Accenture to Scrap Performance Reviews: Will Indian IT Firms Follow?

Accenture to Scrap Performance Reviews: Will Indian IT Firms Follow?
On a day when Microsoft reported its biggest-ever quarterly loss and Apple disappointed analysts with its sales forecast, the attention of many IT employees and recruiters in India was firmly focused on Accenture.

Accenture CEO Pierre Nanterme on Tuesday told The Washington Post that his company has disbanded the existing system of one-time annual performance review. The global IT consulting and outsourcing firm will unveil a more dynamic process to reward employees when annual appraisals get underway in September.

According to Mr Nanterme, Accenture employees will now receive timely feedback following assignments throughout the year.

Analysts say HR managers at domestic giants such as Tata Consultancy Services and Infosys - that are in direct competition with Accenture - would be closely monitoring these developments.

Accenture is not a pioneer in embracing an alternative model of employee appraisal; global biggies such as Microsoft and Adobe had earlier junked employee rankings.

However, Accenture's move assumes significance because of the impact it is likely to have on a large number of IT employees in India. Nearly 1.5 lakh of Accenture's 3.3 lakh employees are based in the country, making it perhaps the biggest private sector employer in the country after TCS and Infosys.

"Accenture has set a trend by junking the bell curve led performance management. It is a huge development from India's perspective. If the move helps Accenture boost employee morale, more companies may be interested," said the HR manager of a leading Bangalore-based IT firm who did not want to be quoted.

Like many global firms, Indian companies pit employees against one another to reward performance; the model that ranks employees on the bell curve - plotting employees in categories of outperformers, average performers and underperformers - was first used in the 1980s.

But a growing tribe of companies are embracing alternate models of measuring employee performance to reduce disenchantment and involuntary attrition.

Accenture's model, if successful, could help Indian IT and BPO companies contain attrition, which tends to spike in the June quarter, when annual increments are announced, analysts say.

TCS, which employs nearly as many employees as Accenture, saw its attrition rate spiking above 15 per cent in the three months to June. Infosys, which reported its first quarter results on Tuesday, also reported a sequential rise in its annualized standalone attrition at 14.2 per cent.

Analysts attributed the rise in attrition in these companies to "seasonality" that among other factors includes disappointment with appraisals.

Accenture's announcement turned out to be a hit among its employees; the company's global managing director Sanjeev Vohra described it as a "good move" on Twitter. Sandeep Sharma, digital marketing specialist at Accenture, said every Indian IT company should follow the move.