Earlier this month, Jeffrey Immelt was replaced as CEO of General Electric after 16 years at the helm of the company. Much of the coverage has depicted Immelt’s stepping down as a result of investors losing confidence in his leadership after GE’s stock underperformed in the past year, as in this Bloomberg report, for example:
Amid mounting pressure from activist investor Trian Fund Management, GE said Monday that Immelt will be replaced by John Flannery, a 30-year company veteran who oversaw a jump in profits at the health-care unit. In a sign of just how great opposition to Immelt had become in the investing community, the stock soared the most in more than a year and a half after the announcement was made.
This was not a snap decision by GE’s board of directors, however. In fact, the planning for Immelt’s succession began not in 2016 or 2015, but all the way back in 2011. Susan Peters, Senior Vice President for Human Resources at GE, shared the company’s strategy in a LinkedIn post, illustrating a thoughtful process befitting a giant corporation responsible for hundreds of thousands of employees and hundreds of billions of dollars in assets:
First, we knew it would take years to move potential candidates through the leadership roles that would develop them. We began intentional moves of key leaders to give them new, stretch experiences with ever increasing exposure to complexity.
By 2012, we wrote the job description and then continuously evolved it. We focused on the attributes, skills and experiences needed for the next CEO, based on everything we knew about the environment, the company’s strategy and culture.
Rachel Emma Silverman broke the story at the Wall Street Journal this morning:
A new performance-management system asks employees and managers to exchange frequent feedback via a mobile app called PD@GE, in person or by phone. The messages are compiled into a performance summary at the end of the year. For GE, a longtime standard-bearer for corporate management, the shift reflects the realities of a new work climate in which employees expect more feedback from bosses and peers—companies, in turn, expect employees to act quickly on that feedback. …
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.
GE executives had hinted at this last month, saying at the time that they were even thinking about doing away with annual raises. The decision to abandon performance ratings comes amid a trend of major employers from Goldman Sachs to IBM to the Pentagon shaking up their performance review systems to de-emphasize and simplify ratings. Other organizations have done away with ratings altogether, like Accenture, which set this trend in motion last year. As a gigantic employer with outsized influence in the corporate world, GE’s performance management systems have always invited copycats—longtime CEO Jack Welch’s “rank and yank” practice of firing the bottom 10 percent of performers was widely imitated—so this change is likely to resonate beyond the confines of GE itself.
However, GE’s move also comes just as we are finding that eliminating performance ratings isn’t necessarily a good idea.
In the HR-as-PR competition, GE has been making waves with its innovative approach to recruitment marketing and employer brand. Last week, the company rolled out a sponsored content deal with Girls creator Lena Dunham’s online publication Lenny Letter, the centerpiece of which was an interview between Dunham and GE vice chair Beth Comstock that mainly focused on empowering women in tech:
LD: Rumor has it that you have a pretty serious, excuse the parlance of our time, “girl squad.” I’d love to hear more about it. You were here today at the Matrix Awards to honor someone who you work with at GE. How do your powerful female peers bolster you, and what have those relationships meant to you?
BC: I love the women I work with. I love the power of meeting people and connecting dots and figuring out what you have in common and how you can help one another. … I’ve tried to reach not only across generations, but also across different kinds of functions and expertise. To get women who are scientists together with women who are artists, and to get them to connect on a different level. Not to just connect about their work, but connect about who they are. I think it’s an obligation. I feel I have to help bring women along.
At one point I looked around, and most of those working for me were women. I’m also a big believer in diversity. Diversity equals innovation. It doesn’t mean just women, you have to have men, too. So I felt bad about it. Should I be hiring different people? Then I thought: In the scheme of things, there aren’t enough women here. That’s my job. To keep bringing in great women and feel nothing more than pride at seeing them go.
At the same time, the interview is designed with a casual and playful feel, and is clearly aimed at humanizing Comstock—and by extension, the organization she represents:
Executives at General Electric “are reviewing whether annual updates to compensation are the best response to the achievements and needs of employees,” Jeff Green and Rick Clough report at Bloomberg:
The company may also scrap the longstanding and much-imitated system of rating staff on a five-point scale. Decisions on both issues may come within the next several months, spokeswoman Valerie Van den Keybus said by phone.
“We uncovered an opportunity to improve the way we reward people for their contributions,” Janice Semper, GE’s head of executive development, said in an e-mailed response to questions. She said it will involve “being flexible and re-thinking how we define rewards, acknowledging that employees and managers are already thinking beyond annual compensation in this space.”
In the upper reaches of the U.S. labor market, a broader shift in benefits is already under way. … Ending annual raises hasn’t played much part in the conversation — yet. When GE considers something like that, “other companies will do it too,” said Ranjay Gulati, a professor at Harvard Business School.