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August 22, 2014 - Talent Management

Adobe Checks in With Performance Conversations

Frank Kalman

For most corporations, February is a relatively benign month.

The year-end scramble of budgeting for the year ahead is mostly in the rearview, as is the chaotic period of work that follows the prolonged holiday season.

But for Donna Morris, senior vice president of people and places at Adobe Systems Inc., February was for a long time a month of demarcation.

For it was typically every February that Morris would bear witness to an unsettling trend: Many of the best employees at the technology firm would leave. Among the chief culprits: the annual performance review. More specifically, stack ranking.

The San Jose, California-based company, known best as a publisher of creative software, had long ago adopted the stack ranking performance management process — a forced distribution system requiring managers to rank employees on a curve, cutting the bottom 10 percent from the organization. The system was popularized in the 1980s, when General Electric Co.’s then-CEO Jack Welch touted it as a central component to the conglomerate’s high performance.

Because 11,000-employee Adobe usually concluded its performance review cycle in January, February typically represented the period in which the infighting over rankings had concluded, and those frustrated at the contentious culture the process created opted to take their talents elsewhere.

“We would go through this process,” Morris said, “and despite the intention of giving information and giving performance feedback to individuals, we would see an increase in voluntary attrition, often by employees that were core to our success.”

By the beginning of 2012, Morris had had enough. Buoyed by a broader strategy shift at Adobe, Morris, with the support of her team and the company’s senior leadership, made the call to ditch the stack-ranking system.

Its replacement: “Check In,” an approach of more frequent, informal performance conversations, centered on deconstructing the prim rating and reporting structure of the annual review in favor of quarterly, monthly and even daily performance conversations.

Now, a little more than two years in, company executives say Check In has sparked a change in Adobe’s culture. Voluntary attrition — employees deciding to leave the company on their own terms — is down 25 percent in the past two years, Morris said. Adobe’s stock price has also experienced a steady climb, which the company attributes to its revamped business model.

Still, the switch wasn’t easy. Decentralizing the previously top-down, formal process took months of planning, and Morris and other executives described training managers on the discipline of maintaining their own Check In process as “ongoing education.”

Evolving Business

In November 2011, Adobe announced a strategy shift. Propelled by trends in mobile technology, the company said it would move from generating most of its business from licensed software to focusing on digital media and marketing.

Among the most noteworthy changes: the company would halt development of its Flash Player for mobile devices and put more emphasis into developing HTML5, a coding language quickly turning into an industry standard. Adobe also said it would shift sales of its Creative Suite software from a licensed purchase model to a digital subscription service.

“At the same time, internal to the organization, we were making a number of organizational changes to align with that strategic shift,” Morris said, “and we were preparing for another of what we would call our annual performance review cycle.”

Under Adobe’s previous performance management process, Morris said every employee and manager would put together a written performance evaluation to be submitted to HR. “The process would involve everybody in the organization knowing what their performance rating was, everybody going through a ranking process to determine compensation terms, cash as well as equity,” Morris said. “And coming out of the process, everybody was advised on where they stood in February.”

But the stack-ranking process had always been a thorn in Morris’ side, mostly because she said it focused too much on the administration of ranking employees, assigning compensation and eliminating low performers, and not enough on helping people improve. The process, in essence, had become another turgid, bureaucratic HR practice disliked by nearly everyone.

Stack ranking is designed to slot employees into different levels of performance. This called for high-achieving employees — called “A players” — to be assigned to the top 20 percent, productive employees to the middle 70 percent and unproductive employees to the bottom 10 percent.

Under Welch’s model at GE, the top employees would receive bonuses and rewards as motivation, and the bottom 10 percent would be fired — giving it the nickname “rank and yank.” The aim is to motivate mid-range employees to become top performers, with productivity — and profits — presumably increasing as a result. Despite some variations, the principles of stack ranking became pervasive at many large companies.

Stack ranking’s critics have grown steadily. And although many firms have moved to ditch the model, others have held steady. Yahoo Inc., for example, recently initiated a similar system to evaluate performance amid efforts to turn around its business.

Those against the model, like Stanford University business management professor Bob Sutton, say it creates a toxic environment that promotes unethical behavioral and kills morale. “American industry has been using a practice that’s demonstratively damaging,” he said. “And they’re just now getting around to changing it.”

The one benefit of stack ranking may be its ability to collect comprehensive data on companywide performance, providing executives with a broad view of talent.But Sutton said the data collected through the process is unreliable because managers are likely to game the system so they don’t have to fire any staff.

In Adobe’s case, the final straw came when Morris was visiting the company’s offices in India. Adobe had in the past tried to tweak its stack-ranking process in an effort to tame the system’s least-attractive elements.

But during an interview with a newspaper reporter in India, Morris said the reporter made a comment about how most HR practices appeared steeped in bureaucracy, providing little in the way of enabling real business results. This put her over the edge.

“It struck me to say, ‘Correct, and some have to be changed,’” Morris said. “She asked if I could give an example, and I said performance reviews. I thought performance reviews should be abolished, because I didn’t necessarily see a correlation between the effectiveness of that process and the desired outcome.”

Checking In Performance

To find a new approach, Adobe turned to an unconventional source: its own employees.

Ellie Gates, Adobe’s director of enterprise global learning, who led the implementation of the new approach, said the team decided to have communications craft a blog post explaining the plan to ditch stack ranking. The blog, sent out in March 2012, also asked employees to suggest what they wanted to do instead.

“We needed to co-create with employees,” Gates said, to find out what elements of the process needed to remain, what needed to go and what could be added that perhaps were not top of mind.

“There were very clear messages,” Gates said. “No rankings — get those out of here. No ratings. Give us more feedback. Help us be more clear around what’s expected of us.”

Morris said the crowdsourcing process crystallized one of the original visions she had for Adobe’s new approach: It would remove administration, provide clear expectations and ongoing feedback to employees, and allow managers to have a more active role in the process.

By July 2012, Adobe had branded its new approach as Check In and started to roll it out. Then HR developed a campaign to introduce the concept, with the aim of being fully operational by the start of 2013.

Morris said HR initiated a series of learning events. The HR team used “Connect,” the company’s Web-based meeting platform, to host leader-led sessions in which Check In concepts were introduced. They also took to more informal social sessions with employees to get feedback on the approach.

Even though Check In is designed to strip the formality of a previously formal process, its components are purposeful and deliberate.

According to Morris, there are three broad goals of Check In. First, all employees must understand what’s expected of them; second, all employees and managers must participate in Check In; and third, the system must provide employees with the opportunity to improve.

Most important, Check In would be left entirely in the hands of managers without meddling on the part of HR, now known as “people resources” within Adobe.

“There is no mandated form. There is no mandated process,” Morris said. “But there is an expectation that everybody in the company knows what’s expected of them.”

Morris said Check In conversations are required once a quarter, although some managers have chosen to incorporate them into weekly and monthly one-on-ones. During those conversations, managers are expected to set clear expectations for the employee. Managers and employees also are expected to provide specific feedback on performance.

But Check In isn’t just a one-way street. Morris said employees are expected to provide their managers with feedback on performance in the same conversation.

The final component to Check In is how annual compensation and merit increases are awarded. Previously, Morris said HR would provide managers with a budget for compensation, with parameters based on rankings and ratings. With Check In, managers are given a budget and then are left to determine how it’s distributed.
Morris likened the concept to Adobe managers running their own business.

“They’ve got a budget, they now have the expectations set for their team, they know the performance of individuals and they’ve been the ones participating in feedback,” Morris said.

Eric Cox, senior director of e-commerce at Adobe, said the freedom to assign compensation has been the most positive element so far for him.

“It gives me an opportunity to try and manage that component within my own team, which is what I have control over,” Cox said, adding that the compensation and rewards process is more “organic” now that he has complete control.

Nuanced Feedback

Moving to a more holistic process hasn’t been entirely smooth.

Morris and Gates said the biggest hurdle has been conveying the nuances of Check In to managers. While managers have largely embraced it, maintaining ongoing performance conversations — specifically, providing proper feedback — was something the company needed to work on.

So Adobe brought in leadership consultant Stephen Miles to work with its executives and managers on how to properly provide feedback.

“The problem is that most executives have no idea how to actually deliver content when they are having a Check In with one of their direct reports,” Miles said. “At the same time, the direct report has no idea how to receive the feedback, resulting in something that had good intentions from both parties, but not being satisfactory for either party.”

Miles outlined the most important elements for both giving and receiving feedback.

For giving feedback:

Treat people holistically by observing what they’re doing well and reinforce those behaviors. Offer things they can augment to be more effective. Collect data throughout the year, so when performance conversations occur there are meaningful things to talk about. Be prepared to bring multiple examples with context of each situation.

When receiving feedback:

Assume good intent. Listen to what the person is saying without getting defensive. Ask thoughtful questions to enhance the nuance of the feedback. Ask for examples to have a better understanding of the suggestions with context. Avoid reacting in the moment; instead, let it sink in. If further discussion is needed, come back at a later point with a thoughtful response.

Gates said Miles’ coaching helped Adobe’s managers rethink the notion of feedback. “It’s a shared accountability model,” she said. “That’s a huge shift.”

Pushing Ahead

As Adobe heads into its third round of Check In at the start of 2015, Morris said the approach is hitting its stride. “People are actually more aware of their performance today than they were ever,” she said.

Though each department or manager within Adobe may have a different approach to Check In, Morris said performance conversations are happening all the time. Cox, the e-commerce director, said Check In conversations are now a normal part of meetings he has with his direct manager. “We have a weekly one-on-one where we talk about business items,” Cox said. “And, invariably, we talk about Check In stuff as well.”

Cox said he especially likes the personalization Check In brings to performance conversations. Because he’s able to form his own system, Cox said he has implemented individual development plans into the Check In process, which employees can now use as a resource to set goals and manage their own performance.

As for record keeping, Morris said HR lets managers decide how to maintain records. Talent reviews, which Morris said the company has with its board of directors once a year, are now more holistic and rich because talent discussions are now more common.

“We clearly do have an overview of who the key talent is at Adobe,” Morris said. “And it is not based on what their rankings and ratings are. It’s based on discussions that happen all the way from the manager talking to their respective director, and the director talking to the VP, and the VP talking to the SVP, who is part of the discussion with the CEO.”

Check In is also more efficient at purging the organization of low performers. With performance conversations more frequent, employees constantly know where they stand. And because expectations are constantly on employees’ minds, those who are not meeting standards are likely to see the writing on the wall in the moment instead of at the end of the year.

As a result, Check In has helped Adobe create a culture where underperforming employees are more likely to voluntarily leave the company, Morris said.
Yet even though some choose to leave on their own doesn’t mean the “yank” of “rank and yank” has entirely ceased. Involuntary attrition — firings, layoffs — at the company has more than doubled from 2012 to 2014, Morris said.

“People should always know where they stand, and that’s what Check In is about,” Morris said. “And that means that if I’m not performing, I should be given feedback on how I can improve my performance. If ultimately I’m not able to improve, then a decision might need to be made about my employment.”

Adobe’s challenge moving forward is continuing to improve at providing feedback. Gates said the HR team continues to add support tools and resources to its employee resource center for managers to use when conducting Check In conversations.

Additionally, Gates said the company is now working to broaden the approach globally. She also said the team is working to improve managers’ emotional intelligence — the ability to more consciously monitor emotion — in performance conversations.

To be sure, Morris said a process like Check In, in its specific form, might not work for every organization. She also said Adobe has been lucky in the sense that managers have taken to the system with greater ease than she initially expected.

But ultimately the move to Check In has been made easier by Adobe’s broader strategy shift, which Morris said enabled the company to create a real, business-focused rallying call for change.

“As a company, we’ve clearly been delivering on the performance expectations that we had for ourselves,” Morris said. “That can’t happen unless you have great employees that are delivering on the performance expectations that are set for them. And that’s where we have great optimism that something is afoot here.”

Thanks to Check In, should that optimism shift, it won’t be long before Adobe is able to take action to get things back on track.

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