GE Saw the Light on Performance, Government Should Too
The answer is not to end employee reviews, but to make them better.
It’s happened again. Another major corporation has dramatically changed the way it manages employee performance. This time it’s General Electric. That’s important because the new approach is in direct contrast to the indefensible “rank and yank” philosophy attributed to former GE chief executive Jack Welch. That process involved a forced distribution of performance ratings, in which the lowest-ranked employees are fired. The new policy, described in a recent Harvard Business Review article, is focused on real-time performance development.
But recent headlines that say GE has decided to end annual performance reviews are misleading. The company’s new approach to managing performance should be closely considered by federal agencies. It has decided advantages. However, GE has not eliminated performance reviews.
If federal human resources practices were ranked using the Jack Welch logic, it is almost certain performance management would be at the bottom and eliminated. An assessment of the practice would be based on three core questions: Does the process contribute to better performance? Does the process help employees to develop their capabilities? Are performance ratings valid and useful in managing careers? There is little evidence that federal practices satisfy any of these purposes.
It’s significant that the authors of the HBR article are not from GE’s human resources staff; one is an operations executive and the other is an engineering executive. That is consistent with an often overlooked point: Performance is a management responsibility. HR is on the sidelines.
The authors make two important points. First, they say, “We’re finding that the new performance-development system is promoting trust between managers and employees—the foundation of high-performing teams.” The new approach is very similar to the role of coaches in sports. Second, they say it has been used “to drive a fivefold productivity increase in the past 12 months.” Both would be profoundly important to government.
It would be to everyone’s benefit to discard the past. A profound difference between the best thinking in the private sector and that which permeates discussions of employee performance in government is the emphasis on poor performers. That is all too evident on the Office of Personnel Management’s website. It follows from the historical focus on performance standards, an idea that gained acceptance in the middle of the last century.
In contrast, companies focus on the high performers. That was GE’s purpose when it adopted the forced distribution policy. Companies celebrate the best performers. The few poor performers are handled quietly and confidentially.
GE’s new approach was summarized as a shift from “command and control” to “empower and inspire.”
The authors say: “At its core, the approach depends on continuous dialogue and shared accountability. Rather than a formal, once-a-year review, managers and their direct reports hold regular, informal ‘touchpoints’ where they set or update priorities that are based on customer needs. Development is forward looking and ongoing; managers coach rather than critique; suggestions can come from anyone in an employee’s network.”
The touchpoint discussions focus on progress in achieving goals, changing priorities, problems that need to be addressed and resources that are needed. It’s an ongoing dialogue that is future focused. They also discuss behaviors, or strengths, that should be continued and areas and ways to improve. The approach is consistent with a continuous improvement philosophy.
They also developed a smartphone app that enables both manager and employee to record performance information—voice and text inputs, documents and handwritten notes.
GE has not discarded the year-end review, but now it’s a summary conversation. The manager and employee jointly prepare a summary document.
It is important to emphasize that GE managers will continue to base compensation, promotion and development decisions on their assessments over the year. There is not a chance a company like GE would back away from pay for performance. Moreover, they need to be able to defend those actions. Under the rank-and-yank policy, GE relied on a three-level rating policy: outstanding, met expectations and failed to meet expectations. There is no reason to think that has changed.
When a three-level policy is combined with another trend, the use of “calibration committees,” it provides assurance that the process is fair. The role of committees is to consider the justification for ratings. The committees reduce bias and discrimination and increase rating consistency.
The approach is likely to be preferable to both employees and managers. The advantages are clear. For managers, coaching has got to be more satisfying. That’s true for their people as well. Yes, for many managers it would necessitate mastering new behaviors. Their subordinates would agree to help. A three-level rating policy would enable agencies to identify their outstanding people as well as the few people who truly are not performing at an acceptable level.
Every employee should know what they are expected to accomplish and how their performance will be assessed. They are likely to also know what would be outstanding performance in their jobs. That should be discussed with their manager at the start of the year. With ongoing dialogue there should be no year-end surprises. And the calibration committees would reinforce the sense of fairness.
GE is among the larger federal contractors. OPM should request a meeting with the GE team that developed the new process. An hour or two of discussion about GE’s experience would be invaluable. The company’s executives might even agree to allow federal agencies to adopt the smartphone app. Government needs a new approach.