PERFORMANCE APPRAISAL AND COMPENSATION MANAGEMENT-AMAZON

Amazon.com, Inc., is an American multinational technology company based in Seattle that focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence

It is every HR leader’s dream to build an organization where employees happily do their best work day in and day out without having a lot of “hand holding from management.”

Over the past few years, many organizations have done away with the traditional annual performance review in favor of real-time feedback. Rather than looking to the past, more organizations are putting in place mechanisms that focus on employees’ on-going growth and development.

Below, we’ll talk about some companies that have established creative alternatives to traditional performance reviews.

AMAZON’S WHITE PAPER PROCESS

When it comes to motivating employees, many HR leaders have talked about the importance of communicating the company’s mission, values and vision. The idea is employees will work harder and smarter if they feel a connection to a purpose that’s greater themselves.

Amazon has taken this a step further. They’ve decided that while principles and values are important, it’s just as important to establish the right mechanism to “nudge” people towards desired behaviors.

“Good intentions don’t work, but mechanisms do,” said their founder and CEO, Jeff Bezos.

One of the mechanisms they’ve developed is known as the white paper process, according to Beth Galetti, Amazon’s Sr. VP of Worldwide Human Resources.

To make decisions (when someone comes up with a new idea for a business or service), Amazon asks them to write a paper. As Beth Galetti explained in her interview with Gallup:

This paper outlines their reasoning and approach, anticipates and addresses tough questions, and states what else the person has considered and rejected in developing this suggestion, and even includes a draft press release that showcases the customer experience at launch.

When the document is developed, team members sit together to read the white paper. This happens before any further discussion begins — so that everyone understands the full perspective of the author and discussions are grounded on a common set of facts and assumptions.

By using this process, the author has to be disciplined in their thinking, consider the objections and how to overcome issues. This prevents people from falling in love with sub-par solutions. With this white paper process, Amazon has had an incredible track record of launching new products to success.

What’s really interesting is that the process isn’t just for making business decisions, it’s also a core part of Amazon’s pay increase/promotion process. It’s how the company ensures that one of their values — “constant learning” — is put into practice.

For many organizations, the way promotions are decided is based on the employee’s accomplishments and successes. But not the case at Amazon. When a manager is looking to promote someone, they are required to write a white paper that documents the employee’s successes, failures and how the person has grown in the process. The manager sponsoring the promotion needs to identify people who have worked closely with that employee, get specific feedback and incorporate it into the white paper.

According to Beth Galetti, Amazon’s review process “attempts to collect data on each individual employees’ superpowers and areas of strength.” The manager who is sponsoring a promotion must gather the “superpowers” for each individual employee as part of their peer and manager feedback, and request areas for growth for the employee to work on.

To make sure this feedback isn’t cumbersome to collect, they keep this process brief — 60 words or less each for the superpower and growth questions.

Related Resources: Creating an environment where employees receive regular performance feedback is a key part of retaining great people. The other part is making sure you’re compensating employees appropriately for their performance. For guidance on how to use your compensation plan to motivate high performance, check out these resources:

Variable Pay Playbook

In a tight talent market where employees have choices about where they commit their time and talent, variable pay is frequently used as a retention, recruitment, and motivation tool. Pay Scale’s 2018 Compensation Best Practices Report (CBPR) reveals that nearly three-quarters of organizations give some type of variable pay. At a time when increase budgets are tight, organizations are starting to shift their rewards towards variable pay over fixed costs (base salary). Doing so allows them to really shell out the cash for their highest performers, but only if they use the right kinds of variable pay.

In this whitepaper, we will discuss

Variable Pay Types and Options

Before you decide whether variable pay is right for your organization, it’s helpful to get a deeper understanding of the variable pay options and the cultural impact of pay choices. The way you design your incentive pay program can make a big difference on multiple pieces of your business, so it shouldn’t be an afterthought. Organizations are using variable pay programs to help them compete for talent, to combat turnover, and motivate all employees to higher levels of performance. But when you get it wrong, you might be wasting your compensation dollars and driving your employees towards undesirable behavior that hurts the long-term success of your organization. In this whitepaper, you’ll get a deep dive on the following:

• Individual incentive bonuses
• Employee referral bonus
• Spot bonus or other discretionary bonus programs
• Hiring bonus
• Company-wide bonus
• Team incentive bonus
• Retention bonus
• Profit sharing
• Market premium bonuses

Who Gets It and Why?

There is also a fair amount of variability across and within organizations when it comes to who gets variable pay and why. Some jobs more typically receive more of this type of pay, while some typically receive less. For example, sales roles and leadership roles usually have explicit pay-outs tied to specific deliverable. There are both organization-driven and employee-based reasons for this. The types of people drawn to high amounts of this type of pay tend to be your risk-takers; risk-takers are often drawn to both sales and leadership roles- roles that chart new territory. Whether or not sales and leaders perform, or even over perform, can make a significant impact to the organization’s bottom line, so often directly linking performance with variable pay can both attract top sales professionals and leaders and positively impact organizations as well.

How to Create a Variable Pay Plan

Often, when building out a new plan, it’s tempting to follow the best practices, the next practices, the “bleeding-edge” practices that other organizations are doing. So how do you know how to build the right variable pay plan? Consider the needs of your organization, your organizational culture, your business goals and objectives, and the makeup of your workforce. As we go through each of these five tips, think about how your organization’s unique circumstances can point to the right way of designing the plan you need. In this whitepaper, we’ll do a deep dive on all five of these tips for creating a pay plan.

1.     How to align pay to organizational results

2.     Set meaningful goals

3.     Consider your workforce

4.     Think about the differences across your workforce

5.     Consider the speed of business and organization life stage

 But not every company has the kind of magnetic employer brand that can be considered the "Sexy Mistress" of professional growth. While Amazon's clarity of purpose and hard focus on objective, data-driven feedback are solid performance management principles, smaller brands who need to hang to their people might be better off leaving the "ratings politics" and "emotional abuse" at the door.   

 Identify the weakness

Amazon’s approach to managing people has been tried before, many times in fact, and mostly it has failed. A core feature of Amazon’s approach has been called “purposeful Darwinism”. This is the idea that if you create a struggle for survival among staff, they will increase their performance. It works by measuring employees on a wide range of metrics, ranking them on the basis of their performance, then splitting them into three groups: a small number of high performers who are lavishly rewarded; a large group of average performers who hold on to their jobs; and a third group of under-performers who are “managed out” of the organisation. This has created a system where, in the words of one ex-employee, “you learn how to diplomatically throw people under the bus”.

This is commonly known as the “rank and yank” system – rank people on performance metrics, then yank out the poor performers. The system was brilliantly dramatised in David Mamet’s Glengarry Glen Ross, when a senior executive from headquarters visits a sleepy sales office to “motivate” the staff. He offers them rewards for results. First prize is a Cadillac Eldorado. Second prize is a set of steak knives. Third prize is “you’re fired”.

This kind of tooth-and-claw competition drains the life blood of most organisations. When your colleagues are likely to stab you in the back to improve their own performance ratings, it is hard to trust them. As a result, people focus on protecting themselves. Sharing knowledge with them or doing things that are beyond the call of duty become very risky. This can create a toxic work environment that undermines the basis for cooperation, sharing and even innovation.

 Performance Management Module 

Behaviorally anchored rating scale definition (BARS)

Behaviorally anchored rating scale is a measuring system which rates employees or trainees according to their performance and specific behavioral patterns.

BARS is designed to bring the benefits of both quantitative and qualitative data to employee appraisal process as it mechanism combines the benefits of narratives, critical incidents and quantified ratings.

BARS is designed to bring the benefits of both qualitative and quantitative data to the employee appraisal process by comparing an individual’s performance against specific examples of behavior which are then categorized and appointed a numerical value used as the basis for rating performance.

The first step is to write CIT (Critical Incident Techniques) which compares an individual’s performance against specific examples of behavior that are tied to numerical ratings of 5 to 9.

Then the employer needs to develop performance dimensions which have to recheck. Next step evolves scaling the critical incidents which leads to developing the final instrument.

  Weakness Of Performance Management Module 

It’s behaviorally based. The BARS system is totally focused on employee performance. Ideally, it removes all uncertainty regarding the meaning of each numerical rating.

It’s easy to use. The clear behavioral indicators make the process easier for the manager to carry out and the employee to accept.

It’s equitable. With its heavy emphasis on behavior, the evaluation process comes across as fair.

It’s fully individualized. From the standpoint of consistency within a company, BARS is designed and applied individually and uniquely for every position.

It’s action-oriented. With an understanding of the specific performance expectations and standards of excellence, employees can much more easily take steps to improve their performance, and they’re more likely to do so as a result.

 Benefits Of Performance Management Module 

Behaviorally anchored rating scale can help improve organization's performance because they:

Are reliable as the appraisals remain the same even when different raters rate them.

 Have clear standards upon which an employee is appraised.

 Are very accurate in the appraisal method and therefore increase reliability.

Give an objective feedback