You know that the state of annual performance review is in peril when General Electric finally decides to stop rating employees.
Yes, it’s true. The company that became famous as the poster boy for forced ranking, the famous 20-70-10 process affectionately referred to as “rank-and-yank” and allegedly pushed (but now denied) by former CEO Jack Welch, has now decided to join the growing club and get rid of ratings for employees.
Breaking with a 40-year-old system
Here’s how it was announced in last week The Wall Street Journal:
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.”
This has been a long time coming, but as we noted here at Talent Insider recently, companies everywhere are finally trying to modernize their methods for evaluating employees:
Revamping performance management is on nearly everyone’s minds. It’s a hot topic based on a hard reality check: Old-school methods of tracking talent, forged in the post-war 1950s, simply won’t work in today’s business environment.”
Millennials won’t put up with old-school style reviews
The reason that old-school approach won’t work in today’s business environment is because Millennials — who now make up the largest part of our workforce — don’t like it and won’t put up with it. They want regular, constructive feedback in a frequent and more informal manner, and companies everywhere, like Adobe, Netflix, and The Gap, are changing how they evaluate workers to better reflect the wants and needs of today’s workforce.
General Electric has been doing that too, and The Journal story notes that:
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.”
A change that’s at least 20 years late
My take: Wow, what a concept — a system that fosters “more meaningful, richer conversations” with employees. Who wouldn’t want something like that?
Answer: No one, although most employees and a great many managers complained about the old ratings and performance management systems for years without anyone who could actually change them (senior management) doing anything to fix what everyone with half a brain knew was irretrievably broken.
Count me as someone who applauds this kind of workplace change. Better late than never I suppose, although for my money, it’s a good 20 years too late.