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Adobe at Crossroads: Mechanistic To Organic: Instructor: Prof. VISHAL GUPTA Academic Associate: SHUBHANGI CHOWDHARY

Adobe found itself needing to transform from a mechanistic, product-based company to an agile, cloud-based one. To enable this cultural shift, it abandoned its traditional annual performance review system in favor of continuous "check-ins" between managers and employees. This less formal approach removed ratings, documentation requirements, and comparisons between employees. Instead, it focused on real-time feedback and employee growth. As a result, Adobe saw improved employee engagement, faster transition to the cloud, and increased stock value. Other knowledge-based companies have since adopted similar continuous feedback systems, while sales/financial firms and manufacturing have retained annual reviews.

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134 views4 pages

Adobe at Crossroads: Mechanistic To Organic: Instructor: Prof. VISHAL GUPTA Academic Associate: SHUBHANGI CHOWDHARY

Adobe found itself needing to transform from a mechanistic, product-based company to an agile, cloud-based one. To enable this cultural shift, it abandoned its traditional annual performance review system in favor of continuous "check-ins" between managers and employees. This less formal approach removed ratings, documentation requirements, and comparisons between employees. Instead, it focused on real-time feedback and employee growth. As a result, Adobe saw improved employee engagement, faster transition to the cloud, and increased stock value. Other knowledge-based companies have since adopted similar continuous feedback systems, while sales/financial firms and manufacturing have retained annual reviews.

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ADOBE AT CROSSROADS: MECHANISTIC

TO ORGANIC

ORGANIZATIONAL DYNAMICS

Instructor: Prof. VISHAL GUPTA

Academic Associate: SHUBHANGI CHOWDHARY

PREPARED BY

 KUMAR ADARSH
Roll no. 19332

 MANISH MARKAND KAPGATE


Roll no. 19329

1
Adobe at Crossroads – Mechanistic to Organic

In March of 2012, Adobe found itself at crossroads of an organizational overhaul. It was looking at a dramatic
transformation in business, from a “one-time purchase” product company to a cloud-based software company.
This would involve transforming the pre-existent structured and mechanistic work culture into an agile and
organic one.

Of the various instruments to bring about this radical shift in organizational culture, the reinvention of
Performance review, or rather its abandonment was perhaps most intriguing.

Adobe

Headquartered in Silicon Valley, and employing more than 13,500 employees globally, Adobe bears the title
of one of the largest software companies. With brands such as Nissan, CNN and American Express in its
portfolio of customers, it also caters directly to customers. With one of the most diversified businesses, its
primary focus is to provide tools to create and deploy digital content, optimizing it over time to improve
business outreach.

Today, its key product portfolios - Creative Cloud (Photoshop, Illustrator, etc.), Document Cloud (Acrobat
and PDF documents) and Marketing Cloud (Web Analytics and Omniture), comprise of an assortment of
products. Each of these was available as a standalone, one-time purchase product prior March 2012. This was
a pain point for the company since the customers did not upgrade the software for several years post-
purchase. With rapidly evolving digital device landscape, this meant that the customers were missing out on
critical innovations. Subsequently, the company’s perception of a “reliable product cycle company” was
signalling no growth potential to the investors, hurting its stock price.

The company decided to transform into a cloud-based software company with a subscription-based business
model. As such, the customers would be paying a monthly or annual subscription fee for regular updates and
feature add-ons.

Traditionally following a desktop software model, the development cycle for the products at Adobe lasted 18-
24 months. The work processes were disciplined according to such long product development cycles. As
such, they were incompatible with the proposed cloud software solution that promised quick resolution of
issues and rapid rollout of features regularly. In essence, this business decision required a tectonic shift in the
organization culture to adopt agile processes and workflows.

Old Practices

The status quo of Adobe’s performance appraisal process was typical of the peer tech companies. It involved

 Managers initiating feedback process from the employee’s peers and soliciting feedback
 Leaders participating and deliberating on the distribution of ratings and rankings to be assigned,
usually on a qualitative scale, in relation to other employees
 Managers compiling a performance summary and delivering to the employees
 Incentives – salary raise, equity endowment and promotions – defined by the employees rank, rating
and level.

2
New Practices

The new Process – “Check-In”

In order to make the shift to new business model, Adobe needed to change its HR practices. So, the
management decided to scrap the older performance management system and go ahead with the system,
termed a “Check-in”. In contrast to the industry standard, where performance evaluation was done at the end
of the year, “Check-in” system is a process of continuous discussion between manager and employees.
Employees and managers meet as needed, discuss expectations and provide feedback.

Less Formalization - Removal of the rating system

In the previous system, everyone was given a rating at the end of the year and his/her performance was
compared to his peers. Only the top 15% of employees were granted the “high performer” rating and this
crippled teamwork and created an unhealthy competition among employees. Also, the bonus awarded to the
employee was dependant on the employees rating.

In the new system, the rating was eliminated. Low performing employees are given instant feedback to help
them perform according to the expectation. Also, the raise isn’t fixed according to rating. The manager is free
to adjust raise based on his evaluation and this evaluation took into account not only past performance but
also the employee potential for growth.

Flexibility - Less Documentation and More Informal Feedback

The previous system was very rigid, resource-intensive and documentation orientated. According to Adobe,
each manager spent around 40 hours/per year for performing the evaluations. In the new system, there are no
rules regarding written reviews or process for evaluating. The process is more informal and fluid, the majority
of the feedback is informal and most of the managers don’t document the reviews. This has helped Adobe to
save 100,000 managers hours/year.

Change in Culture - Focus on employee Growth in contrast to just employee Assessment

In the previous system, employees got feedback only at the end of the year. So, the employee, who weres
failing to perform according to expectations continued to do so for a long time without quick correction. In
contrast, under the new system, the feedback was real-time. This helps employees to resolve performance
issues quickly. The past system was more orientated towards, evaluating employees and granting
rewards/punishment based on the employee rating. Under the new system, the focus is more on developing
employee potential and helping them grow in the organization. The employees can discuss their goals and
developments requirements and are provided training accordingly.

Outcomes of the Check-in Policy for Adobe

The new system helped Adobe to improve employee engagement and company image. Adobe successfully
transitioned to its new cloud-based subscription mode faster than any other software company. And the
“Check-in” system was one of the factors for this success. The new system helped Adobe to 100,000 manager
hours/year. Adobe stock value almost tripled and it rose up in the International Top Global brand rankings.

3
72% of the employees claimed to be receiving regular “Check-in” feedback. The employee perception
improved and during the exist interviews, 75% of the employee stated that they would recommend Adobe as
a great working place.

Applicability across Sectors

Adobe implemented the new performance


management system (PMS) as it wanted to
transform into a more agile and dynamic
organization with a larger emphasis on employee
development. Under the present PMS, evaluation is
done only once a year and hence it is not suited for
industries with smaller product cycles. Also, older
PMS creates unhealthy competition among peers
and impedes collaboration. As a result, firms that
want to encourage teamwork will be moving
towards a continuous feedback system in the future.

So, the continuous feedback system pioneered by


Adobe is suited for the industries that are dynamic
and employee development is critical for success. These industries are the ones with both high
variability and high analysability under the shown framework. The system is applicable for consulting
and software firm, where knowledge workers are the key assets and for other professional service firms.

Following Adobe, other technology companies like Juniper Systems, Dell, Microsoft, and IBM have
adopted the continuous review system. Professional services firms like Deloitte, PwC, Accenture have
abandoned the older PMS. Retail firms Gap and Sears have also scraped the older PMS to improve
collaboration.

On the other hand, the older PMS is still suitable for sales and financial service firms, where individual
accountability is important and financial rewards are based on individual performance. Also, sectors like
large manufacturing firms ( Steel, Cement industry) with less product variability, larger investments in
machinery than human resources are better served by old PMS.

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