Dean Carter, Patagonia’s head of human resources, finance and legal, wants leaders to change the way we measure employee performance… and our own. Considering the outdoor clothing and gear giant has less than 4% staff turnover rate in a period of time business experts are calling “The Great Resignation,” his ideas couldn’t come at a better moment. But what would this shift in thinking look like, and how could it improve retention and bottom line?
When Carter joined Patagonia in May 2015, he was stunned to find the company that prided itself on “irreverence and non-traditional, non-conventional culture” was using a traditional, sit-down annual review process for performance management. Simultaneously Patagonia was making a passionate foray into regenerative agriculture, which moves a step beyond sustainable farming’s “harm-reduction” approach and comprises a set of practices designed to increase and enhance the agroecosystem. Carter immediately saw a way to shift Patagonia’s approach to leadership. He explains it like this:
Armed with white papers demonstrating the damaging effect traditional annual reviews have on employee satisfaction and employee performance, Carter likened Patagonia’s current annual review process to conventional farming practices—which razed growth to the ground and forced an employee to rebuild emotionally—and laid out a plan to implement a “regenerative farming style” continuous-feedback system. Carter believed so fiercely in this approach, he put his job on the line, promising the board he would clear out his desk if the change didn’t result in a profoundly positive outcome. His gamble worked, and within a year, employee morale, satisfaction and retention were on the rise.
As corporate wheels can be slow to turn, Carter followed a phased approach to make the transition, spending the first six months getting his employee base accustomed to quarterly—rather than annual—reviews. Employees were encouraged to set short term performance goals, then participate in informal, employee-led discussions with their managers. To keep the reviews on track, Carter held company-wide training workshops, teaching best practices for giving and receiving feedback.
Once his teams had mastered the informal, quarterly reviews, Carter introduced a digitized feedback system [there are many options on the market], which allowed employees to request feedback from colleagues and managers at any time, providing real-time performance evaluation. According to Carter, this generated a cascade effect in which the employee or manager who was asked to provide feedback was then three times more likely to ask for feedback on his or her own job performance.
In addition to increasing employee satisfaction and making performance reviews less time-intensive (and costly) for leadership, this digitized, continuous-feedback approach increased employee productivity. “We’ve learned that people who are giving feedback digitally are a lot more likely to hit their goals and objectives,” Carter says, “and they actually get a 20% higher bonus than people who aren’t engaging in digital feedback.” Workforce surveys after the shift showed that employees not only trusted management more than before, but that managers showed greater confidence in employees and were more likely to give them opportunities with greater responsibilities.
“I think it’s really important to understand what you put into people as well as what you take out,” Carter says. “At Patagonia, our view is that people are resources to steward, not just resources for extraction and depletion.” With a turnover rate less than 1/3 the national average, Carter’s approach is certainly food for thought.
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