Back in February I wrote a post “Not Even Pay-for-Performance is Safe”. It mentioned some companies that are taking a new approach to performance appraisals, performance ratings, merit budgets, etc. Most articles on this have not provided much, if any, detail on how the compensation side of it works.
One the companies that is “blazing a trail” is Adobe. Rosemary Arriada-Keiper, Head of Rewards at Adobe, graciously agreed to an “interview” on some of the compensation details of their new program.
Please welcome Rosemary.
1)Has Adobe completely done away with performance appraisals (evaluating past performance)?
Rosemary: Yes, we no longer have performance appraisals. While we still believe we need to evaluate performance, we believe this should be done on an on-going basis through regular feedback provided during “check-ins”. These are on-going discussions between employees and managers about goals, status against them, what is working, what is not, whether goals need to be modified or reprioritized given the environment, etc. If there is feedback coming from customers or peers, those are discussed as well. We also encourage conversations around career growth and development. The idea is that these discussions happen real time, when the feedback is relevant as opposed to logging it somewhere and remembering to discuss it at some later point. These “check-ins” are not written. The frequency of check-ins is determined by the employee and manager. We encourage at a minimum that they happen quarterly but we typically see monthly in practice.
2)Has Adobe completely stopped giving performance ratings?
Rosemary: Correct, we no longer provide a rating. We found that ratings were creating a lot of angst in the organization because employees were more focused on the “label” than the actual feedback itself. The goal is that because of “check-ins” both managers and employees should have a very good sense of performance by the time managers need to make compensation recommendations.
3)If #2 is “yes” then how do you decide what salary/merit increases to give people ---- assuming you “pay for performance”?
Rosemary: Merit budgets are given to managers and differ based on roles, geographies and position in range. We allocate different budget pools for sales roles vs. non- sales roles. This is because salespeople can earn upside as a result of their commission structures. We do not provide managers any type of matrix or guidelines as to what they can provide per employee. Instead, we educate them on the ranges, how they are derived, and how they should think about using the range given the budget they have. Each person who receives a budget is held accountable, but we do allow budgets to be exceeded at the manger level and only hold to the budgets at the VP level.
4)You mention there are rewards for key talent. How are key/high performers selected if there are no performance ratings?
Rosemary: We have a separate process for that whereby discussions about key talent happen with leadership in the respective organizations. We do identify who they are and they are “tagged” in the system as Key Talent (yes/no) but no rating per se. Key talent receives stock although occasionally they get cash. Both managers and individual contributors are eligible. The total pool is no more than 2% of the employee population.
5)What has been the response from both managers and employees about this change in program?
Rosemary: Very positive. There’s lots of relief around not having to write annual performance reviews and label employees a certain way. That said, the conversations managers have with their employee has had to shift from “these are the guidelines given to me by HR that I had to follow” to why they made the decisions that they did. It has really pushed managers to own their decisions and be able to articulate them (and defend if challenged). As a result we have gotten lots of requests from them to provide tools/resources/education on how to have these conversations (particularly the difficult ones), role playing sessions, etc.
6)Do you have any other type of compensation plans that employees participate in?
Rosemary: We provide spot bonuses, gift cards, etc. for recognition awards. We also have a formal bonus plan for our management and VP levels.
A big “thank you” to Rosemary for her time and input. This goes a long way in helping us understand the Compensation details of this new approach.
Any thoughts or comments for her?
Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expat twice during her career. Her true love is working with local national issues. Jacque has the following certifications: CCP, GPHR, HCS and SWP as well as a B.S. and M.S in Psychology and an MBA. She belongs to SHRM, Human Capital Institute and World at Work. Jacque has been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications.