Global accounting firm Crowe Horwath has recently eliminated traditional annual performance reviews and substituted a less structured “Measure What Matters” program that requires all supervisors to have more frequent informal meetings with their direct reports.
The company has its headquarters in Chicago. It employs more than 3,500 people, including audit and tax professionals, administrative and HR support staff and financial consultants, in 30 U.S. locations and offices abroad. Julie Wood, chief people officer, says the company is making the switch both as a response to
“We do an annual engagement survey and we realized that in spite of the time and money we were spending on performance management something was missing,” she says. ”Our people were not getting what they necessarily need and we just weren’t seeing the value.”
Wood also acknowledges that more than half of the company’s workforce are millennials. “Clearly the feedback they are providing us in terms of what they are looking for, how they learn and the best ways to give and get feedback has been one of the things driving the transition dialogue,” she says.
The status quo
Prior to changes implemented on June 1, Crowe Horwath had a very traditional performance management system. “Company-wide goals were established and they were cascaded through the business units and down to individuals,” says Wood.
Once goals were created, managers were asked, but not required, to hold mid-year check-ins. However, there was an obligatory end-of-year discussion where employees were rated on a traditional four-point scale from “consistently exceeded expectations” to “did not meet expectations.”
“At the end of the year the ratings scale was used in a consensus series of annual meetings to validate a rating for every person in the firm,” says Wood. “These ratings were part of the initial modeling for raises and bonuses.”
Measure what matters
With the elimination of cascading goals, Wood says each employee now creates a “Measure What Matters” plan.
“They can access one-page business plans for each of our business units and sit down with their performance managers to identify three goals at the beginning of the year that are really relevant to what it is they need to be contributing and focused on,” she says. “It’s a dynamic conversation piece because goals will change throughout the year.”
With elimination of the ratings scale, a “traffic light” is now used as an indicator to show whether employees are on track or they are at risk of not achieving their planned goals.
Wood says the company has also embedded developing leadership streams, or expected capabilities, into the plans. “We need to develop leaders at all levels of the company, even among people who are new on campus,” she says.
Guidance published by the company suggests that performance managers and individuals assigned to them should meet informally at least once a month, even if it’s only for 10 minutes. If a staff member indicated they want more frequent meetings, sit-downs can be as often as once a week.
“Basically the purpose of the meetings is to find out what’s working and any additional supports the employee may need. But there is nothing in the system that’s going to require people to punch a clock or document each time a casual meeting occurs,” Wood says. Nevertheless, she notes that there is an open comments section in the Measure What Matters plan where performance managers and employees can make periodic notes.
Communicating compensation and bonuses
Like all companies that move away from more traditional performance management systems to a new model, Crowe Horwath faces a challenge communicating to employees how raises and bonuses are linked to the achievement of annual objectives.
When it comes to base salary, Wood says it has always been largely driven by the market and that will continue. “We will be talking to employees about how we set market-based compensation and whether they are at the top – or even above in some cases – the middle or low end of the range,” she explains.
“We need to develop leaders at all levels of the company, even among people who are new on campus.”
As far as bonuses are concerned, the company just paid out bonuses for last year and the whole bonus structure is under review. “We might move to more frequent smaller bonuses rather than one annual amount, but it hasn’t been decided yet,” she says.
Wood says the consultation process that led to the first iteration of the new Measure What Matters program was like “a mini crowdsourcing” exercise that incorporated ideas from many internal stakeholders. As a result, she is not surprised that initial feedback to the rollout has been very positive.
“As we pivot to the new approach, we will include more questions in our annual engagement survey to see what is working,” Wood says. “We also have a SharePoint site where people are posting questions and feedback.
“We still have time tracking which measures how much time people put in, but the effectiveness of our new program will be largely determined by whether or not employees tell us they are getting more value from our revised career management program.”
