General Electric Co. (IW 500/6) is getting rid of its much-imitated employee rating system as the manufacturing giant overhauls performance reviews in favor of more-flexible options.
The decision to scrap the five-point scale follows a pilot program involving 30,000 workers, Susan Peters, GE’s senior vice president of human resources, said in a message to employees on July 26.
Many of them said that a performance review system “without a rating was more motivating, and managers told us they were still able to make talent decisions,” according to the memo, which the company provided to Bloomberg. “So going forward we will no longer use the rating as part of performance development.”
The nonnumeric rating system was used to assign employees labels such as “role model,” “strong contributor” or “unsatisfactory.” The company is still reviewing whether to adjust its pay practices, according to an e-mail from GE. Bloomberg reported last month that the company may do away with scheduled annual raises in favor of more flexibility in compensation.
GE recently introduced a performance-development process centered around a smartphone app called PD@GE, which employees use to assess subordinates and superiors on an ongoing basis rather than in a once-a-year conversation. The move, taking a cue from Silicon Valley, was part of a broader overhaul of the company to become more nimble and to streamline decision-making.
The 124-year-old GE, one of the original dozen members of the Dow Jones Industrial Average, has long been a trendsetter. Its management ideas are taught at business schools, and its executives have moved on to run other major companies. The review system championed by former CEO Jack Welch, in which the worst-performers were fired, spread widely.
By Richard Clough