"The whole emphasis has shifted from one of justifying a rating to oneof improving performance," says Linda Murphy, the company's director ofglobal performance management. "We're looking at how we can help theemployee improve his or her performance. And because of that, there's much moreconcentration on the coaching, the feedback, and the conversations that occurbetween the manager and the employee. Coincidentally, one of the pieces is yourrating, perhaps, but the significance of the conversation really is how do wework together to improve performance?"
The Merrill Lynch approach incorporates elements of 360-degree feedback.Employees have an opportunity to solicit feedback from their peers and theirclients, but the key to the system is still the relationship between employeesand their managers. At the beginning of the year, employees and managers settheir objectives. Mid-year and year-end reviews follow.
At the mid-year review, the manager and employee sit down to assess theobjectives set at the beginning of the year. They look at the employee'sprogress with an eye toward making any changes necessary to ensure the ultimatesuccess of the plan. They also update whatever kind of personal development planthe employee may have in place. The year-end review integrates cross-levelfeedback, assesses the employee's progress against business objectives, andidentifies the areas in which the employee needs to show improvement.
These two specified reviews are just the minimum requirements. Throughout theyear, managers are encouraged to provide their employees with ongoing feedbackabout their performance.
Murphy is particularly enthusiastic about the company's recent move from afive-point performance-rating scale to one based on a simple three-point spread.This change, she believes, makes it more acceptable for an employee to be ratedan average performer. And this makes it easier for managers to distinguish thepeople who genuinely are top performers. It also makes theyear-end review less a ratings game and more a conversation about what theemployee has accomplished and how he or she has achieved those results.
"The conversation with the employee doesn't have to be, 'Why aren't I a5-minus instead of a 4-plus,' or whatever," Murphy says. "It allowsthe manager to say to the employee, 'The middle category is an acceptable levelof performance. Most of us are in that category. Now, let's talk about how,relative to your peers, we can move you up in the rankings.' "
For its managers, Merrill Lynch provides extensive training on how to conductreviews, with pointers on how to handle employees at each performance level, aswell as guidelines for how meaningful objectives can be formulated. The companyalso hosts an extensive HR Web site that allows managers to access modules thatdescribe every aspect of performance management.
"Our expectation is that this is a critical element that will help us bemore competitive in the war for talent," says Murphy. "People areexpecting us to be able to say, 'This is what's expected of you, this is howwe're going to help you in your personal development, and this is how you'll bejudged relative to compensation.' Everything is telling us that there's anexpectation among new employees that we'll move in this direction. And it's thesame thing for retaining employees."