General Motors (GM) is overhauling its performance evaluation system for U.S. salaried employees to better reward high achievers and pressure underperformers to either improve or leave. This strategic move aims to attract and retain top talent necessary for GM’s ambitious transition to electric vehicles.
According to an internal memo viewed by Reuters, GM will now reward its top 5% of employees with 150% bonuses, a significant increase from the previous system. This change ensures GM has the talent needed to meet its goals in the competitive automotive landscape.
The memo stated that a more intentional process is required to ensure that GM has the talent needed to achieve its ambitious goals. This process sets clear expectations for performance and holds people accountable. The revamped system evaluates employees on a five-point scale, ranging from “significantly exceeds expectations” to “does not meet expectations,” with bonuses tied to these rankings. GM has approximately 53,000 salaried employees in the U.S.
The updated rankings will be applied during the year-end performance reviews. GM’s new system includes a top and bottom tier, adding more nuance to the previous three-category system. About 70% of employees are expected to fall into the “achieves” middle category, receiving 100% of their target bonuses, while the bottom 5% will be subject to “appropriate action … including being exited from the company.”
Kristine Bhalla, a partner at consulting firm ClearBridge Compensation Group, noted that the five-point scale allows for a more precise evaluation of employee performance, which is a common and practical approach. This change aligns with industry trends, as legacy automakers like GM and Ford adjust their performance evaluation systems to better compete with EV rivals like Tesla and Rivian.
Nevertheless, the automaker offered buyouts to most of its salaried employees in March 2023 and cut several hundred full-time contract workers in May 2023. Bhalla mentioned that while such changes can result in incremental costs, they often allow companies to allocate resources more effectively, paying employees commensurate with their performance.
