As chief people officer for sweet bread company King’s Hawaiian, Amy Hirsh Robinson and her team are developing a new recipe for HR.

The first ingredient? A non-traditional mindset.

That’s what Robinson is using as she seeks to transform the Los Angeles-based organization of 1,600 employees. To start, she has eliminated the company’s long-entrenched merit pay-based performance reviews and moved to non-traditional L&D and total rewards programs.

Robinson recently sat down with HRE at the WorldatWork conference in San Diego to discuss her move from HR consultant for Fortune 500 companies to in-house CPO at King’s Hawaiian and the unconventional changes she’s making.

Breaking bread with King’s Hawaiian

After 20 years as principal at HR consulting firm Interchange Group, Robinson surprised herself when she decided to strike a new career path and join King’s Hawaiian in November 2019. She described two driving factors behind the move: the leadership team’s commitment to the company values and the organization’s ambitious plans for growth.

Robinson says the family-owned and privately held company has long relied on its people strategy as its primary business strategy, something that impressed her. “It wasn’t specifically the role of HR to drive the people strategy,” she says. “It was always top of mind for everybody.”

For example, the leadership team considered filling the top HR position with an operations or marketing executive before hiring her. “They thought very differently,” she says, “which is what really attracted me to them in the first place.”

When she arrived, King’s Hawaiian—like most companies—used a traditional performance review process to provide employee feedback and determine annual merit-based pay raises.

And Robinson, like many HR leaders, dislikes traditional merit pay-based performance reviews. She finds them ineffective in driving employee performance and time-consuming to conduct.

Ending merit pay-based performance reviews

So, she challenged her team to tear down the long-held and universal HR practice of tying merit pay to performance reviews, noting there was nowhere to go but forward. The sentiment earned her the nickname Cortés from her colleagues, who jokingly likened her to Hernán Cortés, the Spanish explorer who burned his ships so his crew could not turn back in their battle with the Aztec empire in the 1500s.

Ultimately, after pushing her team to get creative in separating pay increases from performance reviews, they ended the traditional performance review process a year ago.

In its place, King’s Hawaiian rolled out a “capabilities compensation model,” which bases employee pay on current skills and what workers can contribute to the company today and in the near future, says Robinson. She compares it to a similar evaluation process that prospective hires undergo to develop a salary offer: The offer is based on the current skills and potential benefits that a potential hire can bring to a company, not on previous work performed for the organization.

Separately, employees receive frequent feedback on their performance.

How to dismantle performance reviews

Developing an employee’s compensation level based on the future benefit their skills may bring to the company is challenging, Robinson admits, noting that it requires gazing into a crystal ball.

While the compensation model for King’s Hawaiian is based on an employee’s potential to drive the company’s business, its rewards model is based on past performance or actions taken.

Today, Robinson and her team are having lots of conversations with managers and employees to understand the intrinsic motivators of highly valued employees so that they can create the right rewards and recognition for them.

“We’re finding cash is not necessarily the driver that motivates employees,” she says. “It can validate good work that is already done, but it certainly doesn’t always motivate.”

The team plans to retain some existing rewards programs, such as spot rewards that offer immediate recognition, while creating new rewards programs to recognize employees for exceptional past work, she says. Like motivation, rewards don’t need to be financial.

“For example, let’s say you have a family member who is sick and you need to visit them. We might pay for your plane ticket,” Robinson says. “That’s one way we can recognize someone we want to keep and make sure we are tying a reward to something that is meaningful to them.”

Challenges and lessons when ending performance reviews

When eliminating performance reviews and migrating to a capabilities compensation model, it can be challenging to set the appropriate compensation level for each role companywide. That’s because each role needs to have the fitting job description identified and the correct scope of work mapped out, Robinson says. 

Other challenges included teaching managers to conduct more frequent feedback sessions with direct reports and working through the anxiety that managers and leaders felt with the change, Robinson says, noting she initially underestimated the depth of their apprehension.

“We have people who have spent 20, 30, 40 years with us and have had only this one view of performance management: It’s like ripping off a Band-Aid and it’s not comfortable.”

With time, employees have become more comfortable with the new approach. She has since learned to prepare for a greater level of employee anxiety when changing long-standing HR practices, she says.

Happily, she also has learned that employees feel the new system better reflects their contributions to the company, she says.

These takeaways are helping her to execute on her two people strategy goals, Robinson says. Those are: 1) recruiting, developing and rewarding King’s Hawaiian employees who demonstrate the company’s Aloha values of excellence, dignity and telling it like it is, and 2) creating a work environment that reflects the company’s products.

Says Robinson: “I want to create the same irresistibility that our consumers experience … for our employees and our prospective employees.”