Ford Scraps Controversial Employee Grading System

In the wake of half a dozen lawsuits, Ford Motor Co. on Tuesday said it was backing down from a controversial employee ranking system that required supervisors to give 5% of their staff unsatisfactory grades that could lead to pay cuts and dismissal.

Chief Executive Jacques Nasser sent an e-mail to all employees saying the system would be replaced by a more flexible evaluation system that does not require doling out the lowest grade and reducing pay.

“The negative feedback has centered around what was viewed as an inflexible system by some, and as discriminatory by a few others,” Nasser said in his e-mail.

Four individual and two class-action lawsuits have been filed by former and current Ford workers accusing the auto maker of using the evaluation system to deny older male employees promotions in favor of women and minorities. The plaintiffs claim that older white males were given a disproportionate number of low grades, leading some to be dismissed.

“Consideration of race in employment decisions to benefit minorities and to disadvantage white males is standard operating procedure,” says one lawsuit filed last month.

Under the system, workers were given grades of A, B or C. Those receiving a C could be denied bonuses and raises, and two consecutive years of C grades could mean dismissal.

The decision to scrap the system “has nothing to do with age or diversity,” Nasser said in his e-mail. “It has everything to do with inspiring the best performance of everyone on the management team.”

When the system was launched in December 1999, Ford said it would continually review and refine it, Ford spokesman Nick Sharkey said, noting that last year the company changed the required distribution from 10% excellent, 80% good and 10% unsatisfactory to a 10-85-5 distribution.

“What we’ve retained is what we think is the best of the system,” Sharkey said, including setting of objectives between supervisors and employees; coaching and counseling of workers; formal interim reviews, and formal annual reviews.

“No longer will managers be required to put employees in the third tier, or ‘performance needs improvement,’ ” Sharkey said.

Supervisors may continue to class subordinates in the “needs improvement” category, but those workers will still be eligible for bonuses and raises.

The system covers 18,000 of Ford’s most senior managers among its 345,000 employees worldwide.

James Fett, a Michigan attorney handling two of the lawsuits, told Associated Press that Tuesday’s move by Ford would not affect the lawsuits.

“It’s an implicit acknowledgment they’re dirty,” Fett said. “They know they’re wrong, and they’re trying to do damage control.”