SUC­CESS STORY

Unique Em­ployee Rat­ing Sys­tem

The HR Digest - - Content Features -

Gen­eral Elec­tric’s Unique Em­ployee

Rat­ing Sys­tem

Gen­eral Elec­tric, founded by none other than the in­ven­tor Thomas Edi­son, is into its sec­ond cen­tury of ex­is­tence. Not so long ago, it dumped the an­nual re­views for its work­force, ush­er­ing a dra­matic change in the way per­for­mance is eval­u­ated at the work­place. It’s sell­ing off bil­lion-dol­lar fi­nanc­ing busi­ness that jeop­ar­dized it in the 2008 cri­sis and prompted a “too big to fail” des­ig­na­tion. It’s in a gen­eral sense re­form­ing to re­fo­cus on its in­dus­trial busi­ness. By the end of the trans­for­ma­tion, its in­dus­trial busi­nesses will pro­vide more than 90 per­cent of earn­ings.

It’s made some ex­pan­sive changes in its man­age­ment style too, un­der cur­rent CEO Jeff Im­melt. GE has to make sub­stan­tial changes to its an­nual per­for­mance re­views sim­ply be­cause it doesn’t work for the younger work­force any­more. There’s a grow­ing re­al­iza­tion that the an­nual per­for­mance re­view isn’t a good way to man­age the work­force or to boost per­for­mance. It’s a process which leads to a ten­dency for the HR to fo­cus more on process over re­sults.

The an­nual per­for­mance re­view has been loathed by the work­force in the cor­po­rate world for decades. Things are chang­ing, it’s fi­nally start­ing to fade.

For quite a long time, Gen­eral Elec­tric prac­ticed a rigid sys­tem, cre­ated by then-ceo Jack Welch, of rank­ing its work­ers. For­mally known as the “vi­tal­ity curve” the sys­tem de­pended on the yearly per­for­mance re­view, and came the work­ers’ per­for­mance down to a num­ber on which they were judged and po­si­tioned against peers. A bot­tom per­cent­age (10 per­cent) of un­der­per­form­ers were then ter­mi­nated.

GE got rid of the forced rank­ing sys­tem a decade ago. To­day, it is in the mid­dle of a big shift. It’s drop­ping the for­mal an­nual re­views for its 300,000 work­force, in­stead fol­low­ing a less con­trolled sys­tem of more fre­quent feed­back via an app. There won’t be any nu­mer­i­cal rank­ings at all.

More and more com­pa­nies, like Ac­cen­ture, Mi­crosoft and Abode, have be­gun drop­ping its sys­tem of for­mal an­nual re­views. Gen­eral Elec­tric may not have in­vented the new sys­tem, how­ever it’s the com­pany most iden­ti­fied with it now.

The changes are un­mis­tak­able at GE’S Cro­tonville man­age­ment-train­ing cen­ter, where the com­pany has sent future lead­ers since 1956. The com­pany, as of late, is try­ing to make this cen­ter more friendly, wel­com­ing and open. The cam­pus is get­ting new build­ings. One in­cludes a stu­dio where ex­ec­u­tives are taught sum­i­na­gashi, the Ja­panese art of paint­ing on wa­ter. There’s a two-sided kitchen, built in a ren­o­vated car­riage house that was used to hold cook­ing com­pe­ti­tions un­til a like­ness to­wards over com­pet­i­tive­ness prompted a few changes. An English­style pub at the cen­ter of cam­pus is now an airy café called “The White House” and meet­ing space serv­ing craft cof­fee. Rather than drills on Six Sigma, ex­ec­u­tives can now take cour­ses on mind­ful­ness.

The pro­gram is es­sen­tial to help­ing the com­pany tran­si­tion from man­age­ment by process to man­age­ment en­abled by mo­bile phones for the Mil­len­nial gen­er­a­tion who have dif­fer­ent ex­pec­ta­tions. The pre­vi­ous gen­er­a­tion of em­ploy­ees were mo­ti­vated by com­pe­ti­tion, but this is not the case any­more.

The new app is called “PD@GE” for “per­for­mance de­vel­op­ment at GE” was built by a group con­sist­ing of Sil­i­con Val­ley’s engi­neers. The HR group has been one of the first to em­brace it, in­clud­ing the experiment with no nu­mer­i­cal rank­ing dur­ing per­for­mance eval­u­a­tion. Ev­ery em­ployee has a se­ries of short-term ob­jec­tives, or “needs.” Man­agers are re­quired to have fre­quent dis­cus­sions, called “touch­points,” on progress to­ward those ob­jec­tives and note what was talked about, fo­cused on, and re­solved. The ap­pli­ca­tion can give syn­op­sis, through notes, pho­tos of a writ­ing pad, or even voice record­ings. The fo­cus of the app is on ‘kaizen’ mean­ing con­stant im­prove­ment.

GE em­ploy­ees can give or re­quest feed­back any­time through a feature called “in­sights,” which isn’t lim­ited to their im­me­di­ate man­ager, or their divi­sion. The fo­cus isn’t on eval­u­at­ing how well in­di­vid­u­als are get­ting along, how­ever, on con­sis­tent change. Cur­rently, there are around 20,000 to 30,000 peo­ple us­ing the new sys­tem. GE es­ti­mates that the rest will tran­si­tion by the end of 2016.

Years of re­search from neu­ro­sci­en­tists and busi­ness school pro­fes­sors, has found that the prac­tice of an­nual per­for­mance re­views is flawed. It’s bi­ased and ar­bi­trary. This makes the prac­tice in­ef­fec­tive when it comes to boost­ing per­for­mance.

Even if the com­pa­nies say that they’ve elim­i­nated yearly per­for­mance re­views and rank­ings, there are “shadow rank­ings,” where com­pa­nies still do the same thing, yet more ca­su­ally. The harsh­est crit­ics of per­for­mance re­views ar­gue that nu­mer­i­cal rank­ings and pay dif­fer­en­ti­a­tion are per­haps the most dam­ag­ing parts of the sys­tem, and that such a sys­tem can’t ever truly change. Even when com­pa­nies chuck an­nual re­views, they strug­gle to fol­low them.

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