GE Considers Scrapping The Annual Raise (bloomberg.com)

A user shares a report that details General Electric's rethinking of the annual raise. Bloomberg reports: "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 longstanding and much-imitated system of rating staff on a five-point scale. Decisions on both issues may come within the next several months, spokesperson Valerie Van den Keybus said by phone." "We uncovered an opportunity to improve the way we reward people for their contributions," GE's head of executive development, Janice Semper, said in an e-mailed response to questions. It will involve "being flexible and re-thinking how we define rewards, acknowledging that employees and managers are already thinking beyond annual compensation in this space." In response to this news, ErichTheRed writes: First it was "stack ranking," the process where GE fires the bottom-rated 20% of the workforce every year. Now, a new HR trend may be brewing at GE that is destined to be copied by MBAs everywhere if it takes hold. Personally, in terms of cargo-cult HR trends, I'd take Google's open office nightmare over this one. What do you think this would do to employment stability if widely enacted? I can definitely see banks rethinking 30 year mortgages, for example...

Comments

GE is not the enemy

[schematix]

Firing the bottom 20% of your work force every year is no different than YOU, as a consumer, not purchasing another good or service again because it didn't give you what you paid for. It is assigning value via your wallet.

In the real world people are not equal performers at every task. In fact, some are really bad. Even what some would consider a "net negative" for the team (does more harm than good). Some of those that suck at their current job may not suck doing something else. While it involves some hurtful emotions and short term pain, a job loss can often times be beneficial in the long run.

The issue of not having an annual raise is interesting though. In the US we have gone through a decade of very low inflation. Also prices on many goods has dropped or stayed steady. Companies are not naturally making extra money via inflation to pass on to their workers. The additional money has to come through growth, which is limited in our stagnant economy. So not getting a raise each year might not be such a bad thing in a low inflation economy if it is compensated for elsewhere.

Ultimately the free market will decide though. And my guess is that GE will make sure their top 20% is really well compensated so they stay and keep being productive making money for the company, while everyone else takes what is given to them. While this doesn't sound great if you're in the 80%, it's really is a fair system.