General Electric's Unique Employee Rating System
The HR Digest|October 2016

General Electric, founded by none other than the inventor Thomas Edison, is into its second century of existence.

General Electric's Unique Employee Rating System

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 under performers were then terminated.

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