- Top performers need to be identified and generously rewarded.
- There is value in having a clear discipline for quickly culling nonperformers.
Adapted from “The Wall Street Journal Guide to Management” by Alan Murray, published by Harper Business.
Critics call it “rank and yank,” and it’s a controversial practice.
Former General Electric Co. CEO Jack Welch is the most passionate advocate. He believes that managers should assess their employees every year, and divide them into three categories: the top 20 percent, the middle 70 percent, and the bottom 10 percent.
The top 20 should be showered with praise, affection and various and generous financial rewards. “Sprinkling” financial rewards over a much larger group is a mistake, Mr. Welch argues.
The middle 70 should be given coaching, training, and thoughtful goal-setting, with an eye toward giving them an opportunity to move into the top. Keeping them motivated is the most difficult part of the manager’s task, he says. “You do not want to lose the vast majority of your middle 70 – you want to improve them,” Mr. Welch says in his 2005 book, “Winning.”
As for the bottom 10 percent, “there is no sugarcoating this,” Mr. Welch says. “They have to go.”
Critics say this forced ranking undermines team work. It encourages employees to engage in destructive and wasteful game-playing designed to ensure they get credit, or others don’t.
Stanford professors Jeffrey Pfeffer and Robert Sutton are among the most fervent critics. They cited a survey of more than 200 human resources professionals from companies employing more than 2,500 people that found that even the more than half the companies used forced ranking, the respondents “reported that forced ranking resulted in lower productivity, inequity and skepticism, negative effects on employee engagement, reduced collaboration, and damage to morale and mistrust in leadership.”
Whether you decide to use forced rankings or not, a couple of basic facts are worth keeping in mind.
The first is that your top performers need to be identified and generously rewarded. It’s too easy to fall into a “squeaky wheel” pattern, where financial rewards go to those who make the most noise, or who regularly drum up outside job offers. That’s a mistake. If you identify your top performers and reward them up front, before the competition comes calling, you’ll be much better off.
The second is that firing employees for performance is a tough thing for a manager to do – tough because it has real human consequences, and tough because it is often an admission of management failure, particularly if the employee is someone the manager hired in the first place. As a result, most managers tend to avoid such decisions. There’s nothing magic about firing 10 percent of your people every year. But there is value, many managers believe, in having a clear discipline for quickly culling nonperformers.
If you do have to fire someone, the key to making this event go relatively smoothly is not what you say or do in the final meeting; it’s what you have said and done in the months leading up to it.
The best workplaces are built on clear expectations and candid feedback. In such a workplace, firing may be unpleasant, but it won’t be a shock. And often, poor performing workers will read the writing on the wall and leave or find another job before a firing becomes necessary.
Jack Welch calls this the first rule of firing: No surprises. “In the ideal situation,” he writes, “the last conversation will go like this:
Boss: ‘Well, I think you know what this meeting is about.’
Employee: ‘Yes, I guess I do. So, what are your thoughts on timing and what’s the deal?'”
Mr. Welch’s second rule, also a good one is this: minimize humiliation.
Even after firing an employee, the manager remains responsible for helping him or her through the next step. “Build up his confidence,” writes Mr. Welch. “Coach him. Let him know there is a good job for him out there, where his skills are a better match. You may even help him find that job. Your goal for the fired employee is a soft landing, wherever he goes.”
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