplishments and firms’ recognition and appreciation of them.”
Performance reviews play a role in determining employee bonuses and promotions at Goldman, and will continue to do so, Ms. Cooper said. She declined to say how much weight those evaluations carry.
Along with J.P. Morgan Chase JPM 0.62 % & Co. and Citigroup, C 1.02 % Goldman has enacted several management changes focused on retaining junior bankers. Last fall, the bank announced it would speed the path to promotions for top-performing analysts and associates and would try to eliminate some of the grunt work that often falls to younger employees.
Goldman typically culls roughly 5% of its workers early in each calendar year, in part to make way for new hires. This year, though, the cuts have been deeper in some of the businesses, like debt trading, that are mired in a prolonged slump.
Employee pay has been in decline. The firm’s annual compensation and benefits expenses have dropped 2% from 2012 to 2015 even as its total head count swelled by 11%.
The firm also is paring the maximum number of designated reviewers per employee from 10 to six to decrease demands on colleagues’ time, she said.
Review conversations will now take place over the summer rather than in the fall, giving employees additional time to improve their performance ahead of bonus decisions and annual cuts.
In addition, Goldman will try out a Web-based tool for some employees to give and receive performance feedback at any time, Ms. Cooper said. The hope is that the additional input will lead to more frequent one-on-one conversations with employees and managers, she said. The bank hasn’t determined which departments will try out the system.
Colleagues at Goldman frequently have informal conversations about performance, said Elizabeth Reed, a vice president in the investment-banking division. The new guidelines help set expectations for how often managers should be checking in with their staff members, she said, adding the new tool is a “medium to express that more regularly.”


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