PERFORMANCE DEVELOPMENT AT GE: SHAPING A FIT-FOR-PURPOSE PERFORMANCE MANAGEMENT SYSTEM (A) Resnareh Awoclare Shih-Han Janice Semper, formser Culture Transformation Leader at GE, was Huang preparwl this nase revieaing the foedhack from the latest FastWorki pilot secsion. One wher the s spervision of starting coaclusion was starting to become evident: GE's existing Pmfecrors N. Anand and performance management system, the Employee Management System Jennifer Sondan as a banis for (EMS), institused over 40 years earlier and widely emulated by other class discewsion rapher than fo companies, might no loeger be fit for GE's new direction. iturate wiker effective of She recalled a recent conversation with a GE manager, who echoed this Janice, we disk Fas Works is a great initiative. If gived as the tools to be agile, fleville and cuatemer centric. However, under the EMS, we're just not incentivired so une it. As ase of the founders of Fat Works and given your back proand in cuffure transformation and 11R4 can you do something about this? FastWorks was a GE program initiated in 2013. By combining various tools and methods utilized predominantly by start-ups, the goal of FastWocks was to introdoce skill sets and processes that would enable GE to be more customer centric, lean and agile. A key part of the FastWerks process was for project teans to repeatedly engage with customen, create hypotheses and empirically test assumptions in rapid iterations to determine whether to persevere with an existing idea or pivet in a new direction. The EMS was an employee performance review system based on an annual cyele. Goals were set by the employee and hivher direct supervisor at the beginning of the year, and the employee's performance was evaluated at year-end against the objectives they had agreed on. Janice recalled the common concern of some FastWorks pilot project participants: Im given individal goals and objectives at the beginning of the year. As 1 apply the Faswods methodology, I'm actually learning through some of the teds that T2m invalidating wome of my original assumptions and 1 should be piveting Yet, I am not going to do that because at the end of the year 12 m being held to these prier objectives. This is what yoe're holling me accocentable for? It was becoming increasingly clear that the EMS no longer suited the faser and mere agile GE. Bat what should the new protocol be like, and how shoald Janice's team g0 about designing it? GE's Emplojee Management System The EMS had been an integral part of GE since 1976. It followed a year-long cycle in which employees listed their year's goals at the beginning of the year and submitted a self-assessment against these objectives at year-end. Managers would then follow up with their appraisals and hold one-on-one performance discussions with employees. Ratings fell into three categories "development necded," "consictently meets expectations" and "exceeds expectations." Overall, the year-end review process could take up to three months, ending in March. Employees who wanted additional feedback could ask their managers for an optional unmonitored mid-year review. The EMS captured various elements including the employee's accomplishments, strengths. development needs, career interests and development plan. In addition to performance measurements, employees also rated themselves and were in turn appraised by their managers on GE Growth Values. The GE Growth Values encompassed the success factors expected of all employees: Axtemal Focus, Clear Thinker, Imagimation \& Courage, freluervemess and Ryperfise. They were only crystalized in 2005 after two years of intemal focus group reviews examining GE's core values, successful leadership approaches, and the Growth Values' compatibility with GE's future growth strategy. The performance and Growth Values ratings were then combined in a nine-block matrix, which was used to determine the cmployee's overall rating and atso as a basis for GE's succession and promotion planning. An employee could fall in any of the five categories of Unsatisfactory, Development Needed, Strong Contribufor. Excellen, and the coveted rating. Role Model. In past years, the EMS had served GE well. In the 1990s, ander CEO Jack Welch, GE's focus had been on the relentless pursuit of operational efficiency. It was a time when low-cost competitors from emerging countries were on the rise. To compete, GE became process focused, adhering to Six Sigma to implement cost reductions, quality control and exccution. This emphasis on processes carried over to human resources and performance management, as well.' The EMS was a structured process that recorded employees' goals and objectives, measured employees against these objectives, and rewarded them based on their achievements. It also standardized ways of comparing employees across the firm. By the carly 2010 s, however, with a new business environment and GE 's new direction under CEO Jeff Immelt, the EMS was showing signs of being unwieldy and slow. With the launch of FastWorks in 2013, the flaws in the EMS were no longer inconveniences but had become potential roadblocks to FastWorks' adoption. Fast Works: A Force for Internal Disruption In 2001 Jeff Immelt took over the reins as CEO of GE. Facing a business environment characterized by protectionist policies, slow growth and continuous disruption from competitors and start-ups, Immelt understood that being process driven would no longer be enough. Instead, innovation and creating outcomes for its customer would be key. 2 His vision Was to transform GE - one of the oldest companies in the United States with roots in various traditional businesses - into a digital industrial company. To reach this goal, GE needed to be simpler, faster, more agile and innovative. One crucial step in this direction was the FastWorks program. In 2013GE introduced FastWorks in various pilot programs throughout the company. FastWorks was built upon principles and methodologies advocated by entrepreneur and author Eric Ries in his book The Lean Startup. Applying various tools and processes utilized predominantly by start-ups, such as validated learning, small batch testing, and pivot or persevere, FastWorks introduced skill sets and methods that enabled the large industrial conglomerate to be more customer centric, Iean and agile. A central part of the FastWorks methodology was build-measure-leam, which advocated repeatedly engaging with customers and then, through rapid product iterations, determining whether to persevere with the existing idea or pivot in a new direction. Janice understood the frustrations of the FastWorks pilot participants. Under the EMS, employees were rewarded when they achieved the goals they set out at the beginning of the year; the EMS did not take into account cases where these objectives changed. Given the annual cycle of the EMS, it was difficult to shift objectives during the year. FastWorks, despite its potential to shape GE into an agile and innovative company, was advocating a way of working that was not rewarded by the current performance management system. So, what was the incentive for employees to follow the FastWorks methodology? Janice and her team knew the importance of having a performance management system that was properly aligned with the principles of FastWorks and rewarded employees accordingly. The question was: How should her team redesign GE's new performance management protocol to achicve this goal? Performance Development at GE (Part A) Please read the case in the coursepack and answer the following questions: 1. Why did GE, as an organization, need to change? How had GE's organizational focus changed between the 1990 s and early 2000s? What is needed to make this shift successful? 2. What are the strengths and weaknesses of GE's existing EMS performance review process in the current fast-moving environment that the company is facing? When answering the question, please provide specific, actionable steps that the individuals should take and incorporate speci details from the case and concepts from the power points and textbook in order to support your answers