Up close and personnel

Eleven years into his job, MV Jagannath Rao still hates the annual performance appraisal. As a senior computer scientist at Adobe India’s Noida centre, he gets to do what he enjoys most — writing code and building software products. But he dislikes the hardsell involved in the once-a-year ritual of having to recall and list out the accomplishments of the past 12 months and then sit through an uncomfortable conversation with his supervisor. “Managers are human: they remember your most recent work, not what you did earlier in the year. But it’s embarrassing to keep saying, ‘I did this. I did that’,” says 38-year-old Rao.

A couple of years ago, when the San Jose-headquartered software giant said it was getting rid of annual performance reviews in favour of simpler, informal and regular Check-ins, Rao was relieved. Ever since, performance-related discussions with his manager are frequent and meaningful, minus the cumbersome paperwork and stress. “It’s not a one-way street anymore; it’s a lot more iterative. My work gets communicated regularly and is fresh in the manager’s memory,” he says.

Walking the talk

In November 2012, Adobe broke away from one of the most sacred and despised corporate traditions — the annual performance review or appraisal. Led by Global HR head, Donna Morris, the entire process was junked in favour of informal and frequent performance updates, in line with the company’s changing business model. From a boxed software company with as much as two years between new product releases and a few updates in between, Adobe had transitioned to the cloud, where its products are now available on tap, for a subscription fee. Updates and new features had become frequent and through the year, requiring its teams to innovate in a dynamic space. Measuring output once a year, therefore, made little sense. “Our people could not really wait for the end of the year to know how they did,” says Jaleel Abdul, senior director of people resources for APAC and Japan at Adobe.

The new approach was rolled out across Adobe’s global locations, including India, where a third of its product development workforce sits. Naresh Chand Gupta, managing director, Adobe India, and senior VP for its print and publishing business unit, says the most widely used model that ranked people at various points on a bell curve (with a few top and bottom performers and everyone else in between) wasn’t relevant anymore. “The bell curve was straight out of Jack Welch’s GE model, suited to industrial organisations doing repetitive work,” says Gupta. Work at Adobe instead involves building software products used by web designers, movie makers and photographers and is inherently creative in nature. “If you put too much competition pressure, it’s detrimental to output. There’s plenty of teamwork and cooperation required,” explains Gupta. The bell curve employee ranking system ends up having just the opposite effect by pitting employees against each other. “We wanted to create a model where we got the benefits of a competitive environment and not put pressure on employees. You still have competition but you are competing with yourself.”

Making Check-ins work in India is vital to Adobe’s fortunes. With over 3,200 employees, India accounts for over a quarter of Adobe’s 11,500-strong global workforce and is the company’s second-largest location after the one in US. That number will only go up with the addition of a new campus each in Noida and Bengaluru, bigger than the ones which are currently in operation. “We expect to end 2014 with around 3,300 people. This has been our biggest hiring year,” says Abdul.

Transition period

The formal transition to Check-ins began in mid-2012, involving 10,000 employees globally and 2,000 in India. It started with the HR department conducting workshops across locations and functions to explain the new approach and how it could be conducted, with onsite coaching support as well. An internal website was launched to provide information and tools to employees to work with the new programme. 

Abdul explains that the traditional annual performance appraisal system was not really substituted with another system but it was more like letting go of an annual ritual that had no real sense of its purpose being clear to anyone in the organisation. “Check-in is not a system. It is a philosophy.” 

Informally, ahead of the actual shift, some team leaders and supervisors had been asked to try out quarterly performance discussions to see how it worked. Among them was Rekha Agarwal, who leads a team of 15 engineers in the Core Technology Group. Agarwal recalls that, initially, two of her high-performers were unhappy with the new system, as they were used to the ratings that came with annual review. They felt the earlier system was better as it put them ahead of team members. “This is how our education system works. We have to be first in class in school or college. Now, we’re not telling them that and they feel bad,” she says. It took a couple of quarters for them to realise the new process was more effective and transparent. 

Checking in

Check-in starts with setting of expectations at all levels, in line with overall business goals. “We have put up the CEO’s scorecard and priorities for 2014 on the intranet. Any employee can log in and see how they align with which part of the corporate philosophy,” Abdul says. Then comes providing ongoing feedback, arguably “the most painful part”, he admits, with the frequency of Check-in meetings determined by the needs of a function, vertical or project team. At Agarwal’s team, for instance, while the informal mandate is to do Check-ins at least every quarter, they happen sooner based on business requirements, sometimes even on a weekly basis.

Under the old system, employees were assigned points and bucketed into four categories that defined performance — low, solid, strong and high — which determined their annual raise, bonus and promotion. The problem was that Agarwal, like other managers, had to force fit her team into any one bucket, with no room for intermediate points if she deemed fit. “If I had two people working in the same team and with similar impact on a project, I had to differentiate between them,” she says. 

The points system is still in force in a similar but continuous scale of performance: they can be awarded every three months. Thus, through the year, employees can improve based on the manager’s feedback and increase their final score. “Employees are more trusting of the new approach because of the regular and focused feedback,” Agarwal adds.

There’s also no form to fill now. “We didn’t want a new structure to replace the old one without consequent change in employee behaviour,” says Abdul. “Employees and managers agree to record goals in a format they mutually agree on and that works for their business.”

Finally comes the growth and development aspect of the exercise. “This is owned by the employee and supported by the manager,” says Abdul. “You need to know what your aspirations are and we will give you the resources to help achieve your career goals.” These could range from connecting employees with a learning programme or funding their learning efforts. While, in a way, this puts the onus of charting their careers on the employees, it also requires managers to be more involved with employees’ career growth. “This is an indication of managerial maturity while operating in an ambiguous space. We are giving them a lot of latitude and responsibility to manage,” says Abdul.

How does this impact rewards? That is still a judgement call, says Abdul. Managers can’t routinely take the easy way out and do an equitable distribution, but have to take the effort to understand and evaluate performance more judiciously. It may turn out that a couple of people are rewarded similarly, but that would be based on the performance assessment by the manager, open to scrutiny. 

Check-ins are a welcome change for managers who were uncomfortable with forced bell curve allocations of rewards and the justification they had to give each time. Rahul Vishwaroop, senior quality engineering manager leading the product testing team for InDesign at Adobe India, recalls it as an “annual punishment for managers”. The 40-year-old Vishwaroop endured it during his nearly 15 years with Adobe, both as a team member and supervisor. “For many of us, the appraisal system doesn’t come easy. I like people management but trying to document that is something else. Given a choice, I wouldn’t do that,” he says. His team includes 18 people — 15 in India, two in China and one in Japan — who are responsible for the overall quality of the product. Four report directly to him, while 11, who are younger in the system, are assigned to a manager who, in turn, reports to him. Vishwaroop often found that appraisals had quite the opposite effect — employees were less interested in performance discussions and more in the salary raise or promotion they were hoping to get. “Appraisals would coincide with rewards. People wouldn’t focus on the feedback,” he says.

Under the new system, he meets direct staff once every two weeks and indirect staff every eight weeks (for overseas managers, it is a video call). “We keep it as an open agenda meeting. We talk about progress against goals, course correction, recalibration or change of goals,” he says. “Overall, I’m happier now than I was in the past. Unpleasant surprises are reduced or eliminated.” Among Adobe India’s earliest employees — from when it had barely 25 employees — Vishwaroop is clear that Check-ins are the way ahead in transparency and efficacy. “Now, managers don’t need to colour their feedback in such a way that it ties in with the reward.”

Adobe is also constantly monitoring the system to check how well it is functioning. In addition to feedback from people leaving the company, it also conducts theme-based internal surveys to gauge employee mood twice or thrice a year. The results are collated within a couple of weeks and quick action is taken on areas of concern, says Abdul.

Benefits buildup

The benefits of Check-in have been felt across the company’s global operations, with the 80,000-odd man hours managers spent doing the exercise each year dispensed with — in India, the switch meant saving about 20,000 man hours. Earlier, the nearly five-month exercise would begin in early November and continue till March the following year (Adobe follows a December-November business cycle). Now it’s an ongoing process without disruption of work or sleepless nights for managers and their teams. “We forgot why we started doing appraisals in the first place. We got so enamoured by the system that it became a bureaucratic process. The governance of it overtook the substance,” says Abdul.

The company claims that internal engagement scores went up, as reflected in surveys. “Our engagement scores over the past two rounds at country level have moved up by 6%,” says Abdul. Voluntary or “regrettable” attrition (people quitting) post the review season has dropped to single digits, even as involuntary attrition (people asked to leave) is higher, reflecting that performance is being closely aligned to the organisation’s goals. “After having let go of the rank and rating method, the quality of focus on performance has actually gone up,” he adds.

A direct correlation between the new initiative and bottomline can’t be established — Adobe declined to share numbers that would help establish an effect on performance. “Our voluntary attrition used to be in early double digits until 2012. In the past two years, we have been able to bring it down to single digits. A combination of factors, including improved quality of performance conversation, contributed to this phenomenon,” is the only comment from a spokesperson. “Employees feel this is a fairer system,” says Gupta. “In stack ranking, they experience a sense of helplessness. In this system the sense is, ‘At least I control my destiny.’ To us, that is a validation of the system’s success.” 

In their February 2014 book, Scaling Up Excellence, Stanford professors Robert Sutton and Hayagreeva Rao mention there was a 50% increase in involuntary departures and a 30% drop in voluntary attrition within a year or so of the programme being rolled out. But, Sutton cautions, “Yes, those numbers were shared and approved officially, but they are only for the first year or so of the programme.”

Hurdles ahead

Check-in hasn’t been without its share of challenges. For its 500-odd managers in India, it has been difficult to adapt to, given the ambiguity involved. “The conversation is shifting from, ‘when will I get a promotion and raise’ to ‘how do I learn, add value and contribute to the company’s business objectives’. Those are the kind of conversations we’re helping managers have with employees. And that’s a hard one to do,” admits Abdul. 

Adapting to a new approach was a painstaking process and managers, the key pillar for this to work, were the hardest to orient. “They come from a structure saying, ‘Give me a form; give me a template.’ We had to invest time in making managers unlearn the hierarchical ladder of performance. To do this and yet engage employees and be seen as fair, is a challenge for them,” says Abdul. “One of our biggest change management efforts has been to equip managers for this reality,” he adds.  “We have spent an approximate 2,400 hours around these efforts in the last year alone.”

Adobe isn’t in the clear yet. A July 2014 case study prepared by Stanford Graduate School of Business says, “survey feedback highlighted the fact that some employees did not fully understand how the Check-in approach worked — they were unclear, for example, as to how to set expectations. In this context, one of the major challenges associated with providing autonomy to leaders was the fact that the application was inconsistent across groups. Survey results revealed that some managers were still uncomfortable having difficult conversations with employees. This potentially limited their ability to manage performance and potentially lead change.”

Nischae Suri, partner and country head, people and change, KPMG India, says that while companies such as Microsoft, Kelly Services and Juniper Networks are reported to have junked stack rankings, the problem lies elsewhere. “The bell curve system is just a tool. It’s about how you administer it.” He says performance management has been reduced to an annual administrative process done without much thought. “When you view it as a task that has to be finished by the 31^st, you will meet the bell curve requirement but will destroy value in the organisation,” he says. In other words, Adobe’s Check-in appears to be a step in the right direction. “It’s a simple practice of having a dialogue on performance,” says Suri. With employees just about warming up to it, looks like Check-in is still being checked out.