Where Jack Welch Got It Wrong – The Mandatory, Annual Low-Performer Cut
By Michelle Malay Carter on February 12, 2008
Don’t Hack Jack!
Our underlying beliefs and values drive our behaviors.? Jack Welch believed, ?If you?ve got 16 employees, at least two are turkeys.??? From this belief flowed the talent management systems at GE.? One of the most controversial (and unfortunately?emulated) practices was that of cutting the bottom performing 10% of employees annually.
Judy at the Employee Factor, who also questions the practice,?posted some statistics showing that these beliefs and practices are still common.
Systems telegraph values and drive behavior.??
In addition to, “two in 16 employees are turkeys,” what does the practice of cutting the bottom 10% of employees annually?telegraph and drive?? (Hint:? It’s not trust nor engagement.)
Values Telegraphed:
- We don’t trust or expect our managers to hire appropriately.
- We don’t trust or expect our managers?to deal with under-performing employees so we will micromanage the process.
- Perform at all costs or you are gone.
- Don’t set your sights on anything with a return that is longer than one year.? You may not be around the second year.
- All factors that influence employee performance are within the employee’s control.? (False)
Behaviors Driven:
- Managers who hire well are now penalized, as they will be forced to eliminate team members every year.? With this system, competent hiring managers?are put in the?untenable situation of?either firing good employees, or they must intentionally seek out and hire dead wood with an eye toward firing them at review time.
- I will not help my teammates as they may end up higher on the list which puts me lower on the list.? I can’t risk that.
- I may need to sabotage my teammates in order to make the top?nine on the list.
- I may?need to do something that will get me my performance numbers in the short term but that I know is not in the long term interest of the organization.
- I must fudge the numbers, pay a kickback, cover up mistakes… in order to make the top nine.
Cutting the bottom 10% annually is a defensive, compensatory system for lack of understanding of work levels, human capability and managerial leadership.?
If you believe that:? I’m OK.? You’re OK.? Let’s fix the system, you would design your organization accordingly.? We need to equip, train and support (through systems design) line managers to successfully discharge their managerial leadership duties.
We wouldn’t let our untrained neighbor perform surgery on us in our backyard with a hacksaw, a hardback?copy of “What Good Surgeons Do”,?and a pep talk.? Yet we put employees in managerial positions, offer them some platitudes,?the latest best-selling book on leadership,?and send them off to lead “our most valuable asset” in polluted environments with inadequate tools.
Jack Welch is brilliant, and I admire many things about him, this is not one of them.? I have a more positive belief set regarding human nature and our desire to do meaningful work.? All we need to do is create work-enabling systems that eliminate conflicts of interest for employees, and send them off to work.
I’m OK.? You’re OK.? Let’s fix the system.? In my next post I will discuss how I would take an offensive rather than a defensive approach to low performance.
Have you ever been the victim of a bottom 10% cut?? Have you ever been forced to cut an employee who didn’t deserve to be cut?
Filed Under Accountability, Corporate Values, Employee Engagement, Executive Leadership, Managerial Leadership, Organization Design, Requisite Organization, Strategy, Talent Management, Work Levels
Comments
13 Responses to “Where Jack Welch Got It Wrong – The Mandatory, Annual Low-Performer Cut”
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Michelle, I couldn’t agree more with you. I think Jack Welch was plain wrong on that 20-70-10 approach. It was cruel and encouraged many bad behaviors. Many. And the sick part is that companies are still implementing that approach. Shame on them, I say.
Michelle – I love this topic! I think that you make an incredibly powerful point about how under such a system managers who hire well are punished by having to get rid of the bottom 10% of their workforce out of policy. These 10% could be be performing wonderfully and be a great fit for the job. Perhaps they are new-hires and have incredibly potential that has yet to be tapped because management is unable to recognize an individual’s true talents and abilities.
What scares me most are managers and leaders who read a Jack Welch book and say to themselves “hey, that is a great idea… I think I’ll make a policy of firing 10% of my workforce each year.” The sad truth is that management is often the source of incompetence in an organization and will often do anything to cover this incompetence in a move of self preservation (politicians do the same thing.)
Truth be told that many organizations would do well to fire their low-performers. The practice of firing the bottom 10% of a workforce can have some serious short term motivational effects.
However this is sure to have some serious long term ramifications on the organizations culture and employee morale which may unwittingly bring down the performance of the organization as a whole.
Plus, what’s with an arbitrary percentage assignment for such a serious move? Why not 5% or 20%. This just doesn’t seem rooted in logic to me. It sends a point to an organization’s staff, but the wrong one: your co-workers are your enemies; they threaten your job and your livelihood; sabotage their performance whenever possible.
Performance management is important, but it can be approached in a better way than Welch did. I can give him credit for having the gall and courage to pull off such a move, but is simply isn’t sustainable.
A better approach would be to assign performance goals and benchmarks. If someone just can’t get the results the position and your organization requires, then is it far more reasonable to let them go.
Sorry for the long comment Michelle, but this topic really gets my juices flowing!
Be well!
Chris Young
The Rainmaker Group
Michelle – what a great post. I completely agree with you that culling the bottom 10% is not a wise business practice and it certainly will not create engaged or committed employees. Thank you for referencing The Employee Factor and for responding so intelligently.
Judy
Frank, Chris, Judy,
Thanks for stopping by. Looks like we’re all in agreement – proceed with changing the world! Blog on my friends.
Michelle
Welch’s method of cutting 10% of the workforce is not a “defensive” approach to low performance. In fact, it’s an entirely “offensive” maneuver, aimed at motivating the other 90%. While Welch may not have stated as such, the historical precedent is to the Roman army’s practice of “decimation” — a much more despicable means of enforcing discipline by killing one in ten men in each cohort. (Hence the modern meaning of the word.)
Welch believes in only keeping around “A”-grade performers, and thus, decimating his own troops is one of the ways he ensures employees stay competitive.
Granted, this may be a better idea at a multi-national conglomerate like GE than at a mom-and-pop boutique — but the notion of having continual employee turn-over shouldn’t be thought of as demoralizing. It’s an incentive to fight complacency and an opportunity to find and develop new talent.
As a manager, you can be all touchy-feely and hope that every employee just needs a bit of a pep talk; this is fine in the non-profit or the public sector, where competition is pretty much meaningless and doing the exact same thing with the exact same people every day is perfectly acceptable. But in the business world, if you aren’t moving upwards, constantly improving, then you’re always in danger of crashing– being in the bottom 10% (for whatever reason) means you’re ballast, and are better off being cut loose, for both your sake, and the organization’s.
Hi Shadrach,
Thanks for the comment. I see you feel strongly about this issue as well. I guess we’ll have to agree to disagree on this one.
Regards,
Michelle
I agree that Jack Welch’s ‘decimation’ approach is controversial but there is some value in it. I do not agree with his setting up of mandatory ratios of culling people every year. Obviously the continual and regular culling of the bottom 10% of performers will signal distrust and force employees to set up counterproductive measures. However there is value in culling non-productive and disengaged employees when you (as a manager) first enter into a low performing work environment in certain industry sectors. Coupled with setting a clear mission, communicating expectations of results and focus on positive engagement of employee concerns, the selective removal of non-productive staff at the start of a manager’s term quickly communicates to the herd that change has arrived. A study of managerial paradox is useful here. Managers need to be ruthless and caring, results focussed yet have an interest in process etc etc. Great military commander’s practise this … driving troops till they drop but after a battle lavishing them with praise and material care. It is all in the timing! One point I would like to add (in the context of the roman army’s use of decimation) is that it was purely random and also regardless of rank. However in today business context, the random methodology should be replaced by a productivity measure, yet the removal of poorly productive staff should still occur regardless of rank…hence it should also include removal of middle and senior managers … leaders are essentially responsible just as much as the disengaged employees.
Hi Jazza,
Thanks for stopping by. I agree. I am by no means saying that organizations should not address underperforming employees by reassigning or removing them. I am against this particular unfair methodology for doing so. Thanks for the comment.
Regards,
Michelle
[…] what values does this telegraph?? A while back, I did this with Jack Welch’s practice of hacking the bottom ranked 10% of GE employees,?and it is one of my most visited […]
hi ,
what Jack did is a fairly normal ( bell curve approach). what is wrong in 20-70-10. Its a common phenomena to find low performers in any team /group. unless u identify and remove the deadwood ,how elsev will you motivate high performers. The bar has to be raised year after year , and those who cannot perform has to go. We are in business and we have to mean business. We can not tie the horses and donkeys to the same stable . The prescription of 10% seems to be the contraversy. But be aware , if you donot prescribe , tendency for many leader/manager is to evaluate every one in topline. So at the end of the day the good performers will leave if low performers are tolerated.
In an all well situation , we have genrosities over flowing . Fine then in a downturn situation what will you do ? can you have luxury of carrying the deadwood. It is better to prescribe the lowest rated 10% to be sacrificed , if you have to retain the 90% performers .
Hi rao vs,
Thanks for stopping by. We’re in agreement until the last line of your commet. I’m all for removing or reassigning dead wood. Yes, it is a managerial leadership accountability to deal with nonperformers.
What I am against is the arbitrariness of this 10% process. Again, you are punishing the managers who hire well and do not “carry” non performers, as they still have to cut people. And in this case, it would be good people. How do you think that impacts high performers?
Michelle
I find the process is used subjectively, to weed out those they don’t want, not necessarily the low performer. I’ve seen it on several occasions. People being graded on things that are not in their yearly goals.
I’ve seen teams (departments) decimated so much that all remaining have to work much overtime just to do the same amount of work that use to be done, and management takes pride in it (we do more work with less), simply to try to not be the next one out the door.
It is a process that treats the employees as livestock.
All the above comments and back and forth are great. I believe there’s some merit to either side.
I’m ok with this decimation idea given a couple key notes.
The expectation is clearly set up front. When hired you must know that this is the normal practice. You’re motivated to take the job because you know the company represents the best of the best and that the company delivers the results as a whole.
GE succeeded in being number 1 or 2 in all of its businesses, year after year after year.
Welch has firmly affixed the idea that the “first” team, “first” responsibility and singular purpose is GE succeeding, continually. It seems reasonable and fair to assume that a company can not “rest on its laurels” and expect to be around in the next few years (thus 100% are out the door). Welch manages to place the focus on GE success while still allowing individuals to pursue and improve their own talents that contribute to GE success. It seems to me that this method is highly successful in simultaneous putting the focus on the team while encouraging individual success. That is not an easy thing to accomplish.
Question: was the 20/70/10 rule applied to each dept evenly? I don’t recall thinking that’s how it was employed by welch but it seems that’s the assumption of the contributors above. I would agree that expected each manager all the way down the line to each cut 10% of their staff annually would not be a good method. I understood it as Welch feeling that in his large company 10% from the overall pool need to be cut annually. If this take is correct then those managers that do hire well and have no real bad performers is not punished and probably looks better for hiring those folks than another dept that may have lost more. This would also send the message to other employees that that manager’s doing something right and they might want to be on that team, etc.
This decimation approach also allows continual influx of new graduates or new entries into certain job markets. How often do we see companies hang on to people to feel 15-20 years later that they can’t cut these poor performers now because of their pension or how will they get another job or etc etc. When this situation occurs, nobody really wins. The company is stuck and won’t perform as well as it could (which would essentially punish high performers AND customers) and the employee never really had a chance to change things up when they could better adapt to a new job/challenge.
Welch is right, we must see things as they are, not as we want them to be (not meaning setting goals or aiming high). Its right to want people to be able to develop, and understand that some may develop at a different pace (not within a year or two), but they can always take another stab at it, somewhere else (even another division, etc) having extreme motivation of needing to make a living. Complacency comes naturally, change is difficult and needs stimulus. Business is change, period.