Promoting and Firing Policy - PowerPoint Presentation

Slide1

Promoting and Firing Policy

Team B2Slide2

Contents

Introduction

Names

Method

Ranking Curves

Companies

Benefits

Deming’s System of Profound Knowledge

Deming’s 14 points VS ‘Rank-and-Yank’

General Critique

Conclusion

ReferencesSlide3

General Electric Ranking Method

Pioneered by Jack Welch in 1990s.

It

i

s described as a ‘

major differentiation tool

’ to evaluate performance and

promotability

.

It is an annual process ranking employees according to a

20/70/10

rule.Slide4

“20/70/10 rule”

This method is known with different names:

Forced Distribution Rating System (FDRS)

Vitality Curve

Differentiation

‘Rank-and-yank’

Top GradingSlide5

Method

The system is based on the premise that an organization has to

identify

its

best and worst employees and reward the top

ones with development opportunities and bonuses, whereas

encourages the worst performers to leave

(Johnson, 2004).

Less effective and capable people can be

replaced by new

and more capable employees who will

ameliorate

the overall

performance

of the workforce (Community Banker, 2005).Slide6

Ranking Curves

It ranks employees according to a curve: 20% stars, 70% acceptable performers, 10% non-performers (

Sedam

, 2005).

Rewards

top 20%

in a way that

is both

personally and

financially

satisfactory, and develops the 70%

with training and

coaching, whereas it eliminates bottom performers (

Welch, J. and Welch, S., 2006)

.Slide7

CompaniesSlide8

Benefits GE gained

Set apart the very best from the least effective

Promote the effectiveness of the organization

Facilitate succession planning, pipeline building and leadership development

28x increase in earnings and a 5x increase in revenue at GE between 1981 and 2001.

(GE Capital Solutions)

Slide9

Deming’s System of Profound Knowledge

Appreciation of the System

Knowledge about Variation

Theory of Knowledge

PsychologySlide10

Appreciation of the system

Talented team members within the company

, thus results in better performances

Increase the average quality of workforce

Motivate employees to work harder

Cases Against

Rank-and-yank is weakening the overall organization's system

Discourage teamwork by encourage competition within the organization

Cases ForSlide11

Knowledge about Variation

Cases For

It can be seen that special cause variation (poor performance) is being identified and eliminated from the process

Leads to opportunity for learning which in turn leads to improvement in workforce’s performances

Cases Against

Not all people perform in the same way

Performance might be improved

after ranking

The recorded values will not be unchanging over time. They will differ and vary.

It’s no individual’s fault that targets weren’t being achieved; it was the system by which they were trying to achieve it

Slide12

Theory of Knowledge

Improvement requires change

Get rid of 10% lower-performers so better talent can be brought in

Encourage winning and doing good work

Cases Against

Force managers to push out perfectly good employees

Not value teamwork and co-operation

Newly trained employees might be ranked at the bottom 10%

Cases ForSlide13

Psychology

Cases For

People can get motivated and improve their performance

A self-fulfilling prophecy where people behave in a way consistent to how we expect them to behave

Cases Against

Considered as a cruel approach

Performance relates to what really motivates people

Respecting the rights of people to obtain joy in work and joy in learning

Discourages the development of strong relationship between employees

Turned into a more political system

False ranking (subjective, bias, favoritism)

Slide14

Deming’s 14 Points VS Rank-and-Yank

Institute training on the job

: Employees ought to be given more flexibility and training to improve their skills, as opposed to being fired should

their

performance falls in the lowest 10th

percentile.

Institute leadership

:

Management's

job is NOT to supervise/

evaluate/fire

but to institute leadership, whereby focus on the outcome is shifted to focus

on understanding

and unlocking people's motivation

instead.

Drive out fear

: Employees fearing that they

might not

be ranked at the average 70% or top 20% may

prevent

them

from working together effectively.Eliminate slogans, exhortations, and targets for the workforce

:

Most poor productivity is caused by the system, and hence, beyond the power of the workers to improve. Framing their performance upon their self-portrait can insult the intelligence of the workers.Slide15

General Critique

Managers are not qualified to rank employees in the first place (

Sedam

, 2005)

This method might inflate evaluation in fear of losing team members (Cutler, 2006)

It should be implemented after a stable evaluating process within the organization

The 16% improvement would fall to only 2% after 6 years

It should be deployed in a short-term period with a maximum of 3 years prospect

There are other methods for

managing performance

and evaluating peopleSlide16

Conclusion

Since the 'differentiation' approach yields diminishing return over the years, its

unsustainability

can result in companies

falling behind in terms of creativity and innovation

. Workers are discouraged to generate new ideas and try new things because they risk some unsuccessful trials (seen as poor performance) that eventually get them fired (Hughes &

Halsal

2010).

SoPK

states that most

poor productivity is caused by the system

. Hence, eliminating the employees does not necessary help eliminating the poor performance. As a matter of fact, an employee may be the scapegoat of the poor system of the company, and if that employee is fired,

the company risks losing talent

to its competitor. Slide17

Conclusion

In short, despite proofs from GE’s benefits of the 'differentiation' approach, in the long-run if a company thrives to be sustainably competitive, it should

promote learning

, eliminate fear from the workforce so employees can actually start concentrating on real improvements, real innovation, sharing of creative ideas; all of which will help

retaining talents

, reducing costs in training new staff, and possibly lead to

higher job satisfaction

.

Alternative evaluation

methods may include self-assessment, peers-to-peers, etc...

SoPK

also advocates that performance improvement may be better obtained through a strong program of

education and self-improvement

.Slide18

References

Adrian H.

& David N.

H,

(2002): Comparison of the

14 deadly

diseases and the business excellence model, Total Quality Management,

13:2,

255-263

Anonymous, (2005a).

'Rank and Yank' Systems May Improve Workforce Performance, Study Finds

, Community Banker, 14, 4, p.64

.

Anonymous, (2005b).

'Rank and yank' benefits work force

, Industrial Engineer, 37, 4, p.23.

Cost of Firing: Why Employers are Reluctant to Fire Problem Employees, [Online]. URL:

http://www.peo7.com/newsletter/newsletter9Issue.htm

(Retrieved 4

th

Feb 2012).Cutler, G. (2006).

Tom Tries "Rank-and-Yank" Appraisal

, Research Technology Management, 49, 2. p. 58-59.

Employee Ranking Systems : Rank and Yank, [Online]. URL:

http://performance-appraisals.org/appraisal-library/Employee_Ranking_Systems/Rank_and_Yank/more2.html

(Retrieved 4

th

Feb 2012) .

Johnson, G., (2004). Forced Ranking: The Good, The Bad, And The ALTERNATIVE, Training, 41, 5, p. 24-34.Slide19

Kwoh

, L.,

'Rank and Yank' Retains Vocal Fans’,

The Wall Street Journal

[Online]. URL:

http://online.wsj.com/article/SB10001424052970203363504577186970064375222.html

(Retrieved 3

rd

Feb 2012).

MacLennan, A.,

Forced Ranking Time to dismiss this underperformer?

, [Online]. URL: https://www.strategy-execution.co.uk/sites/default/files/articles/forced_ranking.pdf

(Retrieved 4

th

Feb 2012).

PRISM Consultancy International, (2001-2005). Dr W. Edwards Deming’s System of Profound Knowledge.

Podia Consulting LLC,

Forced Ranking: The Controversy Continues

, [Online]. URL:

http://podiaconsulting.com/pdfs/forced_ranking_the_controversy_continues.pdf

(Retrieved 3

rd

Feb 2012).

Sedam

, S., (2005).

Rank and Yank

, Professional Builder, 70, 6, p.33-34

The Organisation as an Organism, [Online]. URL:

http://www.e2consulting.co.uk/document/The+Organisation+as+an+Organism

(Retrieved 3

rd

Feb 2012).

Vitality

curve, GE Capital

Solutions, [Online]. URL:

http

://

www.cefcorp.com/commequip/productsandservices/acfc/VitalityCurve.asp

(Retrieved 4

th

Feb 2012).

Welch, J. and Welch, S., (2 Oct, 2006).

The Case For 20-70-10

, Bloomberg

Businessweek

[Online]. URL:

http://performance-appraisals.org/cgi-bin/links/jump.cgi?ID=10613

(Retrieved 4

th

Feb 2012).Slide20

Thank you!

Q & A