Following the example of Gap Inc., Adobe and Microsoft, who have announced they no longer rate employees in performance appraisals, Goldman Sachs told employees it would remove the nine-point rating scale from its annual performance review. The review, still run annually, will instead contain a non-numerical rating with three options (outstanding, good, or needs improvement) and move up to the summer instead of fall, to give employees more time to improve before bonuses are decided.
But without ratings — used to determine bonuses and the bottom 5 percent of workers who would be cut to make way for new hires — how will the bank make these quantitative decisions?In internal surveys, staffers requested “more frequent and constructive feedback” Click To Tweet
A report from the Wall Street Journal based on internal memos shed light on the new performance management system at Goldman Sachs.
The company will continue to do a 360 annual performance review. Employees are to be limited to reviews from six colleagues, instead of 10, to reduce the total time the reviews take (Deloitte estimated their performance reviews took up 2 million hours each year). Although the numerical rating system was removed, employees will still be rated as outstanding, good, or needs improvement. Ratings are frequently seen as demotivating and counter-productive, and although the three-point scale is an improvement, it is likely employees will still stress about getting less than “outstanding” and managers will rate their teams highly in order to maintain a positive front.
Providing high-quality and ongoing feedback is at the heart of our culture, and is an important investment we make in our people and the future of our firm
Still, Goldman Sachs is experimenting with more innovative systems for performance management. The new review system is one of many programs developed to retain junior bankers. In internal surveys, staffers requested “more frequent and constructive feedback,” and a web app being rolled out to some departments will offer just that. The tool allows employees to give and receive feedback at any time and is designed to encourage more one-on-one conversations between managers and employees.
The focus on culture and engagement comes at a good time — while the firm’s head count has grown 11 percent since 2012, compensation and benefits have dropped 2 percent. And as we know, culture outweighs compensation, and will be a necessary strategy to drive retention.
“Providing high-quality and ongoing feedback is at the heart of our culture, and is an important investment we make in our people and the future of our firm,” CEO Lloyd Blankfein and President Gary Cohn wrote in a memo to employees.
Disclosure: Reflektive does not have a business relationship with Goldman Sachs, but thought you could benefit from its performance management story, which was sourced through recent media coverage of their changes.