IBM is undergoing a major shift. The company switched from its hardware-based roots and started to focus more on software and services. The move makes sense, as hardware is no longer where the money is. According to Info World, IBM’s software brought the company $25.9 billion in 2013, making it the business’ second-largest source of revenue. On the other hand, sales from its systems and technology business – including hardware like servers and mainframes – fell quickly.
To adapt, IBM rebranded itself and devoted $1 billion to cloud technology. With all of this internal change to its product, it’s no wonder the company decided to take a look at its performance management process as well.
“Employees worked ‘differently than the system assumed,’ Gherson said.”
IBM Employees Work Differently
IBM’s older system, Personal Business Commitments, was similar to the annual review methods popularized in the late 20th century. The company used the same approach for 10 years: Employees would set their annual goals in January and then check in with management in about six months. A final assessment came in December during which managers gave employees a single performance score.
However, Personal Business Commitments didn’t mesh with the way employees worked. Diane Gherson, IBM’s chief human resource officer, told Fortune new priorities would crop up as the months passed while the original staff goals remained the same. Employees often switched their focus to tackle new assignments, and the intentions they had in January no longer applied. Even so, Gherson said, the December discussions were about those goals from the beginning. Employees worked “differently than the system assumed,” she said. Gherson and her team began crafting a new performance review system in the summer of 2015.
They didn’t act alone. In the spirit of creating a more inclusive, relevant arrangement, IBM’s HR department crowdsourced ideas from its 380,000 worldwide employees and received 2,000 responses. A major theme among them was employees wanted more frequent feedback. Taking this information to heart, Gherson and her team created Checkpoint, a system of short-term goals, quarterly feedback and five scores as opposed to one. Checkpoint launched the first week of February 2016.
While it’s a bit early to declare Checkpoint’s effects, one expects IBM to see the same changes so many others have after switching to ongoing performance management. We’ve long understood recurring feedback and goal setting increases employee engagement and productivity. IBM wasn’t the first to make the switch to ongoing performance management, and we think it won’t be the last.