Question

Consulting firm Deloitte works with many organizations to improve their business practices. Recently, the firm looked at its own internal processes and determined that its performance management system needed some new life. With over 65,000 employees to rate, the goal was to make the process faster, continuous, and simpler. After gathering information on its current practice and investigating the science behind performance evaluation, Deloitte came up with a revolutionary way forward.

The current practice was a traditional method of cascading objectives from the organizational strategic level down to the individual contributor level. Managers would rate each employee at the end of a rating period based on how well he or she met those objectives. However, annual goal-setting did not coincide with business operations schedules, and the process consumed nearly 2 million hours a year. Since Deloitte is in the business of improving efficiencies and productivities for clients, it only made sense to radically change its own performance management system.

The science behind evaluations shows that ratings are often affected by unconscious rater biases and perceptions rather than factual performance outcomes. Deloitte's employees often work in teams, and individuals believe that they are able to use their skills and strengths effectively at work. The firm's new approach asks team leaders to specify what future actions they plan to take regarding each member of the team. This shift in thinking recognizes that raters' assessments of performance may be inaccurate, but the way they plan to work with someone in the future says more about that individual's actual performance.

Team leaders now report their future-oriented intentions, from endorsing that they would like to keep the individual on their team to recommending that the individual poses a performance risk that might endanger client relationships or team performance. Since an essential component of performance management is to facilitate improvements in performance, team leaders now check in with each team member once a week to review project status and priorities, provide feedback on recently completed work, and provide any needed course corrections. This frequent communication is initiated by the team member rather than the leader. In this way, each individual takes ownership of their performance and seeks out feedback and input on their performance. Deloitte has moved away from assigning each employee a single performance rating score in favor of ongoing feedback.

A shift in thinking recognizes that raters' assessments of performance may be inaccurate, but the way they plan to work with someone in the future says more about that individual's actual performance. Which of the following is a possible reason behind this?
a. Ratings might be influenced by a rater's bias or failure to observe employees perform.
b. Performance appraisals focus on compensation alone.
c. Many traits that are important determinants of job performance tend to be well defined.
d. Ratings adequately reflect the actual job performance of an employee.

Answer 1

Deloitte's change in performance appraisal is driven by the recognition that rater's biases and inaccurate observations can skew traditional ratings, hence they've shifted to a future-oriented and ongoing feedback approach.

Step-by-step explanation:

The primary reason behind Deloitte's shift in performance appraisal philosophy is that: a. Ratings might be influenced by a rater's bias or failure to observe employees perform.

Deloitte's innovative approach to performance management stems from the understanding that traditional performance appraisals may not achieve their intended purposes effectively. Research suggests that these evaluations can be subject to unconscious biases and do not always reflect an employee's true contributions (Fletcher, 2001). Deloitte's new strategy prioritizes future-oriented actions which are indicative of an employee's value to the team and the organization as a whole.

Implementing a continual, dialogue-based review process, where employees seek feedback and engage in weekly check-ins with their leaders, supports a proactive development culture. This model is not only tailored to Deloitte's business but aligns with the concepts of industrial and organizational psychology, which aim to make performance evaluations as fair and effective as possible (Fletcher, 2001).