The post was originally published in Harvard Business Review by General Electric
As managers in a large, complex organization at GE, we face a daily challenge: ensure that our employees collaborate, make quick and effective business decisions, and provide our customers with superior products and services. But like at other companies, our teams and departments tend to focus on their piece of the business — siloed behavior that causes frustration and impedes broader aims.
To cultivate empowered, collaborative, cross-functional teams, we have been experimenting with a new approach to performance development. Our teams were among the first to adopt it as part of a pilot, and we have used it to drive a fivefold productivity increase in the past 12 months. GE is now rolling it out throughout the company, and it will replace our legacy Employee Management System (EMS) by the end of 2016.
At its core, the approach depends on continuous dialogue and shared accountability. Rather than a formal, once-a-year review, managers and their direct reports hold regular, informal “touchpoints” where they set or update priorities that are based on customer needs. Development is forward looking and ongoing; managers coach rather than critique; suggestions can come from anyone in an employee’s network.
A summary conversation between the employee and his or her manager still takes place at the end of the year, and a summary document, which both finalize and submit together, reflects on the impact achieved and provides a look forward. Just as they did under the EMS, managers still base compensation, promotion, and development decisions on these inputs (as well as a range of other factors, including business performance, internal and external benchmarks, and budgets).
But thanks to the new performance-development approach, the manager and employee can now draw upon a much richer set of data regarding an employee’s unique contributions and impact throughout the year. As a result, the year-end discussions are more meaningful and future-focused — and less fraught with expectations because they are simply part of an ongoing dialogue.
The new approach encourages flexibility and agility. Today, when priorities can change by the hour, we can’t wait until an EMS-style annual review to share 90% of our feedback on how an employee is performing against goals, what learning and development opportunities they should pursue next, or what they need to do to move to their next role. Managers and employees must be able to focus on contributions and impact within the context of current priorities. By emphasizing day-to-day development, we expect to drive better performance overall.
Our business, the Turbomachinery Solutions unit of GE Oil & Gas, provides solutions and services to upstream and mid-stream customers in seven vertical markets. We have 7,000 employees across three P&Ls, 11 functions, 12 regions, and 15 product lines. In recent years, our customers have faced a tough market; our challenge has been to ensure continued growth while reducing their costs rapidly. To do this, we needed all our teams, including Engineering, Procurement, and Manufacturing. to collaborate together better, something we knew year-end reviews alone could not achieve.
We jumped into the pilot by building a collaboration room where teams could engage and develop new ways of working. We gave them a shared goal on productivity and full horonomy and decision-making authority to figure out how to get there. Instead of each group working separately to optimize its portion of the process, as might have happened in the past, the new performance-development approached helped them work together to optimize the overall results. For example:
- An Engineering team redesigned a cooling system for better performance and 50% lower cost.
- The percent of purchase orders placed with a should-cost analysis increased 10X in one year to more than 60%, driving teamwork between Engineering and Procurement and significant savings. (Should-cost analysis is a methodology that builds an estimate of supplier costs associated with a given design. This approach sensitizes Engineering to cost tradeoffs in design decisions, and provides Procurement with a benchmark for negotiations with suppliers.)
- Procurement and Engineering linked with Operations and Sales to improve forecasting and develop volume commitments with suppliers.
We’re finding that the new performance-development system is promoting trust between managers and employees — the foundation of high-performing teams. The insights we are giving and receiving are very different compared to the scrubbed and anonymous 360-degree reviews of the past. This is uncomfortable at first: It is difficult to truly self-reflect and spot the gifts embedded in the increased feedback. As managers, we need to be more vulnerable and show our teams we are growing to give them the license to do the same.
We’re also learning a new vocabulary, dispensing with sticky labels like “strengths” and “weaknesses,” which can follow an individual long past the point of applicability, and focusing instead on behaviors employees may want to “continue” as well as changes they may want to “consider” making. This new vocabulary focuses our teams less on backward-looking feedback and more on forward-looking actions. It frames feedback in a positive way.
For example, an engineer was asked to “consider” being more open to supplier recommendations and to visit the supplier for a day. He did, and in the following weeks the change was apparent. He championed a new approach that doubled our overall savings rate on budgeted project costs. Similarly, a procurement specialist was told to “continue” encouraging volume pricing and other such practices among vendors to increase savings.
While our business unit and our company are still in the early phases of rolling out the new performance-development approach, we view it both as a means to enhance individual and team success and a way to develop new leaders. The shift from “command and control” to “empower and inspire” is dramatic, and, as evidenced by our fivefold increase in productivity, it is yielding significant benefits for our employees and customers.