10% of Fortune 500 Companies No Longer Use Annual Employee Ratings
It's 2015, and General Electric is giving up the forced employee ranking system championed by iconic CEO Jack Welch during the 1980s and 1990s that was adopted across industries as the gold standard for rewarding the best employees and weeding out the not-so-best. In abandoning the ranking system (to the cheers, no doubt, of employees around the world) GE joins 10% of Fortune 500 who have also walked away from forced ranking.
Why the change? Ravin Jesuthasan, a consultant with Towers Watson and one of those interviewed by Lillian Cunningham and Jena McGregor for the Washington Post’s “Why big business is falling out of love with the annual performance review” has an answer.
At the same time supervisors are giving less feedback, employees are becoming accustomed to more feedback thanks to the constant stream of information from social media and other sources.
On top of that, it turns out the sheer effort of giving performance evaluations to huge numbers of employees is resource-draining, as anyone who has struggled to complete their subordinates evaluations before the oncoming deadline, working late into Friday (sorry, having flashbacks) knows.
Lastly, business is so face-paced in today's world that, by the end of the year, the information gleaned might be entirely outdated anyway.
The questions going forward will be: How will all these companies replace the annual performance review? And will that work better for today's world and workforce?