How OKR & Goals Next-Gen Performance Management Are Disrupting the World
by ZORIAN ROTENBERG
CEO. Former VP of Sales & Marketing at lnsightSquared and VP at $1B+ unicorns: Acronis & Veeam. Also CMO at AppAssure (acq. by Dell). Studied Finance, Computer Science and Applied Math at Lehigh and MBA from Harvard.
Man: Zorian is the CEO of Atiim Incorporated. A developer of innovative enterprise OKR goals management and performance management, softwares, and service. Zorian was a VP of sales and marketing in InsightSquared and also served as a VP on management teams of several global software companies. He studied finance, computer science, and applied math at Lehigh University and got his MBA from Harvard business school.
Zorian: Hi, everybody. Thank you very much for joining this session. I really appreciate your time and hoping that this would be valuable and insightful and that we'll leave you with some actionable tips. And the story that I want to share here is how OKR goals and next generation performance management will disrupt the world. Well, of course I'm talking about the world of work. That's what we are all here for, but I actually sincerely believe that a lot of what's happening in this sort of modern performance management will not only disrupt the world of work but, ultimately, the world in general. Because this set of new sort of movement and these new technologies and the processes of this modern performance management will affect people positively at work, which is where we spend most of our awake hours, then surely this will make the world a better place and thus will disrupt and impact very positively, the world.
So let's get going with no further ado. Let me talk to you about this slide, the state of the American workplace. This is a report from the Gallup group. I think all of you are very familiar with Gallup and in this report they talk about employee engagement. They have three categories: the engaged employees, the not engaged, and the actively disengaged. They actually found it very interesting that they talk about actively disengaged as a statistic. Why not simply engaged or not engaged? Well, it's very interesting that apparently the number of actively disengaged employees, and especially in this report as they talk about the U.S. employees, is quite a large number. In fact, alarmingly so.
So let's look at these numbers. So according to Gallup, 63% are not engaged. That's a lot. Out of 10 people at work, on average, and I believe they surveyed over 80,000 people in the US, and they say that 6 out of 10 folks are not engaged at work. Twenty-four percent are actually disengaged. One out of four workers are actively disengaged. They're not loyal to your customers, to your goals, to your company. They're not actively working in line and to help the company achieve its success. They're actively disengaged. And only 13% percent are engaged. This are very alarming numbers. What's going on here?
So according to the same company, to Gallup, 35% of U.S. managers are engaged in their jobs. That actually means that 65% are disengaged. So only one out of three folks who are managers are engaged. That means that majority of them, so two-thirds are disengaged. Now you got to think when you're looking at these statistics, with regard to your own company, where do you stand with respect to these statistics, right? Are you sort of in the average or do you think you're far above the average. Well, this is a reason there are averages because it's very hard to be far above the average actually and you would have to be a couple standard deviations away. So you have to look at these numbers and say, "How are my managers in terms of engagement? How are my employees in terms of engagement? How do they compare to this averages?"
Here's another interesting thing that's happening right now. So 10 years ago, there was no such website as Glassdoor. There was no such website where employees can go anonymously, right? And, in fact, Glassdoor has 30 million users. So 30 million employees of companies are actually going on Glassdoor and giving anonymous ratings on companies. There are 8 million company reviews right there. The average CEO approval rating on Glassdoor and this is according to Glassdoor's own fact sheet. There's a page in their website with their own fact sheet. Sixty-eight percent is the average CEO approval rating. That's 32% disapproval of the CEO on average. Does that bug you?
Now here is another interesting statistics right from Glassdoor. The average company gets 3.2 stars out of 5 stars. That's 64% as the average company rating on Glassdoor. That's a D. Do you remember the last time somebody got a 64% on their spelling quiz in elementary school. That's a D. That can't be good. And as I was saying a little bit earlier, Glassdoor didn't exist 10 years ago. There was no such website where people can go and anonymously review their companies and give these ratings to let new hires or potential hires that are to be attracted to this company know in advance what it's really truly like to work for this company. And if you have low ratings, that's going to increase your recruiting cost quite considerably. And that also means that something is going on the inside of your company that just isn't that good. There is some sort of situation that is worth looking into it deeper. And at a high level, it makes you wonder, is there a way we can manage people internally? Can we manage this performance, this human capital? Can we manage our team better, more effectively so that we can increase our ratings and rankings on Glassdoor, which is public out there.
Deloitte statistics has this that 50% more than half of the executives believe that their current performance management drives neither employee engagement nor high performance. And by the way, employee disengagement are these statistics that Gallup is talking about that are really, really alarming. And in fact, it's the un-engaged and actively disengaged employees that are going to Glassdoor a lot of times to give these low ratings on the CEO of the company or this 3.2 out of 5 stars average on Glassdoor. From the same types of employees who are disengaged and are not managed effectively, not through a high-performance process at your company.
Furthermore, a lot of you here must have read this article at New York Times and heard about this imbroglio that has created a very major sort of breaking news of a situation at Amazon. That the employees at Amazon came out and announced that there are problems internally. They made everyone know what it's really, truly like, according to these employees, to work at Amazon. It blew up at Amazon to a point that it went so public and Amazon, just a couple of months after that August article hit New York Times, came out in October and said, "Now Amazon is completely changing the way they're doing performance management internally." And they want to know how its employees are doing on a regular basis. In fact, there's an article in Bloomberg that says Amazon wants to check in every single day on the employee morale.
That may be a little bit of overshooting here by Amazon. However, it's definitely an indicator. It's highly indicative the fact that Amazon wants to change things completely. They want to change the way they're managing their human capital. They want to change and disrupt their internal performance management, processes and systems. And they want to be able to check in on people regularly. So they don't wait a year too late to figure out or many years too late that something bad happened that it goes straight to New York Times.
In fact, there's another interesting trend that started happening with very large public brands and GE is one of the companies at the forefront, at the vanguard of this major change that is happening in terms of performance management and specifically with regard to annual performance reviews. I'm sure all of you in this session and who came to this event are very familiar with GE coming out and saying, "We are taking this annual performance review that we've had for 30 years that Jack Welch, one of the greatest corporate managers of all time, instituted at GE decades ago." They're taking this practice they've had for 30 years, for three decades and their throwing it out the window and saying, "We're replacing that with a technology, with an app." And what does that app do? It's a performance management app that allows GE to check on a regular basis, at a regular cadence, not once a year on how their employees, their human capital, their employees are doing, what progress their making, what bottlenecks, challenges, issues, problems they're encountering that they need help with from their manager. This is happening right now as we speak.
In fact, as I mentioned earlier, a lot of global brands are now seeing this major overhaul to their internal performance management and specifically removing this annual performance review and implementing a different system. A technology that allows them to regularly, in fact weekly, to check in on all the employees in a very specific way. A lot of it has to do with not just a regular check in that's made by a manager towards an employee but it's actually two way. It's closed-loop. It allows there to be a feedback loop between an employee and a manager, a back and forth that's very productive and effective and also quite efficient. And this is the answer to this old school legacy and no longer truly effective or practical approach of a once-a-year check in we know as annual performance review.
You see here Dell, and GE, of course, and Adobe, obviously Amazon as we just talked about, Netflix and many, many, many other companies. Harvard Business Review wrote about why more and more companies are ditching performance reviews annually. And a Forbes article, where Josh Bersin wrote about this phenomena of regular check-ins, of regular closed-loop, which he refers to as pulses that are happening between managers and employees. He calls it "A new killer app" and he said that there's a new market that's emerging right now that I believe is the modern next generation answer to performance management. In this article, he has this bell curve, and he talks about the companies that are on the right side of the tail. What are they doing that makes them be on the right of the average? It means they're more successful. They have better employee engagement. They have better ratings on Glassdoor as shown here in this chart. Well, they're doing exactly what I was just referring to. They're doing what GE is saying. GE is moving towards continuous touch points between managers and employees. That's what they're doing.
In fact, I'd like to define what these regular check-ins are. They're all about this. They're a two-way, as I mentioned earlier, employee to manager and manager to employee. Pulse/feedback reports, they're used to improve employee engagement, which is a very important metric that we looked at earlier and that Gallup alerted us to fact that they're very low. Employee engagement statistics are extremely low today. An increasing employee engagement, in turn, increases performance and results at a company. So that's what these regular check-ins do. Employees, in fact, who receive regular feedback from managers are 20 times more likely to be engaged at work. So 20 times more employee engagement.
There are statistics also from Gallup about employee engagement and how it impacts results. This is hard data. Higher employee engagement improves productivity, sales, customer satisfaction, and profits. And this is a real data. So in terms of profitability, on average 22% higher profitability due to higher employee engagement. And higher profitability means higher sales, those directly impact profitability, and lower costs, lower costs across the board including lower cost of recruiting, lower attrition, lower turnover of talent, improved retention of talent, and of course, that impacts your customer value and all kinds of successful things start happening at companies that are consistently focused on employee engagement.
Now another thing is that over 50% of new workforce today is under the age of 35. We all know very well what this crowd is looking for. This crowd is looking for more continuous, consistent and frequent feedback on their performance, better alignment with their manager, better more frequent communications. This is the digital age crowd that is very acclimated to instant messages and Twitter feeds. How do you think they like their manager's feedback? Once a year? No, very frequently. So this sort of compounds the need for this consistent performance management. Now here's another interesting thing, we just talked about performance management at a level of regular feedback which is absolutely critical and a major disruption happening right now as you've seen with Amazon, with GE, Accenture, Dell. They're all getting rid of annual performance reviews. GE said in a quote, in that press release that, "This is no longer a once-a-year business world. Business is moving much faster than just once-a-year." Okay?
But here's another thing, there's something missing from purely a weekly feedback. Something missing from the modern performance management, paradigm, and technology that is absolutely critical to this modern performance management. If you don't put it in, you don't only have modern performance management at all. You just have part of it and we learn from Google how they do performance management and gives us some hints at what really is critical for the modern next generation way of performance management. There's a video that Google did on how they use goals, specifically they use a system called objectives and key results. But let's just say this. Objectives and key results is a way of doing goals management at a company. So think of it as just goals management but OKR is one of the most modern and best in practices approach to managing goals at a company in terms of alignment, the bottoms-up, how it's all connected and tracking it, etc. This video had over 250,000 views. That is huge. It's a one hour and twenty-minute video, okay?
Very few music videos or funny comical and humorous videos get even 10,000 views. This video got 250,000 views. This is one hour and twenty minutes. All it talks about is setting goals and performance management practices at Google. How is it that there is such pent-up demand for something like that. It's because we've entered the modern world where if you don't do this, people have no clarity about what they're doing. It reduces engagement if you don't have goals at your company, right? And Google has made it clear that even they, a very large company, can do it successfully and they do it in order to increase performance, engagement, and innovation. Goals management, specifically the OKR system, is used at very highly successful companies like the Dropbox of this world, and the Oracles, and the Twitters, and the Linked-Ins, and many, many, many others, and many Fortune 500s use those as well.
There's a statistic that a mere 7% of employees fully understands their company's business strategy and what's expected of them in order to help achieve the company goals. This is a study that Harvard business school. And 7%, that's less than 1 out of 10 people. That's ridiculous. How can you run a company when only 1 out of 10 people who knows and fully understands what's expected of them and really understands the company's business strategy in order to help the company achieve its top priorities. In fact, just the other day, APA release this article that frequently monitoring progress towards goals increases chances of success. So I want to tie this back, this frequent monitoring, I'm going to tie it back to this weekly feedback.
So when we talk about modern performance management, think of it this way. The modern performance management approach is using the modern goal setting process, which is the OKR system. It is the best practices, goals management, and goals tracking, and goals setting process in the enterprise today. You combine that, combine that with the modern approach to once-a-year annual performance meeting. It's the weekly one, right? Not once a year but 50 times a year, frequently, real-time. You combine those together and you get something very special. You get a system, a process, a solution to how you're going to manage your human capital way more effectively than your competition.
Continue on the topic of goals, goals are combined with employee feedback, as I was just saying, to increase employee engagement and ultimately performance and results at your company. These are some of the statistics from Gallup as well. Now, the ROI on goals, increase in sales and profits, increase in performance and productivity of role, and better talent retention. When people, not just 7% of your people, but your entire company, everyone at your company clearly knows what direction they're going in, how they're aligned to top company priorities, you have a much more effective work force. They're much more engaged, and it's easier to retain these people because they are happier to be at your company. They're more satisfied. They're the ones who give you 5 out of 5 stars on those Glassdoor ratings that we saw a little bit earlier, okay?
So what is modern performance management? It's OKR goals management and, again, it's OKR because that is the best practices for managing goals at the enterprise today as Google has shown us. It's is also regular employee check-ins, which is what GE just transitioned to after 30 years from annual once-a-year to regular employee check-ins, employees pulses every week. What Amazon is going to be doing, what other companies that I showed you are doing today that are global, successful brands. And I'm constantly seeing companies moving daily into this regular weekly feedback, weekly pulse, which is the right way for your managers, for your executives, and for your teams to operate in any company. Plus employee engagement metrics, that's your modern performance management solution. That is your modern performance management approach that you must think about today because as I called this presentation, how are OKR goals and next gen performance management, this modern performance management, how will it disrupt the world? Well, as you can see, the world is being disrupted as we speak. With GE, with Amazon, with the Dell announcement, and Microsoft announcement on changing their performance management, completely overhauling it. This disruption is happening right now and literally started being much more visible and poignant in the past 12 months, in late 2014 and this year in 2015.
And it's disrupting the world because it's making the work, the world of work, a much more effective and more satisfying place to be. And as I started this presentation I said, "Look, we spend most of our awake hours, most of the hours when we are awake, at work," not even with our family, right? So during the week when we spend most of our time at work and when there is a process even technologies that help us work better together with the management, with the executives, with the entire company because we are given the opportunity to be more clear about our direction, we're managed more effectively. Because our manager doesn't tell us once a year something that we need to know about in terms of our performance at work but on a very light regular consistent basis in a closed loop fashion where we can also provide feedback to our managers about what we're looking for. Maybe about some bottom ups or challenges that we have where the manager can help us. If our everyday work is better than our life, our world is better in general.
So what does a weekly feedback, regular feedback loop, or pulse technology look like? What does it look like? What is approximately something that you'll see at companies like GE that are actually developing their own internal one? But this actually a product screenshot from our own product, and I'm certainly not trying to market our product in a very blatant sense. I'm just trying to give you a quick glance of what it really looks like. So this is me in the top right, on the last is a picture of one of my employees who directly reports to me, Val. Every week, he's being asked these questions. What are your priorities? What are your objectives? What are some of the small wins? And later on, there's some questions about what bottlenecks and obstacles you're facing that I can help you with.
He fills those in. I can see those. I can click on this good job icon so he gets the appreciation. It's a very HR critical component to making people feel successful at work and that's what this app does. It's a two-way closed-loop feedback/pulse report that happens every single week. Keeps me and my employees aligned, helps me communicate more effectively with my team, helps me have threaded conversations about specific things like priorities during the week, objectives they're trying to achieve which is these goals, these OKRs that we're talking about. And this, by the way, doesn't show the OKR component. This is purely an example of a weekly feedback app. But the question about objectives directly factors into the OKR statistics that are sort of behind the scenes here. And this tool is what a lot of companies are going to be using in one format or another even. Maybe our product or another product, but these are sort of the next generation performance management closed-loop feedback apps that everybody is starting to transition to.
Finally, you can get a free version that I'm giving you guys out for free here at this conference. Check it out, atiim.com. A-T-I-I-M-dot-com-slash-free is the free version of the regular weekly feedback loop report. You can have it. It's not a free trial. It's actually completely free. It's up to 10 people, of course, but I'd love to hear what you think about it so check it out. Email me @zorianatiim.com and I hope you enjoyed this session and that you've gotten some actionable insights from it to improve performance management at your own company. Thank you all very much and have a great day.