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Gaming The System

How One Company Replaced Annual Performance Appraisals with Gamification

In most organizations, managers set development goals, provide feedback and award pay raises and promotions for their employees through performance appraisals. Over the years, companies have implemented different ways of conducting performance reviews and appraisals from traditional unstructured methods to management by objectives, from the bell-shaped curve and rating scales to 360-degree assessments. The business community is largely divided on which approach works best, but almost everyone would agree that none is perfect.

Of late, many companies such as Adobe, Deloitte, Accenture and IBM are trying to move away from the traditional once-a-year appraisal cycle to advance their performance review process.

Similarities in the many new appraisal models are more frequent feedback cycles and regular check-ins with employees. This mostly attempts to address the drawback of long feedback cycles and prevent surprises for employees when they go through their annual appraisal cycle. It also helps decouple compensation conversations from performance conversations.

While it has been a potent, long-employed concept for engagement, organizations only now have begun to understand gamification’s value in changing behavior.

To combat the drawbacks of traditional annual performance appraisals, iPlace, an international recruiting company with 470 employees, created an innovative company operating system called LaunchPad in 2015. The company’s headquarters are in McLean, Va., with a recruiting center in Pune, India. Employees play weekly and quarterly games, through which they receive continual feedback and earn stars resulting in automatic pay hikes and promotions. Because of LaunchPad, there is no need for performance reviews — and at iPlace they have been eliminated.

LaunchPad is a system in which all key performance metrics are gamified and built into the employees’ work. The foundation of LaunchPad is gamification.

Gamification is a process of applying game concepts to any activity with the goal of making it more enjoyable and motivating. It is a powerful management tool that can be used in a variety of business areas. The field of learning and development is one of the most prominent areas in which organizations have successfully implemented gamification. Online learning platforms, internal training programs and skill development courses have seen great success because of it. Companies also have successfully used gamification in areas such as customer engagement, employee engagement, sales, marketing, branding and social media marketing. While it has been a potent, long-employed concept for engagement, organizations only now have begun to understand gamification’s value in changing behavior and have started applying it to operating divisions.

iPlace chose to use gamification to optimize all areas of business and tie them all together.

Gamification has helped iPlace address some of its key business challenges: performance management, attrition, absenteeism, engagement and even innovation. Gamification at iPlace follows a simple structure in which recruiters are rewarded and penalized with a simple points system. Employees earn stars (points) for doing good work and lose stars for negative actions.

There are four primary components of gamification at iPlace: activity, results, behavior and culture.

Activity

The activity component deals with day-to-day performance and delivery. iPlace operations are broken into clusters of up to 60 recruiters. Each cluster is organized as an entrepreneurial business unit managed by a head who is accountable for the profitability of the cluster. Under the heads, there are managers, team leads and recruiters. Heads are responsible for understanding the needs of clients in their cluster and determining the recruiting strategies required to make the client successful. Depending on the client’s needs, the head assigns four deliverables to each recruiter, team lead and manager every week. These deliverables deal with the activity part of the recruiting process such as fulfilling job orders, submitting candidates, getting interviews, not having candidates rejected and so on. When a recruiter achieves a deliverable, he or she gets a star. In addition to candidate sendouts and interviews, the heads also assign deliverables around speed, quality and cost. This way the client’s goals are in sync with the employee’s goals.

Results

Apart from the weekly goals that deal with activity, recruiters also are assigned quarterly goals that are based on the results they deliver. The quarterly goals are focused on the result component of recruiting such as placements and revenue. If they achieve their placement and/or revenue goals, recruiters earn a lot of stars in one go.

Behavior

The behavioral component deals with professionalism and conduct. For displays of unprofessional activities or negative behaviors such as tardiness, absenteeism and excessive breaks, recruiters lose stars.

Culture (and iPlace Core Values)

Apart from the work-related parameters of earning stars and behavioral aspects of losing stars, employees also can earn stars by following iPlace core values and contributing to iPlace’s culture. Employees with a proper work-life balance and healthy habits perform better. Therefore, employees can earn stars for taking care of their health, wealth and well-being. They earn stars for getting their health check-up done on time, for saving money and making investments, quitting smoking, learning a new skill, helping fellow iPlacers and other departments or even for taking a vacation (for those who never seem to take time off). Stars also can be earned for coming up with creative solutions to business challenges, proposing new business ideas and innovation.

The Rewards and the Value of a Star

Over time, employees earn and lose stars depending on their performance. As they do well, employees accumulate stars. When employees accumulate 40 stars, they get automatic pay raises. When they accumulate 120 stars, they get automatic promotions. The pay hikes and promotions are automatic, no questions asked. Top performing employees can earn up to five raises every year, which keeps them engaged and helps ensure that they are always performing at the top of their game. Because the goals set for employees are in sync with the client goals, whenever employees work toward earning their stars, iPlace’s clients benefit. If a client does not get expected results, the employees working for that client also suffer. In this way, it is always in recruiters’ best interest to deliver superior level of service to their clients.

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The stars earned by all iPlace employees are displayed on a scoreboard that is available on iPlace’s intranet for everyone to see. Any employee can view everyone’s performance (both positive and negative) on the scoreboards. In addition, the scoreboards also are displayed across large screens across the company. This creates full transparency. Everyone knows who is performing well, and who is not. Everyone knows who is getting promoted and why. They respect their peers and appreciate top performers. The transparency goes a long way in modifying behavior. Top performers show up at the top of the leaderboard and feel appreciated. They find that their hard work is being constantly recognized and they are the most engaged part of iPlace’s workforce. At the same time, no one wants to be at the bottom of the leaderboard and they push themselves to do better. Everyone constantly competes to accumulate stars and to move up the ladder.

Even though there are leaderboards and internal competition, it remains a healthy work environment given that one person’s growth does not affect the career of another.

An important point to note is that LaunchPad is not a zero-sum game. If one employee does well, those stars earned do not take stars away from another employee. Everyone plays their own game and progresses at their own speed. So even though there are leaderboards and internal competition, it remains a healthy work environment given that one person’s growth does not affect the career of another.

Results of Implementing Gamification

Attrition

iPlace’s recruiting center is in Pune, India, while sourcers and recruiters work primarily for the U.S. market. This means they work a hard night shift: 6:30 p.m. to 3:30 a.m. (Indian Standard Time). Due to the night shift, attrition always has been a business challenge. Most employees do not want to work the night shift throughout their careers and tend to leave after a few years. The attrition was at its peak at iPlace in 2014.

Since implementing LaunchPad, iPlace’s top performers started making a lot of money. They were clearly identified as employees who add a lot of value to the company and, subsequently, they received a lot of pay raises and promotions. Everyone had the opportunity to define their own growth and carve out their own career path at iPlace.

When employees realized they control their own growth and no team lead, manager or head could stop them if they performed well, top performers started staying with iPlace for longer durations. Overall, it helped iPlace reduce its attrition by 20% from 2015 to 2017.

Late Comings

In India, being late by a few minutes is OK; it’s a cultural thing. Employees often were arriving late at work or being late for client calls by a few minutes. After introducing LaunchPad, iPlace started monitoring late-coming metrics very closely. The company was shocked to realize that in July 2015, about 30% of its employees arrived late to work.

A month later, in August, iPlace introduced an escalation for late coming. Every time someone came late to office, they lost stars. Within a month, late comings dropped by 46%. The company saw a further downward trend over the next six months and hit its best month in February 2016, when iPlace achieved a 90% reduction. Since then, late comings have remained at a constant low. (See Figure 1.)

Placements

Perhaps the most important metric to track performance is placements per employee. The data points fluctuated slightly, creating a wavy pattern from 2009 through 2015.

After implementing LaunchPad, to iPlace’s surprise, there initially was a decline in placements per employee. In the initial days of LaunchPad, a big focus was on activity and volume. iPlace pushed recruiters to submit more candidates without also focusing on quality metrics. The company saw submissions go up, but the conversion ratios for interviews and placements went down. Heads realized that volume alone was not good enough for success. That is when the activity goals changed to focus on quality while maintaining good volume. Subsequently, iPlace’s placement metrics saw a steep rise in 2017 that has been extended further into 2018. April 2018 was a record placement month for iPlace. The company saw a 63% increase in placements per employee per month between pre-LaunchPad and post-LaunchPad numbers. There also was a similar trend across sendouts, interviews and offers.

Why Gamification Works

Positive and Negative Reinforcements

Gamification is designed to reinforce positive and negative behaviors. Games provide rewards for positive behaviors and penalize negative ones. Rewards release dopamine (the pleasure hormone that tells the brain to do it again), while penalties release cortisol (the stress hormone that tells the brain to run away). A positive action that is instantly rewarded will induce employees to do more of it, while an instant penalty for a negative action will induce them to not repeat it.

Instant Gratification

Games provide instant gratification and have very short feedback cycles. Multiple studies have shown that instant gratification and constant feedback are especially valued by Millennials.

Transparency

Gamification is transparent. Rewards for good performance are defined, and so are penalties for bad performance. When something positive is achieved, employees are instantly rewarded and vice versa. Good and bad performance is visible for everyone to see through scoreboards and leaderboards. Everyone knows where they stand when it comes to their effort and results. This creates an environment of fairness in the performance management system.

Well-Defined Goals

In a gamified system, goals are well defined. Achieve X to get Y. The goals are quantifiable and there is no ambiguity or subjectivity. Everyone knows exactly what they need to achieve, and the employee and the supervisor/manager are in sync about what is expected.

Competitiveness

Gamification fosters a culture of competitiveness and pushes everyone to do their best. Competition between peers pushes everyone to exceed their normal levels.

Team Effort and the Social Element

Gamification can be a great way to develop teamwork. Teams working together to compete against other teams leads to positive social interactions. Employees bond over the shared experience.

Rahul Talreja (Fred Price) Rahul Talreja (Fred Price)  is the head of data analytics at iPlace USA and leads LaunchPad’s data and program management. Connect with him on LinkedIn.

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