Originally published on Pursuit.
In the midst of rapid technological and social change, we see equally rapid changes in workplaces.
With work systems and human resource management practices running to keep up, traditional performance review systems are increasingly giving way to results-based assessment. A firm like Netflix, for example, is unequivocal, arguing that star employees should be retained and underperformers cut.
By extension, managers operating in such systems don’t really care about where and when the work gets done — just as long as it gets done.
About a decade ago US consumer electronics retailer, Best Buy, garnered a great deal of interest in the business community when it smashed the clock and implemented its ‘Results Only Work Environment’. Many saw this organisational culture revolution as a step forward for HR and management in general, hoping that firms in other parts of the world would import it. Others wanted to wait and see how it went before making any big changes themselves.
So how did it go at Best Buy?
In 2013, financial hardship and a leadership change at Best Buy resulted in the decision to eliminate its results-based system and call everyone back to the office, following a similar decision by Yahoo’s Marissa Mayer.
For many advocates of workplace flexibility, this was seen as a rejection of flexibility itself. On the other hand, those defending controversial decisions at Yahoo and Best Buy argue that in industries where collaboration is critical to creativity and innovation, people need to be working together. Of course, as is the case with many complex issues in management and leadership, things may not be so black and white, and there’s undoubtedly merit in the arguments on both sides of the debate.
Without knowing what the future holds for firms like Netflix, we can still explore the very real possibility that the organisation and others adopting similar approaches may succeed with results-based systems where Best Buy has failed.
Virtually any strategic management textbook will tell you that “failure” can occur not only as a result of choosing the wrong strategy, but also of poorly implementing the right strategy.
Textbooks across management disciplines will also tell us that the right strategy, system, culture, structure, or practice for one organisation is not necessarily (and not usually) the right one for another organisation. These very basic – but oft-forgotten – principles of management have important implications in our current discussion. Specifically, the failure of results-based performance management at Best Buy could be rooted in any one or more of the following:
- Results-based performance management systems are simply off the mark
- Results-based performance management systems are wrong for some organisations and right for others
- Implementation of results-based performance management systems is just difficult.
Let’s discuss each of these…
Results-based performance management systems are simply off the mark
This may be a bold assumption to make, but we commonly see its opposite — that a results-based system (or whatever else the bestselling author or slick consultant is trying to sell you) is right for everyone. Because they fail to acknowledge the importance of context, such assumptions in either the positive or negative are likely to lead to eventual disaster.
We’ve seen other stories recently about firms eliminating annual performance review systems, and some of those firms are being thoughtful about how they structure performance management. However, it would be a mistake to make a broad assumption that reviewing performance is ineffective, just as it would be a mistake to exclude results-based systems as an option for performance management when there is evidence that they can indeed increase productivity.
So, to be clear, the statement heading this section is wrong, which leaves us with the two other possibilities.
Results-based performance management systems are wrong for some organisations and right for others
To its credit, Best Buy realised that context is important — and perhaps made the right decision for its business. I’m not here to judge Best Buy today. From the start, the company acknowledged that its retail store employees could not be managed on the same system as its corporate employees.
If given the option to work from home anytime they wanted (including when the stores were closed), ‘results’ would obviously be difficult for Best Buy store cashiers to achieve. In other words, not everyone can achieve the required results whenever and wherever they want. Of course, we might argue that setting targets around customer satisfaction and retention would motivate retail employees to be there when the customers are.
However, at the very least, results-based systems have to be adapted to the context.
It’s possible that firms like Netflix, with fewer constraints around face-to-face interactions with customers, might more easily lend itself to results-based systems. We might make an even stronger case for such systems if we consider organisations that are even less dependent on real-time interactions with their customers. Yahoo is an obvious example.
Of course, if the aim is to be the most innovative organisation, interaction and collaboration among employees should be encouraged (Marissa Mayer’s dilemma?) But maybe this just comes down to setting the right targets to motivate collaborative behaviour.
This brings us to the next possibility…
Implementation of results-based performance management systems is just difficult
Implementation of such systems is no picnic, especially if you’re trying to switch over from another system, or if your employees work in different contexts — like Best Buy and, indeed, most other organisations. Furthermore, in theory, a results-based performance management system is only going to be as good as the goals and targets that are set. Otherwise, implementation is bound to fail. If you need customer service or collaboration from employees, you have to figure out targets that will enable informative evaluations around results.
There are a number of dependencies around results-based performance management that make implementation difficult. The quality of the targets driving the system will be determined by the knowledge and thoughtfulness of the managers, HR staff, and employees. It’s also likely to depend on the quality of the relationships among those people and their ability to come to agreement around targets and evaluation criteria.
Going forward
Given the need to create flexibility in the workplace and equilibrium between individuals’ work and non-work responsibilities, the recent revival of interest in workplace cultural change is certainly warranted. Flexibility is, after all, an important mechanism for promoting equality between genders and among age groups, and diversity in the makeup of staff.
But the success of results-based performance management systems in any given organisation will ultimately depend on its context and capabilities for implementation. What works for Netflix won’t necessarily work for Best Buy – or for you – but it’s an interesting case to study and useful in informing decisions.
That said, going forward, results-based performance management systems will be critical considerations for many organisations. Evaluating employees on a presenteeism-centred system is unlikely to work for many, if not most, organisations, as it excludes certain high-potential individuals with flexibility needs.
Results-based systems present a potentially fruitful alternative, so give it some thought and remember to think flexibly.
