In its latest innovation to its performance management process, Goldman Sachs is introducing a system of ongoing feedback in which employees’ annual performance reviews will be augmented with regular check-ins with their managers and peers. Edith Cooper, the investment bank’s head of human capital management, tells the Wall Street Journal’s Liz Hoffman that annual reviews will remain central to determining promotions, compensation, and bonuses, but with more frequent feedback, the company hopes to make these reviews somewhat less nerve-wracking and more productive:
Goldman’s new system is based on software the firm already used in a few divisions last year. It is now being extended to the rest of Goldman’s 35,000 employees. … The idea is that after a big client pitch or product launch, employees can get quick feedback instead of waiting until year-end, Ms. Cooper said. A real-time sense of where they stand allows employees to make improvements and avoid feeling blindsided later on, she added.
Goldman has been on a mission to retool performance management since last year, when it rolled out an updated version of its performance rating system and announced other changes meant to make feedback more timely and descriptive, and the process of giving it less laborious for managers and peer reviewers. Many companies, including competitors of Goldman Sachs such as Morgan Stanley and JPMorgan Chase, have adjusted their approaches to performance reviews over the past two years, and building more continuous feedback systems has been a key component of many of these changes, enabled by new technologies that make feedback easier to deliver.
The growing trend of continuous feedback is often characterized as a response to millennials’ demand for it, but Cooper notes that in an internal survey Goldman conducted in 2015, the employees most likely to ask for more frequent reviews were vice presidents and managing directors, who are mostly in their 30s and 40s. “Okay honestly that makes sense,” Matt Levine comments at BloombergView:
Managing directors and vice presidents, and the bank for that matter, really depend on their performance. If they are not effective at bringing in business, they and the bank will suffer. And they’ve made it this far, which means that they have a basic understanding of what they’re supposed to be doing; now they need to work on fine-tuning their performance. Junior analysts are a much simpler matter. You give them general praise so they feel good, and you provide constant feedback in the form of screaming at them every time you find a typo in a pitchbook. They pretty much already know where they stand at all times.
Our research tends to back up Goldman’s approach of complementing traditional performance reviews and ratings with more continuous feedback. While ditching performance ratings altogether can actually lead to lower-quality performance conversations that leave employees less sure of where they stand, the most successful performance management changes instead supplement them with more regular, less formal, more conversational feedback from both managers and teammates.
CEB Corporate Leadership Council members can learn more about why the conventional wisdom on eliminating performance ratings is wrong, and how to design effective, ongoing performance conversations on our member site.