Adobe’s New Approach to Performance Reviews

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. 

 

Comments

[Jay Schuster]

GREAT piece of work! Talk about 'breakthrough thinking' this is certainly it. What a powerful round table discussion this would make with Rosemary and Jacque moderating.

This shows that 'customization' for an individual situation makes real sense. One possible 'unintended benefit' of this solution is avoiding the constant focus on the 'performance review form' and not emphasizing the most important issues such as feedback, dialog, and goal setting.

Congrats to Adobe, Rosemary, and Jacque.

[Jacque Vilet]

Thanks Jay. Personally I have always felt that HR should give managers a budget and let them distribute it as they see fit. The only way to get managers to own their "people" responsibility is for HR to quit setting such strict parameters that managers end up feeling like "HR made me do it". Let them learn by doing ---- even if they sometimes have to learn the hard way.

[Dan Walter]

I have just returned from the annual WorldatWork Total Rewards conference. The buzz around the simplification or elimination of performance ratings and reviews was a key takeaway from the event. It's great that Rosemary was willing to provide some specifics around how Adobe has approached this long-term issue.

My one concern with the approach is this: How does the company ensure that all of their managers are doing a good job at both the frequency and consistency of the "check-ups". And how do managers keep track of the progress of the individuals throughout the series of checkups?

I personally find most performance review processes to be unproductive or worse, but am always looking for details on how to avoid the potential downside of the alternatives.

[E. James (Jim) Brennan]

Ownership of the performance management process belongs at the immediate-boss level, as demonstrated here. Interesting, how the simple elimination of an overall summary judgment rating can shake things up in such a positive way, inspiring supervisors to upgrade their relevant skills. Continual performance review with ongoing goal revisions and constant feedback is definitely the right way to go.

Remain curious, however, on whether the "no rating nor documentation" practice remains in effect when dealing with seriously deficient performers. From my labor relations background, imagine it very hard to engage in any kind of defensible progressive disciplinary actions without documented written proofs of attempted positive corrective steps, counseling sessions, warnings, etc. Ideally, "bad fits" should lead to reassignments rather than pay cuts, demotions or terminations, and hope that is part of the Adobe approach.

[Jay Schuster]

What I like about the Adobe solution is that it probably 'fits' whatever leadership is trying to do with the performance management process. In a time when organizations are 'buying' automated solutions and 'check lists', the Adobe people are passing 'best practice' and doing something that fits the solution they believe works. That is a wonderful way to go in my view.

I just like folks that are not 'following the latest leader' and instead are looking to how they can best match people with business goals and doing whatever it is.

Interesting comment about the WorldatWork conference. I would love to see Rosemary and Jacque on the program.

[Jacque Vilet]

For those of you who are concerned about whether this type of approach would stand up to legal scrutiny --- Littler Mendelson says that if traditional appraisals are not written or communicated well, then not having them is actually a big plus.

And typically appraisals are a very poor “paper trail” to use for termination situations. The upshot is: Why write appraisals that likely won’t meet legal muster? You have to get lawyers involved in a termination process anyway ---- so you might as well develop a paper trail under their guidance.

A lawyer will instruct you to go through the typical PIP process. Write up #1: Define the problem and what you expect as improvement and communicate with employee. Wait 30 days and review. Write up #2: Communicate with employee again on what to improve or the employee is terminated. Wait 30 more days and then fire.

We all know that this process is not started until the company has already decided to fire an employee. Rarely in my experience has outcome of a PIP led to the employee staying with the company.

Here's link to Littler comments: http://www.washingtonpost.com/national/on-leadership/the-corporate-kabuki-of-performance-reviews/2013/02/14/59b60e86-7624-11e2-aa12-e6cf1d31106b_story.html

Netflix has done away with PIPs and given problem employees huge severance pay. They figure it's cheaper and less time consuming than going through PIPs and legal fees. Other companies seem to be following.

[Rosemary Arriada-Keiper]

To answer Dan's question as to how Adobe is ensuring that manager's are doing a good job at both the frequency and consistency of the check-ins, we do this through short pulse employee surveys that we send out throughout the year. It's an opportunity for employees to share their honest feeback as to how things are going. We position it as healthy feedback that helps us to know what is working and what is not. In terms of how managers keep track of the progress of the individuals throughout the series of check-ins, it varies. We really don't prescribe any one way of approaching this but offer up a variety of tools that managers can leverage which range from goals setting templates to score cards to notes in a notebook. It really is up to each manager and what works form them.

[Rosemary Arriada-Keiper]

Agree with Jacque re the performance of poor performers. If companies really want to terminate an employee it will in most cases involve legal and the very steps described. The check-in approach really has not impacted that process very much at Adobe other than to perhaps alleviate the "shock" effect that employees expereince that something was wrong because it is not addressed until the annual reivew. The Check-ins allow an opportunity for the feedback to be provided throughout the year, real-time and in the moment, so it is not a surprise during the annual review when they are hearing it for the first time.

[Shawn Miller]

This is a great idea and I like the sound of the way it's been implemented at Adobe. Curious as to how long it took to arrive at the 'go' decision then to get this up and rolling?

Actually, I love Jay's idea about an interactive round table with Rosemary and Jacque to learn more, for example:

Agree with Jacque's comments about managers taking ownership versus "HR made me do it," but are there any concerns regarding potential pay discrimination claims (and with the various methods of documentation, how the company would defend against that)?

Perhaps best to start brainstorming within my own team for new thinking around our business and current processes (what an "aha"!?!?!).

Thanks for the inspiration.

[Jay Schuster]

I would suggest that Rosemary and Jacque do an article to submit to WorldatWork's 'workspan' magazine. I have not thought through what the 'drift' of the piece should be but the combination of a solid unique solution and two writers working together to make it interesting would probably work. Pat and I have never been able to 'hit' on a 'workspan' article and mostly wrote for the 'WoWo Journal' but this topic written in a 'non-technical' fashion could make the grade.

I will 'go away' on this topic now. But in a profession that has unfortunately become 'same-old' in lots of ways this interested me a lot.

[Tony Bergmann-Porter]

"Netflix has done away with PIPs and given problem employees huge severance pay. They figure it's cheaper and less time consuming than going through PIPs and legal fees. Other companies seem to be following."

Perhaps it's time to do away with the preposterous fiction of employment at will, and offer all employees an employment contract with specified severance payments under given conditions of fault/no fault termination.

[Jacque Vilet]

Agree with you Tony. But I can never see this happening ---- our "at will" practice goes way back to the slavery days when landowners owned slaves. "At will" has its beginnings in a history that is deeply engrained. Just shows how deeply engrained one's culture is ---- even if one is not always aware.

[Ronika Jandial-Gilbert]

Typically performance ratings may be a criteria for reduction in force considerations. If you are not capturing ratings , how do you handle reduction selections?

[caroline thomas lingham]

Thanks for sharing Adobe's new approach. With no performance reviews with a single money purse to decide who gets what, it looks like the power has shifted to the managers even more. This works if we have all good and fair managers; how positively sure are they of the quality in managers and how do they ensure/measure it? I can see this situation being abused in Asia where nepotism and favoritism is high.

How do they ensure the quality of managers in their organisation and that employees are treated fairly for their talent and paid fairly too.

[Laura Manganotti]

interesting article, Thank you

[Jacque Vilet]

I Ronika and Caroline ---- in Rosemary's absence let me respond.

Ronika --- In situations of lay-off the direct managers should have a good idea who are the weakest performers. They have to know that since performance has played a part in their awarding merit/pay increases. They had to know in their own mind who the poorer performers were. Like this entire new system --- managers are held accountable. They have to get used to it.

Caroline ---- Agree that a company shouldn't just unleash this program if managers are weak. Results would be a nightmare. It begins with sincere and vocal top management that they support this plan. At Adobe top management provided a strong leadership role. So it begins with management. And it may take some time talking to and working with top management to help them understand the benefits. Get the CEOs direct reports' support ---- they are probably tired of hearing complaints from their managers about how tedious writing reviews is!

It will take pretty intense manager training so they are prepared for their new role. They will need support in this process. But they own it. It would be ideal if top management adds this new responsibility to each manager's goals for the year so that part of the bonus is dependent on doing this well.

It is a foreign concept to us in HR to give managers this much discretion but HR is always saying that managers need to own their people. Well this is a great opportunity to start that!