Dear HR Executive:
How much do you really know about forced ranking? Most of us know it's a performance evaluation system that:
- Is often maligned
- Is used by General Electric, one of the most successful and admired companies in the world
- Assesses employee performance relative to peers rather than pre-determined goals
- Identifies three tiers of employees:
- The top 20%, who must be fawned over;
- The next 70% of middle performers, who should be encouraged and retained; and
- The bottom 10%, who must be fired
That last aspect of FR is very controversial. All managers at GE, for example, must fire 10% of their people in any given year. Many find that too brutal.
Former GE chief Jack Welch is obviously a big believer in forced ranking, and we recently published a short article in our newsletter Human Resources 21 that sums up why he thinks it's such a good idea. Please read the article, but before you do, please take just a moment to answer a quick survey on forced ranking. I'll report our findings next week.
Here's the article, about a Jack Welch event at Wharton. He has a particularly interesting perspective on managers who hit their numbers but don't share the company's values. Read on!
The value of candor
Too many managers avoid making hard choices and hurt not only their companies, but in the long run the employees they are trying to protect.
That candid advice came from Jack Welch, former CEO of General Electric, at a recent roundtable event sponsored by The Wharton School.
“I would call lack of candor the biggest dirty little secret in business,” Welch said. “It blocks smart ideas, fast action and good people contributing all the stuff they’ve got.”
Lack of candor is particularly heinous, he says, when it stops supervisors from providing accurate feedback to their subordinates in a misguided effort to be “nice to them.”
‘Rank and yank’
At GE, managers adhere to a “rank & yank” philosophy – culling the bottom 10% of the workforce every year. In school, everyone gets grades and ranked, some flunk or drop out. “Why do we only give grades to kids and not to adults?” Welch asked, noting that, in order to be fair, such a system must be built on candor.
Employees must receive frank, comprehensive and regular performance reviews, he said. That way people will know where they stand, and what is expected of them.
Culture matters, too
Building a strong culture and developing leaders are key roles for any C-level executive, Welch said.
He divides managers into distinct groups. Some show they have the right values and meet their profit goals. Some do neither and get fired. Some have the right values but miss their numbers. They get a second chance.
But perhaps the most corrosive managers are those who make their goals but don’t share the values. Maybe they are loudmouths in a culture that prizes collegiality. “Those are the ones who kill companies,” Welch said.
Although it’s tough, bosses need to remove them because failing to do so can corrode a company’s culture. “In the long run, that’s worse than seeing the results of one division drop,” said Welch.
Source: knowledge@wharton.
Stephen Meyer
Publisher
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