A Tipping Point: General Electric Joins Leading Companies in Reimagining the Performance Review Process

A recent opinion piece in the Washington Post confirms that “big business” is slowly but surely getting rid of the traditional performance review. Some of the bigger players — Accenture, Adobe, and Microsoft to name a few — are now joined by the corporate behemoth GE, signaling what the author of the article calls a “tipping point in the rush to remake a process that both workers and their bosses have increasingly felt needs repair.”

According to Cliff Stevenson, a senior research analyst for the Institute for Corporate Productivity, by next year we could see doubling (from 10% to 20%) of the amount of Fortune 500 companies that get rid of the performance review.

How radical is GE’s change of the annual review process? Pretty radical. For starters, the process is no longer annual, but consists of “less regimented system of more frequent feedback via an app.” More on that later.

Why now?

Well, there are a lot of reasons.

According to some estimations, the traditional performance review system has been around since the 1930’s. GE’s head of human resources, Susan Peters, describes the process as “more of a ritual” than a way to move companies forward. This is big news coming from a century-old company, which was founded by no other than Thomas Edison; not to mention GE is (or rather, was) the poster child for forced ranking. As we’ve written before — forced ranking isn’t the brightest idea in the world when it comes to performance management (at least not in this day and age).

But there’s a bigger problem — the traditional performance review process is just too darn infrequent. The once or twice-a-year process is just not cutting it. Millennials entering the workforce expect personalized options, frequent feedback, and mobility. To quote Susan Peters:

The world isn’t really on an annual cycle anymore for anything…I think some of it to be really honest is millennial based. It’s the way millennials are used to working and getting feedback, which is more frequent, faster, mobile-enabled, so there were multiple drivers that said it’s time to make this big change.

For Whom? Mostly everyone, but especially millennials.

The millennial generation’s expectations are a driving force behind this radical change in thinking, but this growing trend is also supported by research:

“Years of research, from both business school professors and neuroscientists, has found that the practice is ineffective at boosting performance, actively alienates employees, is based on a flawed understanding of human motivation, and is often arbitrary and biased. People simply don’t fit neatly on a bell curve. It ends up being an exercise in paperwork and bureaucracy instead of an agent of change.

Could big name firms validate this research by implementing growth-based performance management tools? A lot of them are well on their way of doing so by combining research with the latest technology.

How will technology reflect our change of thinking regarding performance management?

Build an app for it, of course! After all, organizations are social networks of connections and the data they generate is invaluable in determining the overall health of a workplace. To harness this data, GE’s group of software engineers built an app called “PD@GE” (Performance Development at GE).

Here are the application’s main features:

Each employee has a series of near-term goals, or “priorities.” Managers are expected to have frequent discussions, called “touchpoints,” on progress toward those goals and note what was discussed, committed to, and resolved. The app can provide summaries on command, through typed notes, photographs of a notepad, or even voice recordings. The focus isn’t on grading how well people are doing, but on constant improvement.
Employees can give or request feedback at any point through a feature called “insights,” which isn’t limited to their immediate manager, or even their division. Normally, you never get that feedback unless you manage to track someone down the next day, which people rarely do, and only from a direct manager. If you wait for an annual review, any specifics are probably long forgotten.

Other companies have built platforms based on similar employee-growth model — Adobe’s “Check-in” and GAP’s “Grow, Perform, and Succeed” to name a few. One key ingredient in these innovative systems is how they perceive feedback.

Research has made it clear that negative feedback creates mental blocks in our brains — no matter how well we perform:

Psychologists at Kansas State, Eastern Kentucky, and Texas A&M universities asked 234 staffers at a large university how they felt about performance reviews they had received. The respondents were split up into three subgroups: those who said they were considered competent, those who avoided difficult tasks (to avoid negative feedback), and those who focused on developing and learning skills. The researchers expected that the individuals motivated to learn and develop skills were most likely to take negative feedback in stride. But it turned out that all three groups found negative feedback demoralizing, and all to the same extent.

Therefore, the tone of GE’s performance management app is unrelentingly positive and feedback is categorized in one of two forms: “to continue doing something, or to consider changing something.” It’s clear how this system is beneficial for the manager who, instead of being an enforcer, will coach employees to improve.

This sure beats receiving a number from 1–5 every time Santa stops by. But a change this radical is not going to happen overnight.

The Slow, but Informed, Revolution

While desired performance management outcomes like pay distribution and employee differentiation need to be preserved, the social and technological aspects of the traditional performance review process are being completely redesigned. It took a while for leading organizations to convince themselves this change is needed. But it looks like the days of this HR dinosaur of a process are coming to an end.

“I think we are at the cusp of a brand new era in productivity software where we are finally going to start really looking at how does it help us get our job done”

Alan Lepofsky, VP Analyst — Constallation