Amazon Is Overhauling Its Performance Assessments

Amazon Is Overhauling Its Performance Assessments

Perceptions of Amazon’s workforce management took a hit last year when the New York Times published a controversial feature alleging that the e-tail giant’s organizational culture was overly competitive and dog-eat-dog, that its performance management practices were hyper-critical, and that employees were effectively encouraged to stab each other in the back to get ahead. Amazon strongly disputed the Times’ characterization of its culture, but since then, the company has taken steps to demonstrate that it cares about its employees, soliciting more feedback about their satisfaction and and piloting programs where teams work part-time with full benefits and others work 30-hour weeks.

One of the main criticisms leveled in the Times piece was of Amazon’s performance review process, which uses “stack ranking” to grade employees on a curve and manage out the lowest performers, and which one organizational psychologist has likened to the “Hunger Games.” Now, GeekWire reports, Amazon is making changes to this system, as many other organizations have done in the past two years:

“We’re launching a new annual review process next year that is radically simplified and focuses on our employees’ strengths, not the absence of weaknesses,” the company confirmed in a statement to GeekWire. “We will continue to iterate and build on the program based on what we learn from our employees.”

The buzz among employees is that Amazon will drop or significantly alter its existing employee ratings program as part of the changes in the broader review process. Amazon currently uses employee ratings as the basis for a forced curve or “stack-rank” system — also known as “rank-and-yank” — a controversial management technique used by companies to get rid of the lowest-performing employees and identify those with the most growth potential.

But the extent to which Amazon will replace or modify its current system isn’t yet clear. The company declined to confirm any details beyond its statement. The new approach is expected to start in February of next year.

As Amazon’s announcement reflects, the field of performance management is undergoing some major changes, with many employers, including influential organizations like GE, deciding to get rid of performance ratings entirely, and others scrapping the traditional annual review. But our research at CEB has found that many of these organizations may be throwing out the baby with the bathwater: In disposing of ratings, they may be losing valuable information that helps employees understand how well they’re doing and have more constructive conversations with their managers about how to improve.

With that research in mind, Facebook’s head of people Lori Goler, head of HR business partners Janelle Gale, and Wharton professor Adam Grant recently made the case for holding onto performance ratings at the Harvard Business Review, highlighting the successful elements of Facebook’s approach:

At Facebook, to mitigate bias and do things systematically, we start by having peers write evaluations. They share them not just with managers but also, in most cases, with one another—which reflects the company’s core values of openness and transparency. Then decisions are made about performance: Managers sit together and discuss their reports face-to-face, defending and championing, debating and deliberating, and incorporating peer feedback. Here the goal is to minimize the “idiosyncratic rater effect”—also known as personal opinion. People aren’t unduly punished when individual managers are hard graders or unfairly rewarded when they’re easy graders. …

[L]ast, we translate our ratings directly into compensation. Notably, this process involves a formula, so managers have no discretion in compensation decisions. It’s fair: If you excel, your bonus multiplier rises according to a predetermined equation, not someone’s opinion.