Performance reviews lose their luster

For decades, Jack Welch basked in his reputation for tough-love leadership. General Electric’s former CEO boasted of his fondness for ranking employees and forcing managers to fire the lowest-rated performers.

But Welch’s “rank-and-yank” strategy no longer holds sway. The company recently announced it would rethink its entire approach to performance evaluation for its 305,000 employees.

Under Welch’s successor, CEO Jeff Immelt, GE is considering axing annual performance reviews. Instead, it’s experimenting with more frequent performance discussions between managers and staff. The industrial giant is also launching an app for supervisors and employees to share feedback with each other.

GE has already eliminated Welch’s “forced ranking” system. Other big em­­ployers (such as Adobe, Gap and Micro­­soft) have abandoned the practice as well.

Today’s managers, on average, oversee seven employees. Ten years ago, they averaged just four direct reports.

Tough Talks D

That leaves less time for them to evaluate each staffer’s performance in detail.

What’s more, requiring annual performance reviews comes at a cost. The average manager spends 210 hours a year on performance review-related tasks. Deloitte reports spending 2 million hours a year on performance reviews.

Technological advances make tracking performance easier in real time. Supervisors can use an ever-expanding arsenal of mobile apps to monitor a team’s daily output and productivity.

— Adapted from “Why big business is falling out of love with the annual performance review,” Lillian Cunningham and Jena McGregor,