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I loved reading Jack Welch's books on management. He is a charismatic and energizing leader.

One of his most controversial point of view is the "Differenciation" policy. And I have a big doubt on this one !

Very simply : the trick is to rank your people in 3 categories : Good/Average/Poor performers representing 20%/70%/10% of your staff.

You have a different treatment of each category. By getting rid of the 10% poor performers, you regularly get a better and better company.

The other trick is : you never stop this "selection" process, always getting rid of your 10% poor performers !

I would like to know your opinion on this system and hear about people who have experimented it.

- what kind of team spirit do you get with such a system ?

- how can you rank different people ? Allan may be good at this and bad at that, when Susie is bad at that and good at this. Together they make the perfect team ... Do you want to rank one against the other ?

- why rank people inside the group ? Isn't it better to ask them to get better than yesterday and not as good as tomorrow ?

- Ranking sales people may be simple. But it is more difficult with techs, finance people, admins, etc.

- How would it feel being in the 70% category ?

ccleveland's picture

I’ve very interested in responses to this. My company ranks people during performance appraisals as well. This seems to create an environment where people are often more concerned with looking good and [u]not[/u] looking bad (CYA, finger pointing) than doing the best thing for the company. This doesn’t seem to be very healthy and most people (managers and staff) do not like the system.

Our company’s system is a little different than Welch’s system. Each employee is given a ranking from 2-5 based. The total number of 2’s, 3’s, 4’s, and 5’s are based on a required distribution for a division. Each manager has to “make a case” for how their staff should be ranked.

2 – means poor performer – improve or be terminated
3 – is average and the majority – many perceive this as a negative
4 – is fairly common and reasonably attainable
5 – extremely rare – lots to do with the persistent pursuit of opportunity meeting preparation

I’ve never heard of a 1. I expect the idea is that someone with that level of performance should not make it to the annual review without immediate improvement.

The MT Tools about personal career management (and doing other’s performance appraisals) help navigate this, but organizationally, I think the ranking has some flaws.

jhack's picture

The fewer employees you have, the less likely this is to work. GE is huge and they attract new talent constantly. It's part of the culture and new hires know it. They certainly develop great talent through this competitive process. Does your firm have a steady supply of new talent to fill in for those who are let go?

Performance can be compared to a standard or goal, not necessarily to others. If an employee is hitting their targets, they're worth keeping. Set the targets higher if you wish; absolute performance, not relative performance, is ultimately what matters. If your team is nailing their targets (see Teamwork podcast) then why tear that trust apart?

There is more than one path to high performance.

bflynn's picture

I've found that people frequently complain about Welch's approach because they don't like it or feel its not fair. However, I've never heard anyone argue that it didn't work. The forced rankings system is very effective at keeping people on their toes and over time raises the quality of employees. Productivity will be up and you will deliver more for the company. There is a ceiling on the productivity and you have keep the pressure on to maintain the level.

Morally, I think there is a case to be made that this goes too far, but it becomes a personal ethics battle. Where do you draw the line between encouraging employees and using fear to motivate them? There are some managers who have no trouble using any means they believe will achieve better results and strict business morality says they are correct.

Personally, I do not believe in Welch's approach. There are approaches (coaching, O3s and feedback) which are as effective yet much more humane and do not require the brutality of forced rankings. My comparison comes from several projects with GE and former GE employees, plus what I've learned and used from here.

Brian

cwatine's picture

Brian,

I don't know if you can ...

I would be interested in having some example of "the other side" of Welch's approach, if you had some experience with it ?

Cédric.

kklogic's picture

Our company does this as well and I specifically brought it up at the conference.

Hopefully, I capture Mark's response properly. He said that in a very large company, it can work - the problem is that many smaller companies use this methodology and it is a sample size issue.

My problem with it is that is assumes bad management. If they took all of the time, money and effort it takes to implement this type of system and rehire/retrain for those terminated employees into training their managers - the situation may not exist in the first place.

cwatine's picture

In France, a manager would not be able to "promote openly" a system that says he will get rid of 10% of its staff every year. Even if the performance of the team was good. It would be a legal issue. This is why I don't undestand how Welch can say he has implemented this in any culture and any countries.

Plus, I think this system can only lead to a tremendous amount of pressure and competition inside the company, lowering the efficiency of the teams ...

Plus, how do people get motivated by going in a company that will treat them as meat ?

This is why I would like to find someone other than Welch that has lived under this system and find it a good system !!! :shock:

ccleveland's picture

I don't think a "system" treats employees like "meat." However, people may feel like "meat" if their managers aren't involved in their development, ranking system or not. However good managers can help people feel like part of the company regardless of a ranking system.

CC

Mark's picture

This is such a complex topic. Keep in mind that there will ALWAYS be inherent tension - and therefore energetic disagreements where both sides feel completely justified - in viewpoints between individual opinions and organizational policies. ANY organizational system will chafe in some way against individuals precisely BECAUSE the purpose of that organizational system is to help the org, and not any one individual in the system. This is a classic example of sub-optimization. Jack Welch's system works exceptionally well in companies that have performance cultures - which is to say VERY FEW - and that sets high standards on the front end - which is even fewer - and which helps its managers create relationships, give feedback and coach - which limits us to just a handful. Hire great people, put in place a performance culture, and ask managers to engage in professional development behaviors...and Jack's system will bury any other organization in any industry any day. The individual arguments against the concept - 'harsh, 'not fair' - are all reasonable commentary that miss the point, and sound feeble, in my opinion. Let's all get together on improving our companies first. Mark

cwatine's picture

I of course agree on setting high standards, having a performance cutlture, etc. and most of the values promoted by Welch.

Maybe am I a little bit naive, but I still think a company can perform exceptionnaly well with a culture that doesn't promote competition between members and such an inhumane selection system.

I also have no doubt about the fact that you have to fire people sometimes, because of poor performance or because of poor behaviour.

The gap between us is :
- I would says "sometimes" and I would use no ranking but set the bar of performance and behaviour.
- He would say "systematically" and would use ranking and a fixed 10%.

Maybe is it the difference between a huge corporation that needs a systematic rule and a small company that can have a more contextual approach.

It also can explain why small businesses have a much better image than big corporations, in surveys :wink:

Cédric.

JohnGMacAskill's picture

[quote="cedwat"]In France, a manager would not be able to "promote openly" a system that says he will get rid of 10% of its staff every year. Even if the performance of the team was good. It would be a legal issue. This is why I don't undestand how Welch can say he has implemented this in any culture and any countries.

Plus, I think this system can only lead to a tremendous amount of pressure and competition inside the company, lowering the efficiency of the teams ...

Plus, how do people get motivated by going in a company that will treat them as meat ?

This is why I would like to find someone other than Welch that has lived under this system and find it a good system !!! :shock:[/quote]

As Mark stated, in a company with a very high performance culture, this policy can be enacted fairly and as the 10% do not meet clear and candid performance levels they leave. Some will just leave, the rest are asked to. Don't get this mixed up with just 'scoring' workers and firing the bottom 10%.

Undertaken properly with recorded data, you would have no issue. I do not have personal experience with French labour law - though I have major clients in France so I do follow politics/economics, etc. The UK has EU based labour laws, but this does not stop you letting go poor performers if done correctly.

Basically this policy requires intelligent and continuous people management and human resources activity if is to be undertaken effectively. It has to be part of a weekly, quarterly and annual review performance management system that should be good practice anyway. It should align to required company performance and objectives and should never be a surprise to those affected (late stage coaching!) Indeed many people leave before being dismissed when part of a candid, but fair system.

The bottom line (but obviously not upfront :wink:) is that you would not need to have a fixed quota like 20/70/10 if managers did their job properly. This is a policy created by CEO's because they do not trust most managers to do it as part of their professional approach to the job.

cwatine's picture

[quote="JohnGMacAskill"]
The bottom line (but obviously not upfront :wink:) is that you would not need to have a fixed quota like 20/70/10 if managers did their job properly. This is a policy created by CEO's because they do not trust most managers to do it as part of their professional approach to the job.[/quote]

Brilliant ... I agree. Yes.

Regarding labour law : I think there would be no problem firing 10% of staff every year for good reason. What would pose a problem is stating in advance that in [u]any case, any context, any performance,[/u] 10% will be fired every year. What would be a problem is the fact it is systematic.

Mark's picture

This does not work in small companies.

Mark

cwatine's picture

[quote="mahorstman"]This does not work in small companies.
Mark[/quote]

That's why we like small companies ? :wink:

nagesh's picture

In intent, the forced ranking system (or the 20-70-10 in Jack Welch/GE terminology) is an excellent method for rewarding top performers and setting specific deadlines for improvement for poor performance. Despite this appeal, the system has several drawbacks.

Most organisations that have forced ranking systems tend to experience a lot of resentment to the system--- especially about the requirement that 10% of the people be 'purged' or 'yanked' (inhumane words) out of the organisation every year. The basic idea behind this 10% distribution is that the people here probably don't fit in the context of the current endeavours of the organisation or have established a pattern of contributing little in the recent past. By forcing an employee into this 10% category, a manager is essentially doing him/her a favour by hinting that the person take up a job that fits better with his/her interests and capabilities, whether in another sub-organisation within the company or in a different company altogether. In practice, though, people in the 10% category are usually terminated automatically only if they have been in the 10% category in two consecutive ranking cycles.

Quite often, the forced ranking system is poorly implemented. Sometimes, the upper-level management simply 'copy' the system because they adore Jack Welch and the transformation he brought about at General Electric. Successful implementation of forced ranking requires a thorough organisational culture and a framework of managerial practices. Three of these essential practices are: (1) a great recruiting, mentoring and retaining system that develops a great talent pool to diminish the effects of losing 10% of the people every year, (2) an active feedback system that Mike and Mark tirelessly advocate, and, (3) a management process that sets clear expectations for the performance of people and 'measures' them against these expectations. Without these initiatives in place, the forced ranking system boils down to a popularity contest.

regas14's picture

[quote="cedwat"][quote="mahorstman"]This does not work in small companies.
Mark[/quote]

That's why we like small companies ? :wink:[/quote]

I would caution this reaction to Mark's comment. He did not say that small companies have an inherently better - or even good - way of managing performance. Performance management is not easy. It requires clarity of goals and a clear understanding of the specific behaviors which will facilitate achievement of those goals. Neither of those is easy for large or small organizations.

JohnGMacAskill's picture

[quote="regas14"][quote="cedwat"][quote="mahorstman"]This does not work in small companies.
Mark[/quote]

That's why we like small companies ? :wink:[/quote]

I would caution this reaction to Mark's comment. He did not say that small companies have an inherently better - or even good - way of managing performance. Performance management is not easy. It requires clarity of goals and a clear understanding of the specific behaviors which will facilitate achievement of those goals. Neither of those is easy for large or small organizations.[/quote]

From having read cedwats posts elsewhere, I am sure he is being lighthearted and understands the meaning of Mark's comments.

However, you are correct regarding the fact that you have to manage well in either size of org. It is just that the population required to make a statistical approach - 20/70/10 - meaningful would be significant. I would have thought - no experience myself - it would need to be measured in thousands to be effective (assuming the environmental parts are right, coaching, etc).

cwatine's picture

Regas and John :

Yes, sorry about this. It was humour ( :wink: ).

Small business have a reputation of being more "human" because you are not "just a number". and because quiet often the owner and the boss are one person. So there are other considerations than just pure performance.
But you are right it is all about management : I have some friends owning small business who are awfull to their employes and I have worked for a big group that had a very "human" policy ...

Some people say : "You join a Company. You quit a Boss" (not sure it translate well ...)

---------------------------------------

Nagesh :

Your post is brilliant and very clear. Thanks.

Cédric.

ccleveland's picture

Can someone explain “sets high standards on the front end” to me?

I think there is significant risk of this type of ranking system degrading organizational performance. Mark suggested that the system will work in an environment with strong performance cultures, high “front-end” standards, and strong, effective managers. How performance is measured seems to be also an important component.

Many “performance” standards are independent or not directly tied to the larger organizational strategy. With individualized objectives a competitive ranking system creates an significant internal competition for scarce resources without the best goals of the organization in mind.

As an example, as project managers, we are often given our objectives of time, scope, and cost. We often are using the same financial and human resources as other project managers. Our effectiveness and performance is usually judged on how well we fit into our objectives, not how well the projects improved the organization as a whole. This can lead to “hoarding” or inefficient use of resources.

CC

jhack's picture

Sports teams use this technique, too: only a certain percentage of those at training camp will make the team. Everyone knows it going in, and even if your performance is objectively great, someone better can displace you.

The analogy is imperfect; my point is that culture and expectations (and your talent pool) will play a big part in determining whether this will improve performance or just demoralize the team.

There is more than one path to high performance.

Mark's picture

Setting high standards on the front end means setting the bar high for hiring. Hire only the best, walk away from folks who are pretty good, look for top quality.

This plus a performance culture which is open about positive and negative feedback and rewards managers whose employees perform and get promoted are the framework for managing out the bottom 10%.

Mark

tplummer's picture

I come from an ex-GE company so I know the methods and the wonderful morale it creates :wink: But, there are many good aspects to the system. But, I often hear that it makes the company stronger and better and gets you better employees. This for the most part isn't true. If it were, at some point of cutting the bad and adding good, you eventually hit steady state and then employee the best 10,000 (insert company size) people in the world working for you. Well, that's just not possible. Does it create a performance culture? Yes. Does it really reward your top performers? Yes. Does it keep the underachievers moving? Yes. Does it negatively impact morale for people who know they will never be in the top 20%? Yes. Do you need that middle 50% to get the work done? Yes. So, there is good and bad. It works for GE. It doesn't mean it will work for your company or that it will be willing to leave with the negative aspects of the system.

vinnie2k's picture

Forced ranking might work as a purging system for a few years because the difference in performance between a 1 and a 5 can be initially measured in miles.

After those few initial years, the difference will be increasingly hard to make, and the rankings will be more and more subjective. Not only does this promote competition within teams (which is NOT good), but it also encourages brown-nosing and favoritism.
Also, some employees who were 3s a couple of years ago are now looking behind them because the pink slip is getting closer and closer. This will lead to information retention, less knowledge sharing, low morale, crappy working environments.

Saying that forced ranking is immoral might be true, but I really think it kills business performance.

The problem is that we, managers, bring this upon ourselves because we lack the courage to make more and better people decisions. We only get what we deserve, until we do a better job of managing our people.

Mark's picture

I have clients that have been doing it for 10 years and have found it overwhelmingly positive.

It's certainly not immoral: [i]please[/i]. If it is, then every underperforming employee is immoral.

It works, and needs care when implemented.

Mark

zowkey's picture

Interesting discussion. I don't have a fixed opinion either way but I'd like to push the discussion a bit further.

Are the figures for hiring and firing available for GE over the years? It would be interesting to see if they stick rigidly to the 10% or if it's way off sometimes.

Also the 10% figure works well as a soundbite but where did it come from? Why not 5% or 17.3% and so on. Has this 10% figure been determined rationally as a output from say some serious socio-economic analysis? If not then I would be concerned that it was just a nice round number that was handy for making the 'mice run round the wheel' a little harder.

And further to the comments of a previous contributor it's true that for EU based companies that an explicit policy of firing the bottom 10% would be illegal. Particularly in France where workers effectively have security of tenure.

I suspect our individual cultural contexts have a strong bearing on our views of GEs policies. Mind you, can anyone imagine, for instance, global phenomenon Google firing the bottom performing 10% of employees?

As managers we've all seen star performers one year become under performers the next. Should they be fired that year? I think not. With the right approach they can be turned around. I feel a personal responsibility to improve under-performing staff. If after our best efforts they don't match up then it's time to push them down the disciplinary path and perhaps ultimately to company exit.

Finally, recruitment is expensive so being forced to hire new staff seems illogical when improvement programmes are less costly.

To arbitrarily cull 10% of the workforce seems heavy handed, unscientific and anti-social.

But I am open to other opinions!

Regards,
John

bflynn's picture

[quote="zowkey"]As managers we've all seen star performers one year become under performers the next. Should they be fired that year? I think not.

....

To arbitrarily cull 10% of the workforce seems heavy handed, unscientific and anti-social.[/quote]

I prefer the term "brutal", but your description mostly works as well. I would argue that unscientific does not apply. Culling the under-performers is essentially Darwin's "survival of the fittest", a well recognized scientific theory.

Should they be fired? In the work of forced rankings, there isn't a "should". If they slacked up and dropped to the lowest 10%, then the decision is already made. They get cut.

Brian

bflynn's picture

[quote="vinnie2k"]Saying that forced ranking is immoral might be true, but I really think it kills business performance.[/quote]

The performance aspect of forced rankings is well known to increase the productivity of the business. It is very effective and very good for the business. However, the system is detrimental to the life of the employee. I cannot fathom why an employee would remain with such a company, other than from ignorance of anything better or a sense of being trapped.

Morality is a subjective issue. There are aspects of forced rankings that cause harm and pain to employees and their families. But those same aspects also create superior value to shareholders. Depending on how much of each you choose to focus on, forced rankings can appear to be a miracle of efficiency or a low grade form of coercion.

Ultimately, you have to allow that it is a voluntary system on both sides. If the employee chooses it for any reason, then they accept the good and bad that comes from the system.

Brian

WillDuke's picture

I'm not sure I agree that it's bad for employees. It's bad for the 10%. But if you're a top performer, don't you feel as though you're the only one pulling the cart? Shed the dead weight and get your good employees some help!

mpolino's picture

I suspect that some of the angst expressed here around 20-70-10 is because we've all experienced horrible review environments. We'd all hate to end up in the bottom 10 because our boss was the pointy haired guy from Dilbert. And we've all met someone like that.

I think that most Manager-Tools listeners and posters would not be anywhere near the bottom 10. If you're interested enough to pay attention here, you'll apply some part of this and get better. Willingness to learn is often enough to stay out of the bottom 10%.

Mark Polino

rthibode's picture

I strongly disagree with firing 10% of your workforce each year. In a 100-person organization, you need to fire 10 people per year and hire 10 new ones. The 90 old-timers remaining know that next year 10 more people have to go -- it's one of them or it's one of the new hires. In my opinion, this provides too much incentive for people to sabotage each other's work, rather than working cooperatively for common goals.

If 10% of your workforce needs firing, then fire them. Heck, if 50% need firing, fire them. But if your employees are performing well in the jobs they were hired to do, then fulfil your side of the contract and keep paying them.

I don't work in a for-profit organization. Your mileage may vary.

zowkey's picture

It is very interesting to hear the different opinions but there's very little hard evidence about the effectiveness or otherwise of the discussed processes. Just saying it's a 'scientifically proven fact' doesn't make it so.

Darwin was previously mentioned (something of an out of context quote perhaps more attributable to Herbert Spencer but that's another story). Darwin did however say: "It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change."

Which makes a lot of sense when you think of IBM in the 80s for instance.

Anyway, from my distant European perspective the rationality of arbitrarily culling 10% of the workforce as a performance management ethos is untenable.

But that's just the way we work here. It's interesting to hear how you guys work.

John

terrih's picture

In case anyone's interested, Jack Welch has a podcast and one of the episodes is titled "The Case for 20-70-10." I don't want to try to summarize what he said, I think it's better to go listen to it.

I think partly it boils down to not doing it simplistically... and also, he said it should never be a surprise to someone that they're in the bottom 10%. (Mark & Mike would certainly agree with that!) Some people will respond to the feedback and pull themselves out of the bottom. So in that respect, you could say it's like tough love. :)

But I don't pretend to understand 20-70-10 thoroughly, so I'll stop there. The title of the podcast is "BusinessWeek - The Welch Way."

Terri

zowkey's picture

Terri that's excellent. Found it easily enough: http://www.businessweek.com/mediacenter/podcasts/welchway/welchway_09_25...

Emphasis on communication in performance management and keeping staff informed about their preformance so there are no surprises come final evaluation.

Interestingly he said if you let them know they're in the bottom 10% "you rarely have to fire them".

John

cwatine's picture

Thanks for that. The Podcast clarifies the issue.

I find it absolutely sane that the persons who are poor performers are informed (feedback) about the situation and aware if the fact they will be fired if there is no change. I think firing them without notice would be unethical because it would not let them a chance.

Still, what is for me unacceptable is to fix the number of the fired people[u] in advance[/u]. And it is not legal in France : you cannot base your personel policy on the fact that 10% of people will be fired [u]in any case[/u]. You may do it without saying it of course ...

suedavis's picture

[quote="terrih"]it should never be a surprise to someone that they're in the bottom 10%[/quote]

I'd go a step farther and offer that people shouldn't be surprised by their annual reviews at all. Surprise == not enough feedback....

WillDuke's picture

Speaking of Jack Welch...

Is it just me, or does he come off pompous to other people as well? I had a hard time getting through his podcast. There's a line between confident and arrogant.

Is the info good enough that I need to give it another try?

terrih's picture

Yes, I'd say give it another try. :)

tomdoepker's picture

Nothing beats hearing him explain it himself on the audiobook version of "Winning". (A great choice, to second AManagerTool's vote for it under "Favorite Books")

Jack comes across as aggressive and pragmatic, which it seems safe to assume is the truth.

corinag's picture

I've been listening to his podcast for a few months now, and I don't find that much value in it. It's interesting, but its usefulness for my managerial dilemmas is limited.

On to the 20-70-10. I'm not adverse to a system where poor performers, who've had every chance and help to improve, but didn't are fired. But i think that as a general tool, the system has several conceptual flaws:
- the bottom 10% may not be poor performers at all, just not as good as the other 90%
- the "poor" and "average" performers may improve over the year, and generate better results, and still be ranked similarly, because other have improved as well.
- being "average" is not motivating. Who want to struggle and improve and agonize over doing better when at the end of the year, he/she's still average, and there is no recognition given to his or her additional efforts?

I also believe that a forced-ranking assumes all people are similar, and their conditions are constant over the years of employment.

For example: I know that the company is not bound to care that somebody's husband died, or is going through a divorce, but these things are human and affect performance, so maybe for a two-three month period an average person performs slightly off, and find his or herself in the bottom 10% without being an actual poor performer (ill-suited, untaught or whatever).

Or: people without family responsibilities (care for an elderly parent, child, spouse etc.) have more time to invest in their professional growth, whether by reading or further study, or volunteering. Let's say that makes them 120% performers, or 150% performers. Thus that mean that those that perform 100% are average?

JoeFuture's picture

Not to sound too blunt, but in my experience, most company's [i]don't [/i] care about your personal life. At the end of the day, they have a business to run and customers and stockholders to answer to. To make it worse for you, they probably have a line of people just waiting to do your job, and chances are, they'd find someone without that "life baggage" (as a manager of mine once called it). It's not fair, and it sucks, but it's real and it happens every day.

I believe 20/70/10 can be implemented well, IF you have a culture of feedback, development, and accountability. Without these 3 pieces, then your average in the 70% range won't have any incentive to grow, and chances are they'll just get upset that they're not growing in their careers and even worse, will probably only be motivated to do the minimal amount of work necessary to stay just under the radar.

You also need strong differentiation in rewards within your 70% bucket. Meaning, find your folks closer to the top 20% and reward them much better than the folks nearer to the bottom 10%. Otherwise, you're just encouraging 70% of your workforce to be "average".

stephenbooth_uk's picture

[quote="JohnGMacAskill"]The UK has EU based labour laws, but this does not stop you letting go poor performers if done correctly.[/quote]

The key phrase being 'if done correctly'. If you want to sack someone in the UK then you have to show that there is an actual reason for doing so, that this reason was reasonable, that they were made aware of this before hand and given opportunity to mitigate or remediate the situation before dismissal. The only time you can dismiss someone without giving them a chance to improve is if they have assaulted someone at work or were convicted of a criminal offense incompatible with their job (e.g. an accountant is convicted of fraud or they work in a school and have just been found guilty of child abuse). Even then there would have to be a hearing at which they could mount a defense (e.g. in the case of assaulting someone at work, that the person they were accused of assaulting had in fact been assaulting them and they were just trying to defend themselves).

I'm not aware of it ever being tested at tribunal but doubt that a blanket "We'll sack the bottom 10%" would be considered lawful. I'll see what I can find out.

Stephen

cwatine's picture

[quote="stephenbooth_uk"]
I'm not aware of it ever being tested at tribunal but doubt that a blanket "We'll sack the bottom 10%" would be considered lawful. I'll see what I can find out.
[/quote]

In France, you can't base your HR policy on this assumption. Impossible.
Of course, you can do it without saying it ... :(

corinag's picture

Joe, I quite agree that the company is not interested in your life. I also agree that poor performers are not desirable for a company's future, and should be replaced with people who perform better.

My concern is that forced ranking doesn't actually identify poor performers, it just highlights those that do less well than others. The comparison may actually make you keep people in the 70% who are actually not up to scratch , but are better than some other 10%. Or viceversa, people who are performing well, but not as well as the other 90%.

A second concern is the lack of flexibility in the system, which may be harmful for the company: you may have somebody's who's a 70% usually, who falls in the bottom 10% due to an unforeseen, one-off personal circumstance. I argue that forcing that person out may be counterproductive to the company: the person probably will recover, while hiring and training somebody new from the outside will take longer and cost more than keeping the old employee on through his personal crises.

I do believe however that any system is better with feedback, and I think your point about differentiating rewards within the 70% is crucial.[/quote]

JoeFuture's picture

These days (at least in the USA), I would think any employment terminations would have to be based on a record of poor performance and consistent, timely, documented feedback. So just because you get the 10%, you shouldn't be guaranteed to be fired. However, that probably indicates a downward trend in performance (or at least not enough of an upward trend relative to your co-workers).

If you have a history of solid performance at a company, and you have a period here and there of lower performance due to a personal situation, you are probably less likely to get fired. That is of course, assuming your manager has documented proof of your contributions over the years and has made their management chain aware of them.

If you're thinking how bad it would feel to be in this situation, just remember how it feels for your directs to be on the receiving end of it. Make sure they're getting a fair shake and plenty of feedback.

terrih's picture

[quote]These days (at least in the USA), I would think any employment terminations would have to be based on a record of poor performance and consistent, timely, documented feedback.[/quote]

Depends on what state you're in. If you're in an "employment-at-will" state, you don't HAVE to give any reason at all. The only recourse the employee has is if they think they can prove some sort of discrimination.

Of course I'm not saying it's a good idea to go about firing people on a whim, and I don't think that's what the law is meant for either. I think it's only meant to allow companies reasonable autonomy in developing their own policies.

I live in an "employment-at-will" state, AND my company has policies about documenting poor performance or breaches of company policy so the employee has a chance to correct course.

So theoretically, I [i]could[/i] up and fire someone... and I [i]could[/i] discover that to be a CLM. :wink:

lionel's picture

Where I work some of the groups do this bottom 10% must receive a poor (2) performance rating. Sadly this usually comes during a period a few weeks prior to the mid-year or annual reviews when the dept gets together and the director/sr. mgr says he does not have enough 2's at which point 2's are assigned.

In this case the individual has zero warning about the poor review (or at most a week or two) and thus can do nothing to improve.

However those given a 2 rating are put on an improvement plan that is reviewed by HR. If the employee meets the requirements of the performance improvement plan then they are not terminated - if they don't then they are terminated and the performance improvement plan documents the reasons.

I've had to give several 2's that (imho) were not warranted and it was not pleasant. In one situation I refused to change the review and I had the O3 notes to back me up (not that it helped reduce the pressure).

JoeFuture's picture

Interesting. I'm curious - has anyone ever recovered from a "2" and gone on to have a long and successful career there? In particular, I'm wondering how much the stigma of getting that rating plays a role in their future performance assessments vs. their [i]actual[/i] performance.

corinag's picture

The situation Lionel's referring to is partly why I have misgivings about the 20-70-10. Perhaps it's just a case of a system that works in a certain company because of its unique culture, but needs a lot more tweaking to be adapted into others.

But at the end of the day, people know what they're signing up to when they join a 20-70-10 company, so I guess they could live with the system. I certainly couldn't.

By the way, in Romania, you couldn't implement such a system even if it were the best in the world. The barriers to firing people are so high that many companies actually thing of them as an impediment to conducting business efficiently.

JoeFuture's picture

I agree - having the "automatic poor" rating for a 10% sounds like a very bad idea. In general, that's probably how most of the situations would work out, but the system should also have flexibility to allow for people who just had a rough patch.

In our system, we have 2 axes to rate people on: performance against their commitments and long term contribution expectation. Having a "rough patch" would be reflected on the former, and the 20/70/10 model applies to the latter. So in theory, you could have a review that says you didn't accomplish your goals this year, but in the long run, we still see you as valuable to the company and think you're in the 70% or even 20% bucket as far as career potential.

corinag's picture

That's a great tweak!

lionel's picture

Of the 2 ratings that I've given, and most that I know about, all succeeded in meeting the requirements of their performance improvement plan and are still working here with only 1 exception who improved enough to stay but then returned to poor work and was let go.

Sadly it can also be personality driven where the rating manager dislikes the individual being rated and gives a poor rating. This happened to me and I was able to overcome it after transferring to a new position in the organization where my new management quickly perceived the inappropriate rating.

I'm also aware of a supervisor who rated everyone that worked for her as a 2 so they would not be able to transfer (she was a poor supervisor and her entire staff disliked her). Within a month all had gone to HR (who supported the supervisor) and within another 2 months three had resigned and another took early retirement. Within a week of this the individuals manager stepped in and she was terminated.

Which proves the point that unless the 20-70-10 process is implemented properly, with adequate training and oversight, and with proper measurement that it will turn into a bog that will destroy morale of both the managers and the staff (as it has here in some areas).

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