On the Dash:
- GM’s U.S. salaried workforce has shrunk from about 53,000 employees in August 2024 to roughly 40,000.
- According to an August lawsuit, GM’s rating system places 5% of employees in its lowest performance category and 5% in its highest.
- Management experts warn that forced ranking can erode morale and invite discrimination claims, while industry analysts say automakers need new skills to compete with technology companies and Chinese manufacturers.
General Motors (GM) is using a stack-ranking system that critics call forced ranking to evaluate its U.S. salaried employees as the automaker builds up its software-defined vehicle, autonomous driving, and EV programs. The system ranks employees against their peers, so top performers qualify for larger bonuses while the lowest-rated employees can face termination.
According to the Detroit News, GM wants to draw talent from high-paying Silicon Valley tech companies to speed up development of future automotive technology. Automotive consultant Tu Le said competition now extends beyond China to companies such as Nvidia, Qualcomm, OpenAI and Waymo, and he called the challenge of securing the necessary skills an existential threat to traditional automakers.
That pressure coincides with a shrinking payroll, as GM had about 53,000 U.S. salaried employees in August 2024, but that number has since declined to around 40,000. Le argues that legacy automakers need significant workforce changes to stay competitive, and he says shrinking the organization may be necessary.
Performance system rewards top-rated employees
GM has used employee performance ratings for years, and it introduced the current five-tier version in August 2024. According to Reuters, an internal memo shows GM rewards its top 5% of employees with bonuses of up to 150%.
According to an August lawsuit, GM’s rating distribution generally requires managers to assign employees to five categories:
- Significantly exceeds expectations: 5%
- Exceeds expectations: 10%
- Meets expectations: 70%
- Partially meets expectations: 10%
- Does not meet expectations: 5%
Under that distribution, a 20-person team would have one employee in the lowest category and one in the highest, regardless of overall performance. GM has said its system is designed to foster high performance, provide feedback and reward employees.
Management experts say employers can reward top performers without requiring a predetermined percentage of employees to receive low ratings. Meanwhile, at least two former GM employees have sued the company and allege age discrimination linked to the ranking system. One of those suits comes from former engineer Tuan Le, who claims older employees absorbed a disproportionate share of reduced or eliminated bonuses and potential layoffs.
Additionally, under former CEO Jacques Nasser, Ford briefly used a grading system before dropping it in July 2001. Ford agreed in December 2001 to pay $10.5 million to settle two discrimination lawsuits over the system, without admitting wrongdoing. Ford has since said it does not use a forced-distribution system for annual performance reviews.
For GM, the central challenge now lies in balancing workforce transformation and performance incentives with employee retention, fair evaluations and legal compliance.
