I was with a group of folks a few weeks ago who had a healthy debate on Jack Welch’s “remove the bottom 10% of your organization every year” policy from a couple of decades ago. Some of the folks who run large corporations said this would never happen in their company. Not only were they too big, but also they would have no idea how to identify the bottom 10%. Is it 10% across the board, or 10% in a department, or 10% of a level? Is the bottom 10% in one high performing business unit the same as another 10% of a low performing business unit? Would force-ranking be subjective thereby forcing employees to build alliances like the ones we see on “Survivor” on TV, instead of focusing on performance?
Others argued the cost of this. How much in severance, unemployment, and man-hours to process outplacement would this cost every year? Could that money be better used to re-train the employees or to make more important investments? And what is the cost of replacing 10% of your workforce every year?
Most agreed on the reasons for it. The bottom 10% consume a very disproportionate amount of management time because of their underperformance. They often dilute high performing teams and environments and cost the company ability to meet milestones, commitments to customers, and maintain high levels of quality. All these are the reasons why performance evaluations are so critical – so employees can be made aware of issues and have the ability to seek and make corrective measures.
What started out as a discussion on “Jack Welch’s 10% Rule” ended up being a discussion on just how important Recruiting and Performance Management are to every organization. Getting the right people on the bus (Good to Great) and having the ability to measure performance are two functions that we all agreed should not be outsourced. They should be the responsibility of every manager at every level. We also concluded that although the number might not be 10% for every organization, there needs to be an annual weeding out of low performers to address people simply on the wrong bus.
This week, give some thought to your bus, who is on it, how they got there, and what their true contributions are to your team and company.