Tag: performance

Time to Change Performance Review and Rewards System

I wrote here about the need of changing the HR in agile organizations. Agile HR helps organizations to adapt their culture to be more creative and collaborative and less control and compete oriented. They are here to create best employee experience from the first contact, through day one, support their growth, motivation, and increasing their value to the organization. And once you embrace such collaborative and creative culture, it’s time to redesign the performance review and overall evaluation process. The individual KPIs created by managers for upcoming year becomes irrelevant as the people are inspecting and adapting not only of what they deliver, but also what their roles are as those are changing depending on the needs. Some organizations are going towards team created and measured goals (like OKRs) but the others are removing any fixed goals with exchange to the radical transparency and strong evolutionary purpose. That’s where we talk about team organizations.

If you are not there yet, any type of the 360s, like Comparative Agility, Agility Health radar etc. can be a good start. It helps to start with receiving feedback and learning based on that. We are shifting from management feedback and ranking to self-assessment, peer-feedback, and coaching for growth with regular check-ins. I remember that the biggest shift happened where we stopped evaluating and started coaching people. Help them to design their own journey. We made organizational goals transparent and let teams and individuals to create their own goals. Together with a strong sense of the ownership, it helped to feed the motivation.

Finally the last step is to change the rewards and bonus system. It’s only possible if you already created a culture based on collaboration, transparency and purpose driven. Removing the detailed positions goes hand in hand with changing the evaluation system. The peer feedback is flowing there and back on a daily basis, most of the teams would be running their regular retrospective to improve, and help each other to grow. Most of the agile organizations are shifting towards higher base salary with no variable part as they realize that money are more demotivating factor at the end of the day. In creative complex world incentives for tasks are not really working. So that organizations are decoupling financial rewards from individual performance. If there is any bonus it’s more at the overall organizational level, split to the teams and allowing them to distribute it themselves, then given by the KIPs evaluations or decided by management. Some organizations go further on and make salaries fully transparent to everybody. Such level of transparency is a good review system as any inconsistency is visible to everyone.   

Agile organizations focus on rewarding people behavior, and learning, over just doing your job.  They realize that flexible working hours, self-selection of work, unlimited vacation, work from any place on the world, etc. are better motivation factors than your salary and bonus.

It’s all very different world. And it will not shift overnight. So start small, and inspect and adapt from there. The very first step is to get awareness about what culture you have in the organization and what is the desired culture. You might need a good communication, facilitation, and coaching skill to be able to help your organization to reflect that way, but that’s only the beginning. It’s all about changing mindset. Grow that mindset first, the different practices will follow.

In a summary, Agile HR helps organizations to change their culture to be more creative and collaborative and less control and compete oriented – we build organizations around motivated individuals, involving them in co-creating their journey. Agile HR focuses on the best employee experience from the first contact, through Day one, support their growth, motivation, and increasing their value to the organization. It’s not about processes but a different culture, different mindset.

Agile HR: Evaluations and Performance Review

The next topic in my Agile HR series focuses on evaluations and performance reviews. Once you hire the right person to the team, it’s time to start thinking about evaluations and performance reviews. In a traditional organization, it was pretty simple. Each employee got a task assigned, each task can be evaluated and linked to particular KPI. In Agile organization, it’s not that simple as multiple people collaborate on the same task and even if you try to set some KPIs at the beginning of the year, they mostly become irrelevant somewhere on the way so there is nothing to evaluate at the end of the year. 

The most simple practice used in agile environments is to set a team goal instead of an individual. There is still risk that the goal becomes obsolete during the year, but at least you support the team collaborative culture. The slightly better option is to break the year cadence and create shorter goals. After all, there is no magical on the year cadence when we deliver product regularly. A good practice is to let teams design their own goals, but you need a high level of trust in order to be able to move this direction. Some companies like OKRs, however, I see them too close to the traditional KPIs. Those were still traditional mindset practices spiced by little agility.

A good step on the way is replacing evaluation part by coaching conversation focused on employee development. As every coaching conversation, it is not about the coach but coachee (employee in this case) and is focused on raising the awareness of the person about themselves and their abilities and potentials. When done well, it can skyrocket people performance. But here is the downside – unfortunately, not many managers are good coaches which is a limit in most organizations.

Finally, if you are ready to be truly agile, how about if you do it in an agile manner and run regular frequent retrospectives instead of any form of evaluation. Together with radical transparency, it will create enough clarity about performance towards the Sprint Goal, product vision and entire organizational purpose so people can adapt in a very efficient way. Simple and powerful. Indeed we talk about not only team retrospective which brings so powerful peers feedback but also overall retrospective as it is designed for example in LeSS and organizational retrospective which can be facilitated for example in a form of world cafe or open space. All together it will engage employees in solving team, cross-team, and organizational issues, and increase their motivation to come up with creative and innovative solutions how to be better in delivering value and achieving the organizational purpose.

The frequent retrospective cadence brings regular feedback that allows fast changes and small improvements on day to day basis which as a result prevents big disappointments and surprises of traditional performance reviews which often brings demotivation and stress. Issues got solved sooner, before they are too big and poison the team or department and people get help to work on those issues early, ideally from their peers. You might not be ready for that tomorrow, as the culture of transparency and trust is not there yet, but you can go step by step until no-one misses any KPIs, performance reviews or any formal evaluations and frequent feedback, inspection, and adaptation become the regular way of work. 

At this stage, we often stop using the name of Agile HR and change it to Talent Development where the entire focus of the HR is changing to support overall employee journey and development. Supporting coaching and mentoring programs, and creating an environment for effective peer feedback are just a few ideas about where to start. 

Agile HR

Agile HR or if you want Talent Management as it is called nowadays turn the whole company around. It’s employees centric, delivering value to the whole organization. At a glance, not much had changed. We still need to hire people, take care of people growth, do some evaluations. Just the way we work changed significantly. So let’s go one by one to see the shift.

Hiring

Hiring process focuses not that much on skills, because skills could be learned, and will change depending on the business value priorities, and the team needs, but a person who is a good match to the company culture and the team. In an Agile organization people who can learn fast, are the starts. They can go to any cross-functional team and deliver value. We look for someone who has not a fixed mindset, is ready to change. Having said so, people are often not hired by HR and managers but the teams and the HR are only consulting and coaching teams in that process. The world of the fixed positions is over. All the recruiting agencies need to adapt as well. When we’ve been hiring, we involve team members and give them a strong voice in the process. We stopped looking for C++, Java, or C# experts, we were looking for passionate people who have energy, passionate about anything they did. We want to hear stories about what they love to do. Even if it was just a tiny thing they did over the evenings. We were transparent on how the work is going to look like, stressing the downsides, so they have clear expectations. Transparency is the key, so one of the great ideas is to invite candidates to join a team for a day. It’s like going to the date, getting to know each other better, get a sense on both sides how is it going to be.

One example of a very different interview is to ask the candidate to use a creative set of Lego bricks and visualize how it’s going to be once they joined the organization and have a conversation about the model. It’s something you rarely see in the interviews but it shows a lot about the candidates.

Evaluations

Evaluations and performance reviews changed significantly in Agile space. It’s less about reviewing, performance, and evaluation, more about development and vision of the future and growth. As the Agile organization operates internally in very short cycles, where through radical transparency and instant feedback through retrospectives the organization gets to inspect and adapt and solve any issues right away, we don’t really need classical KPIs as they are not supporting the adaptivity and flexibility Agile organizations need and missing a team aspect as well. As a first step, you can start with setting team goals, instead of individual ones. It will help. However, eventually, you need to redesign the whole concept from the scratch. The key focus is on coaching conversations, transparency, and candid feedback from your peers.

One example of a radical change you can use is the team-oriented feedback. You give each person on a team or organization (yes, it scales) a certain amount of money to give away. Let say $100, and ask them to distribute it to the colleagues. The only rule is you can’t keep it. If you think about it, the message you got by receiving $0 it’s much stronger feedback then anything your manager can ever  say about your performance. Indeed, we need a lot of coaching to help people understand and handle what’s going on, but in general, that’s a good thing. If you scale this to the whole organization it’s even more fun, as the managers get such instant feedback as well as the employees.

Talent management

As I mentioned at the beginning of this article we are speaking more about talent development then HR. What motivates people? How do we grow talents? How do we support them on their journey? How can we help them to be successful? The answer is coaching, support them to create their own development goals, grow their interest, empower them, raise their awareness about themselves. Not surprising, but how many HR are taking such a support role and how many of the companies take it as process and governance role.

Example of such coaching conversation for the people growth could be using a few categories which are strategic for the organization right now to frame the conversation. Firstly, you need to make people aware of how the coaching scale works, that it’s very different from evaluation, it doesn’t have to grow quarter to quarter and that there is always a better way of doing things, and that this tool shall help them to identify their potential and find ways how they can grow to support the organization. As a next step, you let people rate themselves on a relative scale 1..10, where 1 = not good at this area, and 10  = I’m great at this. They need to be able to compare themselves with the other people around in the organization, explain how it would be, when you are 2 points above the level you are currently, what would be different once you get there, what would it mean to the organization, what is currently in their way, etc. All of those are good coaching questions. No magic. It just works like a magic 🙂

Traditional metrics are dead, let’s kill KPIs

Most of the people, when you ask them, admit that KPIs are not any useful at their organizations. They don’t motivate, they don’t change people’s behavior to any better way. In the best case KPIs are usually a formal metric, in the worst case a way how to punish people. In modern organizations, which are built on top of collaboration and teams, the need for individual metrics disappeared. So what can you do instead?

If you have a bit of courage, you may try this: ask all team members to distribute for example 100$. They can give it to any team member, but can’t keep it for themselves. In a very short time, you get a very honest feedback. If you ask people to give Kudos or appreciations together with that, it’s awesome. Problem of bonus distribution solved. There are companies which distribute the bonuses not only within one team, but across the whole organization. To the receptionist, CEO, sales, developer. Your choice. We make it very transparent, so the system will correct any weird behavior as exchanging bonus money within two people. In general this is more theoretical question. I haven’t seen it happen but it comes out anytime we talk about it with managers. I guess it indicates lack of trust.

Another way how to do it when your organization is more Agile is to give every month people some money to their bonus account, you can keep them of give some to the others. Each month the random person from your company rolls a dice and if there is a six, the money is yours and we start to build another jackpot. When it’s any other number, they just continue in moving money as appreciation. As no one knows when the money is going to be paid, they don’t game it.

Finally, I have to admit that I don’t believe in any money bonuses. They are not going to help with real motivation and the risk of side effect is higher than possible outcome. So I would kill not only individual KPIs but bonuses as well. You can achieve better motivation by giving people autonomy, responsibility and clear purpose. And you can help them grow with coaching. It takes more time and energy then do KPIs and bonuses, but it brings higher results.