Mc Graw Hill Organization Behaviour, 6th Edition

CASE: GE (pg 51)

GE has played an influential role in managerial practice, in part, because of a highly charismatic
CEO named Jack Welch, who ran the company from 1981 to 2001. In light of intense competitive
pressures and the commoditization of many of GE products, Welch focused on goals related to
costs, efficiency, and operational excellence, and he instituted practices that reinforced employee
behaviors to ensure that his goals could be met. As an example, Welch advocated an annual job
performance review process that drew sharp distinctions between effective and ineffective
employees. He felt that the best way to do this was to have managers rank employees relative to
their peers and to fire the bottom 10 percent. Welch’s hard-nosed approach to managing the
performance of his employees led GE to great success during his tenure. Welch’s successor at GE,
Jeff Immelt, recognized that a new set of employee behaviors was necessary to compete in a
changing competitive environment where technology and innovation are making product life
cycles shorter. Rather than focusing on doing things in the most cost-effective and efficient way,
and without error, employees need to take risks and test new ideas, and incorporate learning from
errors into deliverables. With this shift in thinking, Immelt moved GE away from many of the rigid
practices that Welch implemented, including the “rank and yank” annual performance review
system. Immelt and others at the company came to believe that the system promoted
competitiveness rather than cooperation, and that it had become a time-consuming ritual that
hindered the type of risk taking necessary for the company to succeed in the 21st century. In fact,
GE has moved away from formalized annual reviews of employee job performance altogether.
Rather than rating employees each year on a scale that results in labels such as “role model,”
“strong contributor,” or “unsatisfactory,” the company has adopted a smartphone app called
PD@GE, which facilitates ongoing performance feedback throughout the year. Managers are
expected to have frequent discussions, or “touchpoints,” with employees on short-term priorities
so that discrepancies can be fixed quickly. Employees can also use the app to request feedback
from others in the organization so that they have a better understanding of whether they should
continue to do something or to change what they are doing. Although there are still open questions
regarding how the system can be used to support compensation decisions, the company is
convinced that it will provide feedback to employees that is more relevant and timely.
2.1 How well do you think that Jack Welch’s performance review system evaluated employee
job performance (as we have defined it in this chapter)? Which specific dimensions of job
performance do you think his system emphasized?

Answer:
Jack Welch’s performance review system emphasizes on the employees’ results or actual
job performance rather than their behaviours. The annual job performance review process helps
Jack Welch to differentiate effective and ineffective employees in the company. Employees are
evaluated based on their ability to achieve the goals set such as achieving efficiency and
operational excellence. In order to motivate the employees, Jack Welch proposed to fire the bottom
10 percent of the employees. Indeed, Jack Welch’s performance review system helps to company
to excel. However, job performance is defined as the value of the set of employee’s behaviours
that contribute to the organizational goal accomplishment, which does not focus only on the results.
This review system which only emphasizes employees’ results may also bring some adverse
effects. For example, employees may conduct counterproductive behaviours such as sabotage or
gossip with the aim of ruining other employees’ performance or to promote own self.

2.2 Describe advantages of the PD@GE app as a means of evaluating employee job
performance.

Answer:

By using the PD@GE app as a mean of evaluating employee job performance, it is more
convenient for employees to get feedbacks from others and managers to oversee their job
performances. This is because they just need to access the PD@GE app on their smartphones
which are used daily. Besides, it is more relevant and more timely compared to the rating
employees each year on scale. In this way, employees can make the most relevant improvement in
time on the corresponding feedback from the appropriate parties. On the other hand, managers or
other employees in the organization can just provide their feedbacks to anyone who is requesting
feedbacks from them. Employees may have more control on their own development since they can
ask for their own feedbacks. In addition, job performance behavior can be obtained from different
aspects. The feedback questions in the PD@GE app can be set in various dimensions. The most
significant benefit is the overall job performance of employees and productivity of the organization
will be enhanced from time to time.
2.3 Describe disadvantages of the PD@GE app. Explain why managers with longer tenure
at GE may have doubts about the effectiveness of the PD@GE app. What could be done to
alleviate potential concerns?

Answer:

The disadvantage of using PD@GE app is it is difficult for the management to make
performance evaluation and administrative decisions such as promotions since the ratings may
vary from one employee to another. Although multiple sources are taken into account in generating
an overall performance score, it is often unclear how the information from the various sources
should be weighted. In addition, by using PD@GE app, employees may give biased evaluations if
they believed that the information will be used for compensation, as opposed to just skill
development. Some employees may be unwilling to provide negative information if they believed
it will harm the person being rated. Furthermore, employees can also seek for feedback from
sources that they believed to be most positive.

Managers may think that the process to rate an employee now is more complicated than
that the previous system. When the “rank and yank” system was implemented, feedback was made
annually by managers only. It was easy for manager to rank and rate each employee and the result
was also simple – appreciate the “Top 20” by giving pay raise or promotion and terminate the
“Bottom 10”. However, when the PD@GE app was launched, feedbacks came from different
sources and aspects with different credibility. The wide range of information confuses the
managers on the process of rating the employees and choosing the so called “best employee” to
give pay raise and promotion to. Besides, the managers may doubt that the new system is not strict
enough as it did not mention the consequences if an employee receives many bad comments or
feedbacks. This flaw of the system may cause the employees to lose their motivation to improve.

To alleviate the potential concerns, GE should provide more guidelines to the employees
regarding the way of giving feedbacks using PD@GE app. For example, employee must attach the
related evidences when giving feedbacks to prove their trustworthiness. Number and details of
discussions should be mentioned. GE could also provide workshop to help the employees and
managers to adapt to the new system. Lastly, GE can provide extra incentives such as bonus to
employees that obey the system or punish the employees that abuse the app.