GE Does Away With Employee Ratings
July 26 2016 - 10:51AM
Dow Jones News
By Rachel Emma Silverman
General Electric Co. is getting rid of ratings.
The industrial giant's salaried employees will no longer be
given one of five labels -- ranging from "role model" to
"unsatisfactory" -- as part of their annual performance review. The
changes, to be announced to employees Tuesday, breaks with a system
GE has used in some form or another for the last 40 years.
Chief Executive Jeffrey Immelt is undertaking a bid to refocus
on the company's core industrial business. To spur these efforts,
GE has spent the past few years reimagining the way its 310,000
employees work, placing new emphasis on experimentation and
risk-taking. A new performance-management system asks employees and
managers to exchange frequent feedback via a mobile app called
PD@GE, in person or by phone. The messages are compiled into a
performance summary at the end of the year.
For GE, a longtime standard-bearer for corporate management, the
shift reflects the realities of a new work climate in which
employees expect more feedback from bosses and peers -- companies,
in turn, expect employees to act quickly on that feedback.
Numerous firms, including Goldman Sachs Group Inc., have
recently dropped employee ratings, citing evidence that boiling a
year of performance down to a single category does more harm than
good for many. Yet, such ratings remain the norm for most workers.
Consultancy Aon Hewitt found that 90% of 880 surveyed tech
employers in a recent survey used performance ratings, with a small
minority considering ending the practice.
Roughly 30,000 GE employees have tried rating-free reviews in
the last couple of years. An internal study found that bosses could
dole out pay and promotions effectively, and employees and managers
preferred the new approach. At a meeting last month, about a dozen
senior executives finally decided to dispense with the past
practice.
Scrapping ratings "led to more meaningful, richer conversations
that were not getting distracted by...a label," said Janice Semper,
a GE human-resources executive. She adds that the changes apply to
GE's 200,000 salaried employees. Hourly workers may eventually be
included if labor contracts allow.
Without ratings, pay and bonus decisions may become more
nuanced, according to company leaders. Though high performers can
still be rewarded with annual raises and bonuses, managers can make
finer distinctions among employees who fall in the middle of the
spectrum. Managers say more detailed feedback may spur
middle-of-the-road employees to aim higher.
GE shook up the way it evaluated performance about a decade ago,
when it dropped its well-known forced ranking system. The rankings,
favored by longtime CEO Jack Welch, asked managers to grade
employees against one another, with those in the bottom 10%
encouraged to leave the company.
Some employees may be happier without ratings, but research
suggests managers have a trickier task. A survey of 9,000 managers
and employees by advisory firm CEB found that the employees felt
the quality of review conversations suffered significantly, because
managers struggled to explain to workers how they performed in the
past and provide specific steps for improvement.
GE executives said the company is training managers to improve
regular feedback conversations. Managers acknowledged that some
employees may prefer the simplicity and familiarity of the old
categories.
A rating "really oversimplifies something that is much more
complicated, " said Brian Finken, a Florence, Italy- based
operations leader in GE's oil and gas business, adding that "some
people get obsessed with the score," focusing more on the category
than on the review discussion.
Mr. Finken, who oversees seven direct reports, says he's "glad I
don't have to spend time codifying feedback into one score. I can
focus on the conversation instead."
In keeping with GE's new style, Susan Peters, the company's HR
chief, will announce the shift to employees via a message on the
PD@GE app.
Write to Rachel Emma Silverman at rachel.silverman@wsj.com
(END) Dow Jones Newswires
July 26, 2016 10:36 ET (14:36 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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