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Why GE had to kill its annual performance reviews after more than three decades

Posted on by Brandon Klein

The move by more and larger companies away from annual reviews and ratings is well past due, say management theorists. Years of research, from both business school professors and neuroscientists, has found that the practice is ineffective at boosting performance, actively alienates employees, is based on a flawed understanding of human motivation, and is often arbitrary and biased. People simply don’t fit neatly (pdf) on a bell curve. It ends up being an exercise in paperwork and bureaucracy instead of an agent of change.

“When you look at the evidence about stack ranking…. The kind of stuff that they were doing, which was essentially creating a bigger distribution between the haves and the have nots in their workforce, then firing 10% of them, it just amazed me,” Bob Sutton, a professor at Stanford’s Graduate School of Business told Quartz. “We looked at every peer reviewed study we could find, and in every one when there was a bigger difference between the pay at of the people at the bottom and the top there was worse performance.”