General Motors (GM) is implementing a new performance evaluation system for its salaried employees in the U.S. in a bid to attract and retain top talent and drive the company’s goals in the competitive electric vehicle (EV) industry. The move comes as legacy automakers like GM and Ford aim to compete with EV rivals such as Tesla and Rivian, who offer stock-heavy pay packages to their employees.
Under the new system, GM will reward its top 5% of employees with 150% bonuses, a significant increase from the previous system. This change is meant to better incentivize high-performers and encourage low-performers to improve or face potential consequences. By offering higher bonuses, GM hopes to attract and retain the talent necessary to thrive in the cut-throat automotive transformation towards electric vehicles.
In an internal memo, GM stated that a more intentional process is required to ensure the company has the talent needed to achieve its ambitious goals. The memo emphasizes the importance of setting clear performance expectations and holding employees accountable for meeting them. By implementing this new ranking system, GM aims to foster and reward high performance, which will ultimately help the company compete in a rapidly evolving industry.
GM’s new performance ranking system evaluates employees on a five-scale system, ranging from “significantly exceeds expectations” to “does not meet expectations.” Bonuses will be tied to an employee’s ranking. This transparent approach ensures that employees understand what is expected of them and provides them with feedback to help them develop professionally.
Ford, GM’s competitor in the industry, has also recognized the need for a revised performance review system. Ford CEO Jim Farley stated that changing the company’s performance review system to align bonuses with creating shareholder value has been an essential aspect of their business transformation. By adopting a right performance management system, Ford has embraced a fundamental change in how they operate as a company.
The new GM system adds a top and bottom tier to the previous three-category ranking system. This refinement separates employees into “partially meets expectations,” “achieves expectations,” “exceeds expectations,” and now includes “significantly exceeds expectations” and “does not meet expectations.” This added granularity allows for a more accurate evaluation of employee performance.
GM estimates that approximately 70% of its employees will fall into the “achieves expectations” category, receiving 100% of their target bonuses. However, the estimated 5% of employees who fall into the “does not meet expectations” category will face potential consequences, including potential termination.
It is worth noting that these changes come as major automakers, including GM, are in cost-cutting mode to navigate the expensive EV transition. Many of these companies have been downsizing their white-collar ranks to preserve funds. In March 2023, GM offered buyouts to most of its salaried employees, and in May of the same year, the company made further cuts by letting go of several hundred full-time contract workers. Similarly, Ford and Stellantis have also reduced their ranks over the past year.
In conclusion, GM’s new performance evaluation system for salaried employees is a strategic move to attract and retain top talent in the competitive EV industry. By offering higher bonuses to top performers and holding employees accountable for their performance, GM aims to achieve its ambitious goals in the automotive transformation. This shift aligns with the broader trend seen in the industry, as legacy automakers like GM and Ford adapt to compete with their EV-focused rivals.
