Tag: jack welch

Let’s Yank the ‘Rank and Yank’ System

I have communicated before my dislike for “Neutron Jack” Welch’s “rank and yank” system of performance management.  Microsoft’s abandonment of its own forced ranking process that subscribed to Welch’s sour approach hopefully signals its end for good.  The continual renewal of the corporate ranks by casting aside the “bottom 10%” of the employee roster seemed so simple.  In fact, it was too simple and short-sighted (and a bit inhumane).

A good performance management process sets realistic expectations between a manager and an employee.  If those expectations are met, then the employee keeps his/her job.  If those expectations are not met, then the manager needs to course-correct with appropriate training and support or make the difficult decision to terminate employment.  In this system, I can easily imagine organizations where, because of good management over time, all of the employees are performing well or as expected.  Why then force out 10% of the able-bodied work force?

One of the Welch system’s greatest flaws is simply the costs associated with turning over 10% of the GE workforce every year.  That’s 30,000 employees every year!  Beyond the recruiting costs, there are also on-boarding and training costs as well as more intangible costs associated with the slowing down of projects as newer employees get up to top speed on internal practices and protocols.

I say “good riddance” to forced ranking as an employee management tool.  It was about time other large and influential companies recognized it for what it is – wrong.


The HR Experts for Small Business

Performance Review Systems

Remember the “rank and yank” employee performance review system?  “Rank and yank” is the slang term for the forced ranking system which Mr. Jack Welch pioneered at General Electric starting in 1981 and which was used to gut the “bottom 10%” performers of the workforce every year.  Mr. Welch is the almost mythic GE leader who garnered the nickname “Neutron Jack” for eliminating 100,000 company jobs soon after becoming the CEO.  I do not dispute that Mr. Welch was a brilliant business person who (one way or another) consistently delivered results.  I would just never classify him as the selfless, humble person categorized as the highest level leader in Collins’ book From Good to Great.  Is the “rank and yank” system consistent with your values as a small business leader?  Shouldn’t organizations be similar to families with shared values, shared ethics and common approaches?  If you agree, then perhaps the “bottom 10%” rule is a bit of an easy out; it may let management off the hook from giving employees the tough love that they may really need.

In the family model, divorce is a normally occurring reality, and divorcing from employees for misbehavior or for not sharing the company’s values, ethics and approaches is acceptable; not controversial.  But what about the brother/sister /employee who maintains commitment, tries hard but just cannot deliver a similar degree of defined results?  Uh, just cut them off from the family?  Hardly.

In many organizations, underperforming employees who maintain commitment to the company values may very well be mis-allocated human resources; maybe their capabilities better serve the company in another capacity.  I can count on more than two hands examples of hard-working, smart employees who under-performed in one position, but then went on to a very successful career at the same company in another.  Given the investment of time and money already in some of these employees, HRInsights recommends that you, as a manager, should consider the following before choosing a point of no return for both the company and the employee.

Step 1:  Revisit the performance criteria defining the success of the position.

  • Are the criteria relevant to the employee’s function?
  • Is the employee able to influence the outcome?

Step 2:  Evaluate why the employee has under-delivered on the performance criteria?

  • Does he/she understand what is required to be successful in the position?
  • Does he/she lack a key characteristic that is critical to success in the position, eg. communication skills, leadership, ability to work independently?

Step 3:  Evaluate if there is another function in the organization which would be better suited to his/her capability set and past experience.

Step 4:  Consider transition to another position or begin termination process.

Good people who share your company’s value and ethics alone are hard to find.  Once you have identified these people, do everything you can to insert them into the right place within the organization.  And, forget about being the next Jack Welch.  Mr. Welch was a good businessman, but he is old and he was wrong.  GE has since dropped Mr. Welch’s forced ranking system, because it was just insane to force people into categories where they did not belong.  Coincidentally, there is a relatively new corporate video titled, The GE Family.  In it, one employee’s comment summarizes the point well, “Once you become part of a family, why leave?”