December 04, 2008

Promotion and Firing Policy

This week we have had all our presentation done already, and Qian and I were responsible for the topic "Promotion and Firing Policy".

GE has a vitality curve, which differentiate people into three categories and our presentation is to find out the logic and validity behind the vitality curve in light of Deming's system of profound knowledge and discuss the likely impact on employees.

For people who don't understand what the Vitality Curve is, it basically differentiates people into three categories, the top 20% are A players, the Middle 70% are B players and the Bottom 10% are C players. For the A players, they will get promotions, bonuses etc, whereas the C players have to leave the company.

There are a lot of critics about false ranking, first, it can be subjective, and might be bias. Second it just simply cannot be fair for the C players, because they might not have done anything wrong, but because they are in the lowest 10%, so they lose their jobs.

Deming's philosophy is about fairness, no reward for the winners and no penalty for the under performers, since there are variations in the system. today, for those that perform well it doesn't mean they will perform well next time, and the same for those that under-perform, if they didn't perform well today it might not be their fault, but some externalities, such as the machinery,  wrong methods etc...

After the other team presented their understanding about false ranking, I thought I should raise the question that if false ranking has so many critics, why are there still so many companies using it? for example, GE, and why it seems the vitality curve works well in GE.  I think the question I was asking was also what we are required to acheive from the mini project that is to find out the "Logics and Validity".

However, I think I was misunderstood by others. I never said GE's success was build on the vitality curve. What I am saying is the Vitality Curve is a part of the organisation and as a successful company, GE seems to works well with it. All I want to ask is why?

I suppose in my own presentation, I answered myself, that is using Jack Welch's words, "being transparent and being honest" and also in conjunction with a performance system including the 360 feedback and Session C meeting, etc

Deming will be against the idea of the Vitality Curve, since it not only punishes the low performers, but also creates fear in the working environment. there are also examples showing that false use of the Vitality Curve can lead to disastrous results. However, can I say GE is a successful example that is using it? is it Valid? I don't work for GE, so I don't really know.

There will definitely be more competition than cooperation, but on the other hand does it encourage winning and doing a good job?

The society we are living in is competitive, right? if not, why do we always talk about "improving competitiveness" for a company?

If everything is fair, why do we need to work hard to get at least a 2:1 degree so we can get a good job? why is there high un employment?

If ranking systems are so bad,  and ranking people is one of Deming's 7 deadly diseases, why are so many companies still using it?

I am just simply asking questions, doesn't mean that I am a big fan of false ranking, because I am not, I know it is unfair and all the other shortcomings, I have done my research.

- 2 comments by 2 or more people Not publicly viewable

  1. Yes Mei , I think you bring up an interesting debate here. Is the competition from false ranking ultimately beneficial or destructive for a company. In my opinion, there is not a simple yes/no answer. Both sides of the argument seems very strong. It may depend on how each method is managed i think…

    A. One thinks that competition leads to better performance. And if the system of competition (as in GE’s case) is CLEAR and FAIR (in the sense no one is treated favourably than others), then the employee themselves shouldn’t feel bad about it because by working in GE they would have already accepted that this is the only way to survive in the company.

    The draw back with this method is that, if some other company (not GE) used this method but not everyone in the company agree to the system, then it will create a lot of resistance and is destructive to worker’s morale

    B. But the other school of thought argues that better performance doesn’t have to come from competition, it can come from better coaching, better empowerment, better training and so on. What it says is that ultimately there is a natural range in performance variation , so it makes no sense to fire the bottom 10% because maybe in the next PA they may have a chance become the top 10%. What we should do to the bottom 10% is to give them extra support and if at the end of that they are still the bottom 10%, we will find them another job where they can perform better (essentially this is Deming’s idea of managing people i think…).

    Although the second argument makes good sense. Plus it appeals to our own beliefs that ‘all men are equal’ + ‘certain things are beyond our own control’. I think the reason many companies choose option A because the seoncd option requires a lot more management resource to first make sure people are already performing at their best yet is still under performing by company standards. Second to find people another job is harder to do then it sounds. It is probably ‘easier’ and ‘better’ in the performance point of view to find talent that will naturally perform without further management intervention.

    05 Dec 2008, 16:58

  2. Paul Roberts

    A good post Mei. The questions are more important than the answers perhaps because what appears to suit one organization may not suit another. Also, what one organization appears to do may not be the whole story i.e. was GE successful despite and not because of its forced ranking policy? I often find it useful to apply business practices to sport and vice versa. If you created a team (for football, hockey, basketball etc.) out of world class players and then forced them to compete with each other for a place on the team every year, would you be likely to create a world class team? What would the effect of competition be on their ability to work as a team?
    So, if you wish to build an organization that values teamwork, co-operation and collaboration, we have to think about what we value and recognize as effective behaviours and make sure that our public recognition of people and teams is congruent with those values.

    13 May 2009, 15:25

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