Business Irish

Monday 24 October 2016

Corporate trend-setter GE has the knives out for HR's sacred cows

Jeff Green and Richard Clough

Published 07/06/2016 | 02:30

Jeffrey Immelt, chief executive officer of General Electric.
Jeffrey Immelt, chief executive officer of General Electric.

General Electric is the laboratory of American management. So when the manufacturing giant says it's rethinking a bedrock tradition of corporate life - the annual raise - you can bet that executives everywhere will be watching closely.

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GE executives are reviewing whether annual updates to compensation are the best response to the achievements and needs of employees.

The company may also scrap the long-standing and much-imitated system of rating staff on a five-point scale that classes workers on a scale from "outperform" to "underperform".

Decisions on both issues may come within months, spokeswoman Valerie Van den Keybus said.

"We uncovered an opportunity to improve the way we reward people for their contributions," Janice Semper, GE's head of executive development, said.

It will involve "being flexible and rethinking how we define rewards, acknowledging that employees and managers are already thinking beyond annual compensation in this space".

In the upper reaches of the US labour market, a broader shift in benefits is already under way. Businesses are competing over younger workers for whom other perks may be as important as pay, and senior employees looking for more flexibility as they near retirement.

To lure and retain talent, they're ready to reconsider everything from parental leave and paid time off to when and how performance is rated.

Netflix said last year that employees can take a year off for child care, and many more companies, including Adobe Systems, are offering at least six months. Goldman Sachs and Microsoft, as well as GE itself, are among employers to announce an overhaul of performance review systems in the past year.

If America's most-skilled employees can increasingly order up bespoke packages from their bosses, something like the opposite is happening at the bottom end of the labour market, where temporary or contracted-out jobs with limited benefits make up a growing share.

Less than a quarter of all companies in the US offer parents any paid time off, and only about 44pc of workers qualify even for guaranteed unpaid leave.

The gap is fuelling concern about rising inequality, and US Democratic presidential candidates are backing efforts to enshrine longer parental and sick leave in law, rather than leaving it to the whims of employers.

GE, one of the original dozen members of the Dow Jones Industrial Average, has long been a trend-setter.

Its management ideas are taught at business schools, and its executives have moved on to head other major companies. The review system championed by former ceo Jack Welch, in which the worst-performers were fired, spread widely.

Current ceo Jeffrey Immelt says he's seeking to simplify the company and streamline decision-making.

GE recently introduced a new method of performance review based around a phone app called PD@GE that employees use to assess both subordinates and superiors. It aims to replace a once-a-year conversation with rolling feedback. (Bloomberg)

Irish Independent

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