The annual performance review has been a ubiquitous and generally loathed fixture of the corporate world for decades. But haters can rejoice: It’s finally starting to topple. The best part? Even the company that popularized the toughest form of formal annual review is moving away from them.
For decades, General Electric practiced (and proselytized) a rigid system, championed by then-CEO Jack Welch, of ranking employees. Formally known as the “vitality curve” but frequently called “rank and yank,” the system hinged on the annual performance review, and boiled the employees’ performance down to a number on which they were judged and ranked against peers. A bottom percentage (10% in GE’s case) of underperformers were then fired.
The company got rid of formal, forced ranking around 10 years ago. But now, GE’s in the middle of a far bigger shift. It’s abandoning formal annual reviews and its legacy performance management system for its 300,000-strong workforce over the next couple of years, instead opting for a less regimented system of more frequent feedback via an app. For some employees, in smaller experimental groups, there won’t be any numerical rankings whatsoever.
With the decision, GE joins other high-profile companies—like Microsoft, Accenture, and Adobe—that have started dumping or have already gotten rid of formal annual reviews. GE may not have invented stack ranking, but it’s the company most identified with it. And given the longstanding and pervasive influence GE has had over the business world, its move could represent the beginning of the end for a practice that has been at the heart of how corporations have managed people for many decades.
Hallowed but shifting ground at GE’s Crotonville management training campus (General Electric)