solution

Jessica Taplow, head of People and Culture at iQmetrix Software Development Corp (iQmetrix), was about to unveil the results of her recent quasi-experiment in July 2019. Over the last six months, she had tested four different performance evaluation systems in the organization to determine which was best. Performance evaluation systems were chronically plagued by difficulties: they were too cumbersome, too slow, too expensive, too time consuming to implement, too backward looking, too demotivating, and too unfair, and they were generally loathed by employees and managers alike. However, performance evaluation systems were seen as necessary for rewarding good performance, penalizing poor performance, and identifying development needs. Taplow was hoping to identify a system that would minimize the difficulties while delivering the benefits.

iQmetrix, a software development company founded in Regina, Saskatchewan, by brothers Christopher and Greg Krywulak in 2001 and now headquartered in Vancouver, British Columbia, was built on the idea that sharing information and metrics through computer systems would lead to breakthroughs in efficiency, productivity, and competitive advantage. The company was even more important to the founders as an opportunity to build what they called the “ultimate organization,” in which creativity and innovation would flourish and people could be their best. Flat decision-making structures—in which staff had access to information, autonomy, and authority to make decisions—would allow solutions and innovations to emerge from anywhere in the organization. The idea of the ultimate organization became a foundation for the evolution of the iQmetrix culture. As a young entrepreneur starting out, Christopher Krywulak did not know what the ultimate organization looked like, but he knew he was dissatisfied with what he saw around him in the business world, and he wanted to create an organization in which people like him could flourish. He believed he would recognize the ultimate organization only after he had created it. This belief became the development strategy that iQmetrix returned to time after time. Each time growth putstress on the company, the company’s strategy was to decide what it needed to do next to continue creating the ultimate organization.

As the company grew from its Regina base and opened satellite offices in Winnipeg, Vancouver, and Charlotte, North Carolina, it experienced pressure to become more formalized. Searching for a model that resonated with the initial founding vision of the ultimate organization, iQmetrix adopted holacracy in early 2017.

HOLACRACY

Holacracy contrasted starkly with traditional organizational designs. The goal of holacracy was to create an organization based on following simple rules for recognizing, articulating, and creating the tasks that needed to be accomplished and then giving people the authority to adapt their professional roles to these new tasks at their own discretion. Holacracy organized people around common tasks or projects. In holacracy, there were no job titles—only roles. Moreover, there were no managers in holacracy. Instead, authority was distributed throughout the organization, and work was organized by groups of employees (referred to as “circles” within the organization’s structure) that formed and disbanded as required, according to the tasks they needed to accomplish. Circles followed detailed procedures regarding how decisions were made and how meetings were run.

Holacracy sought to increase transparency and reduce the time required to make decisions by making three key changes to the organization: (1) it organized the work to be done by roles, (2) it associated specific accountabilities with those roles, and (3) it gave the person assuming each role complete authority to make the decisions required for that role. This approach contrasted with traditional hierarchies, in which the organizational structure tended to push accountability upward and which required people who did the work to continually seek authority to make decisions, resulting in lost time, a lack of ownership, and low levels of accountability regarding decisions. Such a system—in which the more powerful enjoyed the perks of power and the less powerful had little or no accountability—could encourage bad habits for both management and employees. To successfully implement holacracy, iQmetrix would have to eliminate both of these outcomes.

PERFORMANCE MANAGEMENT AT IQMETRIX

The adoption of holacracy meant that adopting a new performance evaluation method was also possible. It was clear that a traditional, stable, yearly formal assessment process would not be appropriate. Moreover, there was an industry trend toward giving up employee performance appraisals, recognizing all the difficulties associated with them. What should the company do instead? During the first 12 months after iQmetrix introduced holacracy, the company left its performance assessment processes relatively unchanged; performance assessments were handled idiosyncratically throughout the company—sometimes well, sometimes poorly—but in most cases, just once a year. Given holacracy’s fluidity and emphasis on capability, Taplow needed a more responsive and developmental performance management system, so she turned to the literature for help. Taplow identified three different types of performance assessments:

1. those built around absolute rating scales, which asked questions such as, How well can an employee do a task?

2. those built around relative rating scales, sometimes with a forced distribution, which asked, How does the employee compare to their peers?

3. those built around developmental, qualitative evaluations, with no numeric ratings at all.

After her study, Taplow decided to try out four different models of performance assessment: two absolute rating models, one relative rating model, and one model that used only qualitative feedback. The first absolute rating system she tested was a fairly traditional model that used a graphic rating scale. In this system, employees were evaluated along a number of behavioural dimensions that had been identified as central to good performance on the job. Employees were given scores (from 1 to 5) on each of these dimensions, and an overall rating was determined from these scores. The second absolute rating system Taplow tried used a nine-box grid that placed employees across three levels along two dimensions: (1) their current performance (low, solid, or high) and (2) their future potential (a good fit at the current level, able to move up or laterally, or able to move up one or more levels). Appropriate development opportunities could be designed and provided for employees, depending on their placement in the grid.

The relative system Taplow tested was the relative percentile method (RPM). This was a modern socialcomparative rating method that asked managers to assign percentile scores to each employee’s performance across a set of performance dimensions. The rating was made in reference to the performance of the employee’s peers both within and beyond the company.

Finally, Taplow tested the use of qualitative performance feedback only, based on an emerging trend in the human resources community toward the abandonment of scoring in performance management systems altogether. Instead of scores, people were given only qualitative feedback, with the intention that such feedback would be free from the often-demotivating factors associated with numerical ratings and rankings and would thus encourage higher levels of engagement and overall job performance.

THE QUASI-EXPERIMENT

In the spirit of investigation, Taplow set out to test which model might work best at iQmetrix. To this end, she examined employee reactions to these four different performance management models. Each of the four models was implemented in four different parts of the organization for six months. At the end of six months, Taplow began to collect data on managerial perceptions, employee perceptions, and performance, which would help her decide which system should then be rolled out to the entire organization. Today, she had her data; she turned to the to the Excel spreadsheet and opened the file.

What study design did iQmetrix use? Did it provide the information that Taplow required? What did she find?

Is anything missing from the iQmetrix study? What? What are some of the study’s limitations? Would you have done anythhing differently?

What are your recommendations for Taplow? Why?