The recent lawsuit filed against General Electric may indicate that the company’s long-renowned ranking system isn’t quite as transparent as it seems.

The suit, which is seeking class-action status, was filed May 31 in U.S. District Court in Connecticut by Lorene Schaefer, general counsel for GE’s transportation division. It alleges that GE discriminates against women systematically.

According to the complaint, Schaefer relocated with her family to Erie, Pennsylvania, from Atlanta to accept the position after being promised that she would be promoted to the company’s senior executive band from the executive band.

The complaint notes that her two predecessors, both men, had been promoted to that rank either before or at the time of taking the general counsel position.

Five months after taking the position, however, Schaefer’s boss, Charlene Begley, CEO of GE Rail, left and was replaced by John Dineen, who created “an old boys network” at the company, consistently excluding Schaefer and three other female executives from meetings, Schaefer says.

Schaefer’s performance ranking dropped from being among the top 20 percent to being among the middle 70 percent, she says, but “in mid-2006, Dineen told her that if her performance continued to be strong, he would support her for promotion,” according to the complaint.

But in April, Greg Caputo, the HR manager for GE’s transportation division, informed Schaefer that she was going to be demoted because she was “not big enough” for her position and that Dineen wanted “a big-time GC,” or general counsel, according to the complaint.

Schaefer is seeking $500 million in damages for a class of 1,500 executive band female employees and attorneys.

Whether GE discriminated against Schaefer because of her gender, the fact that she was surprised by her demotion indicates a problem with GE’s performance appraisal process, observers say.

GE has long touted its performance appraisal program. In an unrelated interview with Workforce Management on May 29, two days before the suit was filed, Bill Conaty, senior vice president of human resources at GE, described why differentiation is important, saying: “It isn’t about putting a stamp on someone’s forehead or anything. It’s about constant communications and appraisal systems that have candor and honesty.”

But the fact that Schaefer was surprised to learn of her demotion is a sign that perhaps GE needs to make sure all managers are being candid about their staff’s performance, says Jan Rose, a principal at Capital H Group.

“If an employee is surprised about what they hear about their performance, then something is wrong with the performance appraisal process,” Rose says. “If it hasn’t already, GE may want to do an audit of its system to make sure it’s generating the results that it should.”

But GE maintains that “every decision regarding Ms. Schaefer was made on the merits.”

“We strongly deny the allegations made by Ms. Schaefer,” spokeswoman Archana Handa says. “We will defend against the claims in court.”

If the job requirements had changed under Dineen, it should have been communicated to Schaefer before the demotion, says Roz Courtney, managing director of Roslyn Courtney Consulting, a Scarsdale, New York-based consultant.

The lawsuit indicates how increasingly difficult it is getting for employers to manage employees’ expectations because job definitions change rapidly, says Peter Cappelli, director of the Center for Human Resources at the University of Pennsylvania’s Wharton School.

“It’s difficult to talk to employees about expectations because that requires employers to know what they are going to need a few years down the road, and most companies don’t know that,” he says. “You can’t promise employees anything today.”

—Jessica Marquez

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