Jack Welch, former CEO of GE has written several popular management books wherein he shares his vast wisdom. Full disclosure: I have not read any of them. Where I work, our management team is keen on Welch wisdom, so I politely listen to some of the ideas they have picked up from the Guru.
Most sound reasonable to me, but one is total shit. The 20-70-10 approach to staff performance management. The idea is described succinctly here. The approach involves ranking your employees (nothing wrong with that), and then dividing them into the top 20%, middle 70%, and the bottom 10%. This is where things start going astray. Categorizing like this sets us up for the inevitable value judgements that are associated with class-dynamics. Then, according to the philosophy, the bottom 10% are managed out of the company. I am optimistic that before they are released, they are put on a performance plan whereby they are given an opportunity to improve, and thus, move into the 70%, (but I know of some companies that have elimination quota that must be filled). Finally, this is done every year, with the bottom of the organization being shown the door.
Many companies use this "Best Practice" to "maintain a high quality staff." There's a fundamental assumption behind this practice: that your staff quality fits something like a normal distribution. That is, about 70% of your employees are doing what you ask of them; 20% are exceeding expectations; and 10% are falling short. Furthermore, there is an assumption that even after eliminating from the bottom, there continues to be another 10% that, next year, you should deal with.
Year over year, where does this additional 10% of losers come from? They were hired! The second assumption is that you hire another batch of people you don't want. This is the stupidest thing, and the reason I wrote my book, "Agile Hiring." It's because companies do a shitty job of hiring and must fix it by cleaning house.
This is such a destructive practice. In my industry, people are often relocated. They uproot their their families, they buy homes, and put their kids in new schools. And some percentage of these people, after rewiring their whole lives, are going to be shown the door. This is a moral outrage!
Putting morals aside, since corporations aren't people (wat?!!!), and therefore, don't care about morals, does this make business sense? Hell no! Do you think that putting relocated families out on the street gives your company credibility? A good reputation? Does this draconian flush-cycle improve company moral? Does it promote collaboration, or does it promote competitiveness? Do you want your remaining employees jockeying for position, or do you want them working together toward a common goal, feeling safe in the knowledge that they won't have to worry about an annual slaughter?
So what's the alternative? That's easy. Stop hiring people you are going to fire. Learn how to, and dedicate your organization to, hiring the best. Hiring with excellence. Develop an excellent hiring staff, and set high standards for candidates. Put effort into your hiring. Put effort into hiring because you now realize that hiring is one of the most important things your company does. It builds your reputation, it leads to great retention, and it moves the focus onto the job rather than onto the ranking.
Most companies suck at hiring. They suck because they don't understand what it means to their bottom line. They suck because they don't make room for their best people to be intrinsically involved in the hiring process. They suck because it's easy to hire poorly, and seems hard to hire well. They suck because they don't even realize they suck.
The benefits of great hiring are many. Retention, employee satisfaction, productivity, moral, reputation, ability to attract top candidates. If you find yourself considering, or implementing house-cleaning procedures every year, then you don't have a staff problem, you have a hiring problem.
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