In an interview with Jack & Suzy Welch, the great (greatest) manager argues that his policy of sacking the bottom 10% of his company each year was a good thing because it allowed the sacked employees to go wherever they could do better.
Further, he argues that because the feedback was continuous at GE, it wasn’t as if the sacked employee would come to know one fine morning that he was jobless. He was given plenty f opportunity to shape up before he was declared as hopeless. To put it differently, GE and the employee tried hard to work things out before GE decided that they were incompatible.
On the face of it, Welch is most convincing, though Pfeffer has argued, equally convincingly, against the policy (in general, not specifically at GE).
However, may we ask two questions, both concerned with cut-offs? Why 10%? And why one year?
Isn’t a year too long to decide that a company and an employee don’t belong together, more so when the former has the collective wisdom of its managers, codified into policies and criteria, on its side?
Does, say, an undergraduate student need to wait to the end of the year to understand he isn’t learning anything, not because he’s stupid but because he hates the subject. (He may pass the exam, but that’s a separate matter, and a sad reflection on the evaluation system.)
Of course, knowing in advance doesn’t help the student much because he can’t change courses mid-year, and has to waste till the next academic year starts. In GE’s case, however, isn’t the company needlessly prolonging the pain (and messing up the employee’s resume)? Shouldn’t the probationary period (surely they had one), whatever it is, be enough? If it isn’t, shouldn’t it be made so, by packing in enough into it for both parties to get a fair idea of whether there’s hope ahead? Was GE too kind?
Second, why sack 1 in 10? Did the 9th chap take the hint and leave anyway? If he did, what about the 8th chap? And the 7th, and so on? How were border-line cases dealt with? Were they transferred within GE?
By the way, what happened to the top 10%? Did they stay, or leave with the great taskmaster’s certificate getting them fatter paycheques from GE’s competitors?
Finally, did GE keep in touch with the sacked employees to figure out if that logic of releasing people for better things held water. That would have some implications for their recruitment system. If (most of) the sacked-employees went on to better things, it’d imply GE picked winners though it couldn’t always find the correct slots for them; on the other hand, if the sacked employees continued to do badly, one would suspect deeper flaws in the selection processes and criteria.