When Dean Carter left his post as chief human resources officer at Sears Holdings Corp. in the Chicago suburbs to become vice president of human resources at Ventura, Calif.-based Patagonia Inc. in April 2015, he was seeking sunnier skies–in more ways than one.
The retail dinosaur was deeply troubled.
“The whole company was deteriorating,” says Carter, noting that “the burning platform was, ‘How fast can we slow the deterioration?’ ” Meanwhile, the edgy outdoor clothing and gear manufacturer was on fire. When Carter arrived, the company was in the midst of three straight years of double-digit brick-and-mortar store growth, with sales reaching a new peak of $750 million that year.
With such a stark difference in both corporate performance and culture, it would be easy to assume Carter would leave the entire Sears HR strategy behind him. However, there was one aspect he was determined to transplant to sunny California: continuous performance feedback. At Sears, Carter had launched a continuous-feedback system for all 90,000 employees, but when he arrived at Patagonia, he was stunned to discover the booming company was still relying on the traditional sit-down annual review rather than building a feedback loop into the daily operations.
“Everything about Patagonia’s culture is based on irreverence and the non-traditional and non-conventional, so I was really surprised to see this extremely hierarchical, traditional approach to performance management,” says Carter. “I really wanted something that was employee-centric and centered on getting the data straight to employees so they can change their behavior tomorrow.”
Bringing confidence from Sears’ experience with continuous performance feedback and “a ton of white papers,” Carter made the case to Patagonia CEO Rose Marcario, its leadership team and board, telling them: “This is where the future is headed.” Marcario liked what she heard, but wasn’t sure if a system of continuous feedback was the right thing for Patagonia’s 2,000 employees. However, convinced that continuous feedback was the way to go, Carter placed his own career on the line.
“I told them, ‘As CHRO, my job is to give you certainty. If this doesn’t work, you can let me go,’ ” he says.
Carter’s gamble paid off. Within one year of his arrival, Patagonia eliminated performance ratings and implemented a tech-enabled system of continuous feedback and quarterly check-ins. Employees were encouraged to give or request feedback at any time from colleagues or managers, providing them real-time 360-degree insight into their performance. Since the shift, the company found that those who participate in the system receive higher bonuses than those who do not. Carter says they also “say they know what’s expected of them, say they trust their manager more and their managers view them as having a lot more capacity to take on more responsibility.”
Continuous performance feedback has become a rallying cry across the HR community in recent years, with early adopters like Microsoft, Accenture, Goldman Sachs and Adobe garnering heavy coverage in the business press. The latter went so far as to publish a toolkit for its famous Check-In system, making it available to other organizations. More than 600 companies downloaded the guides and worksheets during their first few months of availability last year. But as organizations explore this new world, free of ratings and full of conversations, they are discovering the best way to transition from a traditional performance-management approach to a continuous-feedback model–and how to successfully address the challenges that lie in the way.
The Spaces Between
Admittedly, Carter says, his team moved too quickly when instituting continuous performance feedback at Sears, going “big bang” and changing “everything at once,” which made it difficult to move the needle. Determined not to repeat that mistake, he undertook a phased approach at Patagonia, spending six to nine months on getting people “into the groove” of having quarterly, employee-led conversations with their managers. Employees are encouraged to set quarterly stretch goals and discuss their progress toward them with their manager, who asks questions, using templates provided by HR.
“By doing this in blocks, we’ve helped the organization grow and get muscle memory, and then we move on to the next skill-building exercise for the company,” says Carter. “Just like any skill-building technique, you focus on a single skill, get better and then move on to the next one.”
Once employees and managers mastered the quarterly check-in, Carter’s team set out to help them understand how to give and receive feedback. It only takes three pieces of feedback for most employees to grasp the concept, he says, and 10 pieces for people to start recognizing its value.
“The very first piece of feedback you get is all smileys: ‘You’re awesome,’ ” says Carter. “The second piece is, ‘You’re pretty good’ and the third is, ‘Here’s a way you could get better.’ ”
Once employees begin to feel comfortable asking colleagues for feedback, a cascading effect takes place, according to Carter. The person who was asked to provide feedback is then three times more likely to ask people for feedback on his or her performance.
“When you ask for feedback, you create generosity in the system and it explodes exponentially,” says Carter. “It’s much more powerful to ask than to just get it unsolicited.”
While that feedback populates a repository of performance-related data, which are then brought to bear during annual reviews and quarterly conversations, Carter says it’s what happens “in the spaces between” that truly drives employees to better performance, as employees often follow up on feedback received by talking face to face. This allows them to delve deeper into their strengths and weaknesses and immediately course-correct rather than waiting for an annual review to learn about their shortcomings.
“At town halls, I ask the question, ‘How many of you have gotten feedback in the last week?’ and 70 percent of the room will raise their hands,” says Carter. “Then I say, ‘How many of you have changed your behavior this past week as a result of feedback you received?’ And 70 percent of the people will raise their hands. That’s pretty incredible.”
New York-based JPMorgan Chase recently tested a technology-enabled continuous-feedback approach with 50,000 of the firm’s 240,000 employees and managers.
Using a tool it designed called Insight360, managers and employees are able to ping each other for performance-related input moments after a meeting, completion of a project or at any other time, according to Michael D’Ausilio, managing director, consumer and community bank. The person requesting the feedback gets to determine who is able to see it, and all feedback sent through the system is tagged with the name of the person who sent it, providing greater context and transparency and more opportunities for clarification or follow-up conversations. The firm is refining its approach and is gathering feedback from employees and managers who have used the tool before rolling it out across the entire employee population.
Enabling Improvement
Proponents of feedback apps contend they can play a key role in enabling greater growth and development. Indeed, Carter says, the ability to “plug into the HR ecosystem” and make the connection between feedback and development opportunities has been one of the biggest steps forward in the continuous-performance software space.
Advances in technology are also driving accountability, as organizations strive to ensure that feedback is continuously being shared, says Christa Manning, vice president, solution provider research at Bersin, Deloitte Consulting LLP in Boston.
“[Giving feedback] may be common sense, but given the nature of businesses today–they are so big, so virtual, so distributed–maybe you’ve lost some of that critical mass of having people in an office,” says Manning. “Now, these systems can make sure that things happen and bring data back to executives and senior managers to hold those managers accountable.”
Typically, feedback apps will have a reminder component, which will automatically send a message to managers, prodding them to take action, according to Andee Harris, CEO of HighGround, a Chicago-based HR cloud-platform provider specializing in continuous-feedback products, including those used by Patagonia.
“Everybody wants to be a better leader, but we all get busy and forget to do the things we should be doing,” says Harris. “Our tool will say, ‘You haven’t recognized anybody on your team in 20 days’ or ‘You haven’t given any feedback in 30 days.’ ”
Such capabilities aim to hold managers responsible, but organizations must be careful to view technology as an enabler, rather than a “be-all, end-all,” says Harris.
“Where companies get sidelined is they just implement the technology, thinking it’s going to solve everything,” says Harris. “You have to have the right culture and the right processes in place, where people know how to give feedback in a constructive way.”
Harris recommends companies take a top-down approach and encourage members of the leadership team to role model an appropriate continuous-feedback process. While Carter agrees that it’s crucial for leaders to model behavior, he employs a simple method for encouraging employees to participate in Patagonia’s optional continuous-feedback approach.
“At the end of the year, I say, ‘Hey, guys, you don’t have to use this system, but the people who are [using it] are getting bigger bonuses than the people who aren’t,’ ” he says. “ ‘So if you’re interested in performing better, which may lead to a better bonus, you should consider this.’ ”
While the hard data back up the assertion that actively participating in the giving and receiving of feedback is beneficial to employees’ bank accounts–participants average 6-percent higher bonuses than non-participants at Patagonia–Carter understands it may not work for everyone. In fact, there may be some workers for whom participation in quarterly check-ins would be detrimental.
“You don’t have to use our prescribed system to be successful,” he says. “If I have someone who is performing real well and not using the check-ins, then I want to leave them alone. Clearly, they have a system that’s working.”
False Choices
As the number of millennials in the workplace increases, continuous performance feedback will truly become the “new normal,” according to Levi Segal, a partner in the talent, reward and performance consulting practice in the New York office of Aon Hewitt.
Having grown up with “everything at their fingertips at any moment,” Segal says, millennials are driving the move toward continuous feedback–and that’s only going to amplify as millennial employees assume their place as the largest generation in the American workforce.
Does that mean the annual review is poised to go the way of the eight-track? While some believe continuous-performance management has the potential to serve as a replacement for the annual review, Segal cautions organizations to beware of “false choices.”
“Essentially, this is a false choice that is presented to people: You could either be for continuous feedback or you could be for the annual review,” says Segal. “You can have both and you should have both. You should have your annual review and you should have formal touchpoints and informal touchpoints. You need all of it.”
Carter echoes those sentiments, stressing that formal reviews at Patagonia provide “an annual reckoning,” particularly since employee compensation and bonuses are tied to performance.
Likewise, D’Ausilio expects to retain annual reviews at JPMorgan Chase, although he does see continuous feedback contributing to a more effective yearly round-up.
“Managers and employees who have had these conversations throughout the year are more connected, more committed and see a greater quality of results as the year progresses,” says D’Ausilio. “In essence, the annual review should sum up what employees already know and where they are headed. Feedback does that all along the way.”
