Our Performance – transforming performance and culture at Virgin Money and CYBG

I’ve recently shared the case against classic performance management, and why it is time to change.  Now I want to share an example of a better way – during my time at CYBG and then Virgin Money we transformed our performance practice, and along with it the culture and performance of our people.  This is that story.

I’ll talk about how we started, the philosophy, the design, how we introduced it and how we sustained it.  This is going to be headline stuff – please do reach out to me on francis@greenjuniper.co.uk if you’d like to discuss more about what it could look like for you.

Before we dive in, let me share three key things:

  1. It’s made a massive difference:
  • Managers who follow this approach have 30% more colleague engagement.
  • Sustained success – five years of implementation and refinement.
  • Cultural impact – It started the cultural journey that helped CYBG acquire Virgin Money, even referred to in the deal prospectus: “[Virgin Money] will continue to build on CYBGs innovative approach to performance, with a focus on team rather than individual contributions.”  That’s the only time I’m aware of PM contributing to a corporate merger!
  • Wellbeing – we were normalising conversations about wellbeing two years pre-pandemic.
  • Future of Work ready – it underpins Virgin Money’s approach to work – A Life More Virgin.
  1. It’s an approach with a team ethos, created with a team effort:

This was a team effort including our CPO and LT, our project team, my brilliant OD team and wider HR, and our partners at Positive Group, Uncountable and Clear Review.  Most importantly, managers and colleagues across the group breathed life into the approach.

  1. I’m a wholehearted advocate:

Since 2017 I talked to dozens of companies, spoken at CIPD annual conference and recorded interviews with Clear Review.  The success of this approach is one of the main reasons I set up Green Juniper as I left Virgin Money – I want more people and companies to enjoy better, more rewarding and more successful work.

Our Starting Point and Philosophy

CYBG (Clydesdale and Yorkshire Bank) was created by IPO from National Australia Group in early 2016.  The shift being a subsidiary to a newly independent bank in a tough market meant new demands for our people, the need to shift performance and transform culture.  Kate as our CPO prioritised building a cutting-edge performance practice, and that’s where the team and I came in.  

We started with a raft of external research including insight into psychology and neuroscience from the Positive Group, understanding intrinsic motivation through work such as Dan Pink’s Drive, and external scanning into all the pioneers of new performance – Adobe, consultancy houses and similar.

We looked hard at our context, org design and operations – processes, capability, structure of the business.  We thought about how people adapt and sustain change – including tipping point, nudge theory, product adoption curves and how to start a movement (remember Lessons From a Dancing Guy?).

We pulled all of this into our core philosophy:

  1. Performance must support and drive strategy and culture
  2. We want a one-team ethos, grounded in positive psychology
  3. This is about maximising performance, not controlling it.
  4. Treat wellbeing as the fuel for performance
  5. Reward allocation as downstream decisions

Our Design:

The philosophy led to our design which has a quarterly flow, with 5 key elements:

Team goalsaligning to strategy

No-one succeeds on their own.  Companies organise people into teams to deliver work.  The best performing teams have common goals, influence over their work and direction.

This led us to move from individual scorecards to team goals.  Every quarter teams come together with their manager to review and refresh goals.  They’ll have around 8 goals, with each one aligned to one strategic goal for the business.  

The approach strengthens team collaboration, gives voice to team members, increases ownership, clear prioritisation and organisational alignment.

Personal goals learning and improving

Teams get better when team members get better.  We wanted to create an environment where people focused on increasing their contribution to the team.

We did this by asking every colleague to set two personal improvement goals each quarter.  This replaced the annual development plan.  Each goal was tagged against one of our values, supporting culture.

The limited number of short-term goals creates focus and encourages immediate action.  It’s grounded in the idea of marginal gains – If each goal aims for 0.5% improvement in performance, then that’s 4%+ per year.  

Feedbackthe fuel for improving performance

We took the view that you can’t improve if you don’t learn.  You can’t learn if you don’t get feedback, and you’re not helping the team if you don’t give feedback.

Feedback often has a bad rep, with a lot of focus on what’s wrong.  It can also be very poorly timed.  We set out to transform this, making feedback feel like a gift.  To do this, we wanted lots of regular, positive, helpful feedback.  We asked people to share feedback through Clear Review, sharing one thing they liked (a thumbs up), and one suggestion to make it even better (a lightbulb).  We also asked people to tag the value that it related to.  

This approach is important – it places the onus on the giver of feedback to think harder about our culture, and about what to do to improve.  It gives much more regular praise to colleagues, priming them to be open to improvement.   It doesn’t replace difficult conversations or verbal feedback, but starts to build an environment where positive, helpful feedback is the norm. 

Check-ins – the performance pitstop

In 2017 a lot of continuous performance approaches had no regular requirements at all.  Our view was that there was always a need to pause, check-in and go again.  We created quarterly check-in, with a specific flow. I think of them as a pit-stop – pull over, refuel, refresh, go again.

The flow started by confirming the colleague was on track (removing threat).  It then moved to discuss wellbeing (the fuel for performance).  Those two points set the ground for the rest of the conversation – discussing feedback, progress against personal goals, contribution to team goals, and setting new personal goals.

The approach was grounded in positive psychology and focused on maintaining progress.

Viewpoints – creating evidence-based performance

We didn’t want to major on process and form filling, so managers had to answer just a few key questions after each check-in round:

  1. Is colleague performance on or off-track?
  2. How fast is the colleague improving?  (achievement of personal goals)
  3. Was there a wellbeing conversation?
  4. Has the colleague received a good mix of feedback?

We combined this data with all the data coming out of the system – around 250k data points per quarter.  We could mine that data to target interventions – e.g., managers who needed help, teams who were struggling with feedback or on setting goals.  This meant we were always helping to incrementally improve (in line with the philosophy).

Pay and Bonus – breaking the link

I’m not going to major on this, but recognise it is a tough hurdle for many people, if PM is basically about reward allocation.  However, with our philosophy we took the view that OP should be about performance, and financial reward was secondary.  We had to stick with a philosophy concentrating on intrinsic over extrinsic motivation.

This meant that pay awards were determined by position against market, and everyone who was on track over the year would be the same bonus percentage as their peers.  The stance was – we’re one team, we win together.

Launching the Approach

I’m biased, but I do think the design we implemented is the smartest approach to performance I’ve seen.  However, what makes it work is the engagement and the embedding.  

It’s critical to realise that people are well and truly stuck in the rut of classic PM, sometimes over decades.  Transforming it requires changing individual and collective beliefs and behaviours, often starting from a point of low engagement and low trust.

We set about on a multi-prong approach to engage people, including:

  • Making the scale of change clear – whenever we presented, our first slide was a bulldozer.
  • Inspiring examples – given our timing we used imagery from 2016 Olympics like Hannah Cockcroft sprinting to gold, or the GB hockey team huddling and resetting goals.
  • Human examples – we used Couch to 5K and Scottish Slimmers to show how we can all benefit from incremental gains.  
  • We created organisational stories – three of our LT members ran the London marathon and we used it as an example of relative performance, improvement, personal goals.
  • We found stories that others could own and share – one of our LT members illustrated personal goals with Roger Federer perfecting a new shot every off season.
  • I’d listen to and talk with teams, and we’d work out how to make the approach fit for their context.  This wasn’t once and done – I spent time with our commercial banking team every quarter for the first year, hearing their successes and challenges and refining the approach together.
  • We recognised HR was critical, and it was just as tough for them.  The changes disrupted reward, policy, wellbeing, learning, case management, change management and others.
  • When we came to training, we focused on behaviour, not the system – if you want to change behaviour, train behaviour.  If you want to have less process, train less process!  Our friends at Uncountable did this by taking our people through experiential training that was like a Mission Impossible – Apprentice – Crystal Maze mash-up in a Premier Inn.  

Embedding the approach

Sustaining is tough.  We know that some people get it right, and some don’t.  Teams change with turnover and organisational change.  Peaks and troughs of work shift priorities.  Sometimes we assume that people will all adopt new processes, but in practice it is much more like a product adoption curve.

With that in mind, we set about creating a movement.

  • Wherever there was good practice we celebrated and amplified it – we had senior leaders who were the role models for feedback, banking area managers who’d got great practice, and our Commercial Banking team nailed the spirit of team goals.
  • We used the data to spot good practice and identify those who needed help.  We weren’t punitive though – if we could see an area just hadn’t got it nailed, we’d offer help – how to generate more feedback, have better goals, improve practice.  We simply made it clear that high performing teams did this, and low performing teams didn’t.  Which did they want to be?
  • This also meant reprioritising within HR – what data we provided to HRBPs, how we sustained quarterly activity, how we tackled areas that serially didn’t do a good job.

And what about success?

Earlier this year, members of my former team shared some brilliant data with me.  They cross-referenced five simple practices in our performance with data from the engagement survey.  

There was a direct correlation between performance practice and colleague sentiment.  That included engagement, understanding organisational strategy, advocacy of the company’s products, stretching performance and satisfaction with line management.  

What emerged was that managers who did none of the five scored 50% on the above measures.  Managers who did all five scored 80%.  To get a sense of the performance difference this creates I picture a hockey or football match, where one team has five players who are motivated, know their positions and the team tactics, and the other has eight.  We all know which team will win every single time.

What next?

One of the most common barriers I hear is along the lines of “our organisation isn’t ready for this” or “our managers aren’t good enough”.  Let me assure you – when we started, we weren’t “ready”.  However, taking the long-term view, making a start, and continuing to improve was transformational.  You never complete a journey you don’t start!

I’m passionate about this because I know it works.  It makes work better for people and people better at work.  A big part of the Virgin ethos is creating great colleague experience, and that’s why we shared with so widely.  We also know that context is everything – what we did won’t fit other organisations.  Both of those beliefs remain true now I’m running my own business.  It is absolutely possible to create a positive culture and high-performing organisation.  Elements I’ve described above will work, but it’s got to be tailored to you.  If you’d like to make a start on transforming your performance and culture, please reach out, either via LinkedIn or to francis@greenjuniper.co.uk .  Wherever you’re starting from, I’d love to help!

Why classic performance management doesn’t…err…manage performance

Performance management should be awesome.  It gives the opportunity to reach every colleague, create alignment, strengthen culture, raise performance, and maximise the return on our greatest asset. 

Sadly, classic PM has lost sight of this.   According to Gallup: “[it costs] as much as $2.4 million to $35 million a year in lost working hours for an organization of 10,000 employees to take part in performance evaluations – with very little to show for it”.  PM has largely been distilled down to a process that feeds pay and bonus, rather than managing performance.  It is grounded in the belief that money is the primary motivator, neglecting all the other drivers of human performance. (CIPD).

In this blog I’m going to try to set out the case against the classic PM approach of cascaded goals, annual appraisals, roundtable assessment, performance distribution and bonus awards.  Next week I’ll share a bit of a case study on how we transformed this at CYBG and then Virgin Money, and what learned over five years of practice.  Green Juniper can work with you to review your current practices and shape much more effective performance practice – please reach out if you’d like to discuss.

So, let’s look at the failings of PM:

  1. It undermines culture.

Companies set out target culture, values and behaviours that will lead to superior performance.  Those tend to include more empowerment, collaboration, reduced hierarchy, more adaptability, more transparency, and more room for initiative. 

PM pulls against this kind of culture.  It is hierarchical (goal cascade).  It is inflexible (annual goals).  It discourages collaboration (individual goals).  It increases risk of failure (performance ranking).  It is opaque (round-table rating).  Organisations can do fantastic work to drive culture, but with classic PM it is like driving with the handbrake on.

  1. It doesn’t measure organisational performance.

Executive teams look at reams of data on all aspects of the performance of the company.  When it comes to looking at the performance of people (their greatest asset, and likely their greatest cost), they get very little quality data.  Often the only actual performance data that the executive team will see is the final performance distribution at year-end.  They can see the performance round has been completed, but not whether goals have been delivered or performance improved. Even that data isn’t helpful – the curve is the same each year, effectively saying that performance is the same despite all the performance management, learning, career development, communication, goal-setting, coaching, townhall sessions and engagement surveys over the course of the year.

  1. It does not sustain alignment

In the absence of performance data, executives rely on inputs – getting an aligned set of goals through the organisation.  Well aligned organisations generally perform better but achieving and sustaining alignment is tough (HBR).  

The problem is goal setting is slow – cascade can take 8 weeks (15% of the year!).  It’s unwieldy, so not revisited or reviewed.  This means alignment isn’t refreshed through the year as there are external events, strategy refresh, changes to plan etc.  The business spends 8 weeks getting aligned and then 44 weeks drifting apart.  The consequence is that goals reviewed at year-end often don’t relate to the actual work delivered.

  1. It weakens teams

We organise people and work into teams as we believe that leads to better performance.  High performing teams typically have common set of tasks and objectives, a clear direction, ways of working, psychological safety (rework).

In classic PM team members are given their own tasks, with no sight of their team mates.  It puts team members in competition for finite reward.  The rating system does not encourage colleagues to help team-mates who are struggling, or support colleagues who are prospering.  At the extreme, this intra-team competition contributed to Microsoft’s “lost decade”.

  1. It undermines good management

Good managers are critical for building high performing teams – reinforced by Google’s project oxygen.  A good manager creates alignment, develops team members individually and collectively, deals with issues, creates a positive environment.

While organisations may invest in developing managers, setting expectations and so on, the performance management process undermines all of this.

A great manager who raises the performance of their team members, who tackles under-performance and who builds a strong team ethos is making their job harder at year-end.  They’ll have more high-performers and fewer weaker performers, making it hard to “hit the curve”.  When they go into roundtable discussions, they’re a hassle for their team-mates and their own manager, because they make it harder to distribute ratings.  In contrast a mediocre manager who isn’t raising performance and doesn’t move under-performers on is a “good corporate citizen”, helping to meet the performance expectations, and critically making their boss’s life easier.

The subliminal message from PM to managers is to always have a weak team member and don’t have too many strong ones!

  1. It is discriminatory

One of the biggest issues with performance management is that it is discriminatory.  There is a belief that it is objective, and that roundtable exercises act as a safeguard, but that just isn’t true.  The approach of appraisals and roundtable discussions plays in to so many cognitive biases such as recency, affinity, proximity – basically people who we like, who are like us, and who are close to us, are more likely to get better ratings. (Engage for Success).  That would be one explanation why the gender pay gap and ethnicity pay gap are so intractable – decades of rating and decisions have slowly built up.

What next?

Traditional performance management has been around a long time, and some people have been very successful through it.  However, overall the approach does not support modern organisations, doesn’t drive individual or team performance.  There are much, much better ways out there. 

Next week I’ll aim to share the kind of practice I’ve put in place previously, and how it has worked.  If you’d like to discuss what could work for your organisation, then please reach out.

Why right now it’s time to transform performance management

Sometimes, tools or practices that have served us well become obsolete.  Remember how cool CDs were?  The Blackberry?  Blockbuster? One-hour photo printing?  The world moves on, and failure to adapt is a slow death.  That’s where we are with performance management.  It’s long been overtaken by better practice, but many organisations are still stuck with it. 

In this note I want to argue that if you’ve not moved away from classic annual performance management, the time to do it is right now, for these reasons:

  1. Organisations have changed rapidly in the last two years
  2. People, work and society have changed even faster
  3. The PM deal of good performance for improving pay is dead in the water
  4. Year-end 2022 could be the perfect storm

As a bit of background, I’ve been fortunate enough to take people on the journey to continuous performance management twice – we transformed performance at CYBG in 2017 and expanded that to Virgin Money in 2018/19.  I know how tough it is to deal with resistance and inertia, I’ve seen what does and doesn’t work and found ways to progress.  In the last five years we learned, analysed, experimented, and refined practice.  My arguments here are grounded in science, good practice and lived experience.  I care about this, because I know it is possible for PM to drive performance and give colleagues better working lives. 

Over the course of the week I’ll share a couple of pieces on the case against performance management, what a better approach can look like, and how to get started.  For now, let’s look at why it’s more important than ever to change:

  1. Organisations have changed

The level of ambiguity now is greater than ever – in the UK we’ve seen systemic shock after systemic shock – Brexit, Covid, war in Ukraine, 4 Prime Ministers in 6 years.  Organisations must be far more adaptable, able to evolve goals and strategy rapidly.  Operations, structures and role demands have to change as a result of faster digitisation (McKinsey) the move from bricks and mortar stores (PWC),  supply chain and inflationary cost pressures (BDO).  

Organisations are adapting – more agile methodologies, investment in upskilling and reskilling, new tech, revisiting communication and organisational values (emphasising adaptability and innovation).  However, it is striking that performance management (which should be driving performance of the whole workforce) often doesn’t feature in these discussions – reflecting that classic PM doesn’t support organisational need.

2. Our people have changed, and so has the way they work

Through Covid we spent so much time coping that we didn’t really take stock of all the change going on around us.  HR had to focus on safety, health, and managing operational resources. There wasn’t the headspace to see the workforce transform.  

It has transformed though – half a million over 50s left the workforce through Covid (ONS), and close to 3 million people have started work from school or university.   That’s more than ten per cent of the workforce who are new, but also less visible and less connected to organisations in the remote/hybrid world – as evidenced by the “quiet quitting” phenomenon emerging on TikTok.  

More fundamental is that life has changed for every one of us.  The relationship with work has been challenged by furlough, redundancy, and role changes.  Home is now a place of work, and 38% of UK workers are still hybrid (ONS).  Around 2m people have long Covid (ONS), and 10% of the population are experiencing persistent mental health challenges (BMJ).   Where we work, when we work, how we work and our ability to function have all been impacted.  All of these impacts disproportionately impact protected minorities, with performance systems carrying real risk of systemic discrimination (Personnel Today).  

High Performance depends on a whole host of factors – wellbeing, location, connectivity, relationships, personality, experience, nature of role, quality of management.  Classic PM tends to simply focus on the process, rewarding those who’ve delivered the most, likely to be the people with the most advantages.   

3. The mental deal is dead in the water

The performance deal for colleagues goes along these lines: “I agree performance and development goals.  If I work hard, deliver on goals, build skills and experience, then my salary and career progresses”.  Pay frameworks support this – new starters begin at the bottom of a pay range and progress towards a market rate.  

However, it doesn’t work.  Collectively, real median income rose by less than 1% between 2007 and 2021 (economicshelp.org).  Individually, it can easily take 20+ years to reach market rate for a role.  

Classic PM works on the basis that this deal remains in place, but people just aren’t buying it anymore.  The exit of over 50s, the great resignation, historic high levels of vacancies (1.3m March to May this year), “quiet quitting” and the volume of industrial action all demonstrate dissatisfaction.  This reflects the very real financial pressure people are under, but it also reflects that people don’t believe companies are keeping their promises around performance and reward.

4. Year-end 2022, the perfect storm?

There’s a lot of dissatisfaction, and it is going to get worse – industrial relations are wobbly; pressure is on companies to drive performance;  pressure is on colleagues to pay the bills.  Inflation is double digit, and energy costs in October will rise by about £800 (even after Liz Truss’ magic).  Someone earning median fulltime salary for the UK will need a pay increase around 4% to cover those costs alone.  In May, annual pay growth was 4% with inflation at 9% (The Guardian).

How does this relate to the performance year-end?

Colleagues need a good pay rise.  Their route to that is a good performance rating.   This year, more than ever people will be pushing for a high performance rating.  Let’s assume 50-60% of colleagues argue they’ve performed strongly – that’s not going to match the corporate distribution curve. 

The organisational view is likely to focus on retaining and rewarding their good performers – more pressure to “hit the curve”.  Every manager in every round-table discussion is going to turn up with acute pressure from their team for high ratings, and they’ll have to calibrate with a more varied workforce and less visibility than ever.

It leaves managers in an invidious position – through Covid they’ve built stronger relationships, stronger teams, and now they’ll have to tell many colleagues “We don’t think you’re as good as you do”.  That’s going to disengage people, diminish trust and increase cynicism.  And managers aren’t well set to handle this –   Over 60% are experiencing some degree of burn-out, impacting their ability to perform well (HRDirector.com).

Even if the exercise was perfect, the outcomes will still be damaging.  The gap between pay deals and inflation means even the top performers will be worse off in real terms.  Some will conclude they need to move to be properly rewarded (and there were 1.3m vacancies in the UK last quarter).  Others will stay, just more cynical and more toxic – diminishing performance (see this month’s HBR).  

This year-end will amplify the failings of performance management.  It exposes the contradictions in working practice.  There will be transparent impacts – retention, grievances, sickness.  The more pernicious impacts are long-term – lower engagement, trust, wellbeing and psychological safety.  And lower psych safety can lead to 37% higher turnover, 33% lower productivity, 36% lower collaboration (Accenture).   Following a classic-year end process could easily mean you spend thousands of hours of work to make your people perform worse.

So, what to do?

There’s no simple solution.  The economic position is brutal.  While organisations can’t tackle the economic position, they can definitely take actions that strengthen engagement, trust and performance.  

There are three things I’d recommend now:

  1. Commit to transforming your performance approach.  Tell your people what you’re going to do, tell them why, get them involved.  Be open about the context, the challenges right now and acknowledge that the current process doesn’t work. 
  2. Listen to people about their experiences of performance and appraisals.  You’ll hear horror stories, but it is cathartic, and it gets people engaged in creating something better.  Use this to inform your design approach, and test ideas with people as you do.
  3. Treat this as a break point for reward distribution – e.g., consider flat awards this year, to give you time to shape a reward strategy fit for the future.

Moving to a new performance approach isn’t about refining a process.  It’s about changing beliefs and behaviours, to drive better performance.  It is a win-win change though – raising organisational performance, strengthening culture, creating more agility, helping managers and giving colleagues better working lives.  The key is to get started, and I’d be delighted to help you with this – so if you’re interested in making work better, please reach out!