Cases for Performance Management
Continuous Performance Management at Patagonia
Patagonia makes outdoor clothing for climbing, skiing, snowboarding, surfing, fly fishing, mountain
biking, and trail running. Patagonia is known for using innovative fabrics and vivid colors in its clothing as
well as using environmentally conscious materials such as recycled polyester and organic rather than
man-made cotton. The company culture encourages employees to treat work as play and consider
themselves the ultimate customers for the products they produce. Patagonia places a high emphasis on
transparency and working collaboratively to come up with innovative problems and solutions to
problems. To help facilitate collaboration, Patagonia tends to recruit and hire employees based on
current employees’ informal network of friends, colleagues, and business associates. When Dean Carter
joined Patagonia as vice president of human resources, he was surprised that the company still used
only the traditional annual performance review and didn’t supplement it with a continuous feedback
system. Carter made the case for adding a continuous feedback system to Patagonia’s CEO, arguing that
this type of system represented the future of performance management and aligned with Patagonia’s
emphasis on transparency and collaboration. He was so convinced that Patagonia’s traditional
performance management system needed to be revised that he told the CEO she could replace him if his
recommended approach didn’t work out. The additions to Patagonia’s performance management
system that Carter helped implement included an emphasis on both annual and quarterly goals,
continuous feedback, and quarterly manager–employee check-in meetings. Annual goals focused on
targets such as sales, expenses, and cost reduction are used for traditional end-of-year formal
performance reviews linked to compensation and bonus decisions. Quarterly stretch goals are
developmentally focused yet designed to help employees make progress toward their annual goals.
Patagonia encourages employees to set truly challenging stretch goals to encourage them to seek out
feedback at any time from managers and peers on their progress toward these goals, which in turn, can
help them improve their progress toward their annual goal in the subsequent quarter. Feedback can be
requested and provided through an app that employees and managers can access on their notebook
computers, tablets, or smartphone. This gives employees the opportunity to receive highly motivating
and rewarding social recognition from the people they work with. At quarterly employee–manager
check-in meetings, discussions focus on quarterly goal progress, potential changes in goals for the next
quarter, and what the employee learned from the feedback they received and how it will change their
behavior during the next quarterly performance period.
The changes to the performance management system were implemented in steps starting with
encouraging quarterly employee-led conversations with managers and then adding a focus on the
importance of continuous feedback and understanding how to give and receive it. At first, the feedback
employees provided to each other tended to be positive but gradually it included areas that could be
improved. The emphasis on providing feedback helped start a reinforcing cycle in which the employee
who was asked to provide feedback felt comfortable asking others for feedback on their performance.
Setting stretch goals and participating in the continuous feedback process using the app is optional. But
many employees are motivated to use the continuous feedback approach after considering data
showing that those who do are more likely to achieve their annual goals and receive 6% higher
bonuses than those who do not participate. Further, since the new system was implemented
Patagonia’s employees report that they have a greater understanding of what is expected of them and
have greater trust in their manager. The more frequent conversations have also increased managers’
beliefs that employees have the abilities to take on additional job responsibilities. Also, when Carter asks
employees at Town Hall meetings how many of them have changed their behavior as a result of the
feedback they received, over 70% raise their hands.
QUESTIONS
1. How well do you think Patagonia’s approach to performance management seems to meet the (a)
strategic, (b) administrative, (c) developmental, (d) communication, (e) organizational maintenance, and
(f) documentation purposes of performance management? Use evidence from the case to support your
opinions.
2. What characteristics does feedback need to have so that it is useful for changing behavior, and in
turn, performance?
3. Which part of Patagonia’ s performance management process contributes most to its effectiveness?
Explain.
MANAGING PEOPLE Helping to Encourage Frequent and Productive Performance Conversations
Genpact is a global business consulting firm. Its more than 90,000 employees help the world’s large
corporations improve their business processes. The firm, which started as a division of General Electric,
applies data analytics to a wide variety of business problems. To explore its performance in satisfying
customers, Genpact brought in a leader in the field, Peter Gloor, a research scientist at MIT who also
runs a consulting firm called Galaxy Advisors, which specializes in the field of network analysis, or the
study of communications patterns. Gloor observed that Genpact’s client communications contained
data that Galaxy’s Condor system could gather and analyze to identify relevant performance measures.
At Genpact, 176 teams of up to several hundred members worked with key accounts. Galaxy would
assign 26 teams to its analysis, and the other 150 would be a control group, continuing with its normal
practices. Condor would not read the contents of Genpact’s messages to clients but would collect
information about the e-mail between team members and clients: the frequency of the Genpact
employee responding without checking with a supervisor, the simplicity of language in the subject line,
the speed of responding, and the extent to which the client dealt with only one employee. The data
would become performance feedback that teams could use to identify areas for improvement. Over a
two-year period, Condor analyzed more than 4.5 million messages. Twice a year, Genpact conducted a
customer satisfaction survey in which clients indicated their likelihood to recommend Genpact. The
early results confirmed Gloor’s prediction that teams whose communications were direct (no supervisor
needed), simple, and speedy and that continued with the same Genpact employee would be associated
with greater customer satisfaction. Each month during this period, team leaders met to learn their
team’s performance on the four measures, and they took this information back to their teams, so all the
participating employees could see which measures needed improvement. The employees received
performance feedback—data on communication patterns—once each quarter. Initially, results were
provided at the level of the individual team member, in order to contribute to individual improvement.
However, this raised concerns that lowerperforming employees could feel punished for participating in
the project. So the feedback shifted to a team-level focus. Even without the individual feedback,
Genpact employees could see what needed to improve, and they shifted their communication behaviors
to ones associated with client satisfaction. By the end of the test program, client satisfaction scores in
the group using the Condor data rose 5%, while they fell by 12% for teams in the control group, resulting
in a 17-percentage-point gap in favor of the teams getting the feedback on their communication
behavior.
QUESTIONS
1. How well do you think Genpact’s network analysis approach to performance management met the
criteria for effectiveness? Explain.
2. If you were in Genpact’s human resource department, would you recommend that the company roll
out the same kind of performance feedback to the remaining teams? Why or why not?
3. In addition to identifying effective communications behaviors, what other insights could use of this
data provide?
