GM Overhauls Employee Performance Ratings to Reward Top Performers

General Motors is revamping its employee performance rating system to better reward high performers and pressure underperformers to improve. The new system offers top employees 150% bonuses and evaluates staff on a five-scale ranking. This move is aimed to attract top talent amid the competitive shift towards electric vehicles.

General Motors is revamping the way it rates the performance of its salaried employees in the United States, aiming to better reward high performers and exert pressure on low performers to either improve or leave.

According to an internal memo viewed by Reuters, the Detroit-based automaker will now reward its top 5% of employees with 150% bonuses, surpassing what was previously available, to attract and retain the calibre of talent necessary for succeeding in the fiercely competitive electric vehicle transformation. "To ensure GM has the talent required to achieve our ambitious goals, a more intentional process is needed that sets clear performance expectations and holds individuals accountable," the memo stated.

Legacy automakers like GM and Ford have been fine-tuning their performance evaluation systems for U.S. salaried employees to better compete with the stock-heavy pay packages of EV rivals like Tesla and Rivian. GM's revamped performance ranking system evaluates employees on a five-scale system, ranging from "significantly exceeds expectations" to "does not meet expectations," with employee bonuses tied directly to their rankings.

"GM is proud to have a culture that fosters and rewards high performance, which aids in attracting and retaining top talent in a competitive industry," a GM spokesperson said, adding that employees will be assessed under this new system during their year-end performance review.

Ford CEO Jim Farley earlier emphasized that linking bonuses more closely with shareholder value creation has been a crucial part of their business transformation. "The right talent alone isn't enough. Over the past two years, it has been vital to implement an accurate performance management system. This fundamentally changes how we manage the company," Farley told analysts during an earnings call.

The new GM system adds top and bottom tiers to the prior three-category scheme, which classified employees into "partially meets expectations," "achieves expectations," or "exceeds expectations." Under the new system, GM estimates that approximately 70% of its workforce will fall into the "achieves" middle category and receive 100% of their target bonuses.

Employees in the bottom 5%, categorized as "does not meet expectations," will face "appropriate action ... including being exited from the company," the memo said. Amid the costly EV transition, major automakers have been cutting costs by downsizing white-collar staff. GM offered buyouts to many of its salaried employees in March 2023 and further cut several hundred full-time contract workers in May 2023. Ford and Stellantis have similarly reduced their workforces over the past year.

(With inputs from agencies.)