In recent years there has been much debate about performance review or annual appraisal processes. Some of the debate was influenced by changes in practice within large corporations.
This is the first in a new series of case studies examining performance management. Our aim is to find out what really spurred change and what actually happened behind the headline announcements.
CEB research has found that more than 9 in 10 managers are dissatisfied with how their companies conduct annual performance reviews, and almost 9 in 10 HR leaders say the process doesn’t yield accurate information.
In addition, the CEB (formerly the Corporate Executive Board), found that performance management is time-consuming. A CEB survey discovered that managers estimate that they spend an average of 210 hours a year on performance management activities. Managers said their employees, in turn, each spend 40 hours a year. This might be time well spent but it appears that it is not: seventy-seven percent of HR executives report to the CEB that performance reviews don’t accurately reflect employee contributions.
In August 2015, GE decided to do away with annual reviews for its 300,000 employees entirely, replacing these evaluations with more frequent conversations between employees and managers. Senior managers had begun questioning the value of the GE Employee Management System, which had been in place for almost 40 years. The key question posed was: Is it delivering what is needed for the future? An internal review suggested that the EMS was not in practice encouraging continuous and fluid processes of performance development. It wasn’t providing feedback in real time nor helping GE respond to change and prepare for the future.
GE’s existing method of performance review was rather formal, it took place once, sometimes twice, a year and the focus was on a review of the past. The most notable features were its formality, a strong sense of looking backwards and that the system itself drove the process from the top down.
GE’s new system changed the language and the technology of performance management. The focus became development rather than a rear view mirror examination and the name was changed to signal a new intention: Performance Development at GE or PD@GE for short. The aim was to encourage forward-thinking, actionable conversations as a daily priority. These conversations between managers and employees were to consider performance in terms of insights and fuel for coaching, and to have a strong forward focus on delivering impact and outcomes. A strong emphasis was placed on developing employees and delivering business outcomes, focusing on work that matters most, and accelerating an employee’s growth through continuous discussion.
The process is supported through the use of an app: the PD@GE app. This provides a single place where employees can set priorities, organise discussions with managers, and share insights with fellow team members. It was created to encourage a more nimble approach to professional development to ensure maximum efficiency and best serve the company’s customers.
The process allows for occasions where a manager and their team member may take stock and plan development and future work priorities. As GE rolled out the PD@GE approach they experimented with an integrated ratings system, and without. They noticed that, when piloting the no-ratings system, compensation and bonus planning still took place and the overall quality of the conversations were better. GE’s expectations are that managers know their employees so well that they can articulate their impact and behaviours, and then rewards are aligned to both, rather than merely relying on a performance rating.