Change Implementation Techniques for Creating a Sense of Urgency

Technique 2.59 Staff Vitality Curve

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(differentiating staff and forced ranking)

. This was developed by Jack Welch, ex-CEO of GE. It is based on understanding that employees are an organisation's core competency. It involves

- people facing reality

- differentiating between good and bad performers in your organisation.

. This is based on the top performers contributing significantly more than others. According to Fiona Smith (2009k), the top performers will contribute 60 times more than those ranked as the poor performers. For some organisations it is higher, eg

- Google found a 300 times difference between the top and bottom performers

- for Microsoft the difference was 1,000 times.

. In addition to the formal personnel evaluation, such as 360 degree evaluations, there is an informal, unspoken personal review, ie a review process that involves differentiating people/talent within the organisations by asking management to rank their staff based on performance into 1 of 3 of groups (A's - top 20%, B's - middle 70% and Cs - bottom 10%), ie the 20 ‐ 70 ‐ 10 grid.

Differentiation (Vitality Curve)

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or example, if there are 20 people in the management staff, identify the 4 in the top 20 and the 2 in the bottom 10% - by name, position and performance. The under-performers generally leave the organisation.

. Making these judgments is not easy and not always precise. However, year after year, differentiation raises the bar higher and higher so that the calibre in the organisation increases. It is a dynamic process where no-one is assured of remaining in the top group forever. They have to demonstrate that they deserve to be there.

. Differentiation involves sorting people into As, Bs or Cs based on customer focus, personal energy, energising other people, obtaining competitive edge, execution performance, competency in E-business and 6-Sigma

- the As are filled with passion, committed to making things happen, are open to ideas from anywhere and are able to energise both themselves and others

- the Bs are the heart of an organisation and are critical to its operational success. Bs need to be managed by training, positive feedback and goal setting so that they remain engaged and motivated by realizing that they are an important part of the organisation and have the chance to move upwards in the organisation

- the Cs don't get the job done and procrastinate rather than deliver. They need to be managed out of the organisation as they are usually "square pegs in a round hole". Very often these Cs had successful careers in other organisations and in other pursuits where they truly belong and where they can excel.

. To work properly, the vitality curve must be supported by the appropriate reward system. The appropriate place on the vitality curve determines the reward. For example,

- As should be given rewards 2 to 3 times the size given to Bs,

- Bs should get a solid increase which recognises their contribution. Need to keep the Bs motivated and engaged with training, positive feedback and goal setting so that they have the chance to move upwards

- dealing with the Cs is tough, especially several years into the process after the worst performers have been culled.

. Sometimes a few "stars" and a few "late bloomers" are missed

. Need to be careful of "differentiation abuse". This can be prevented by a transparent, objective performance measurement system which defines expectations, goals and timelines; involves a program of consistent appraisal

Some examples of the type of evaluations done

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Some comments on this "rank and yank" system

. It has been heavily criticised as creating a culture of fear and unproductive competition plus relies on subjective assessment

. It has been found to be effective at clearing out the "deadwood" for up to 3 years; after this it becomes difficult to recruit people who are more effective than those fired

. There is some evidence that forced ranking can result in a 16% productivity improvement for the first couple of years; for the 3rd and 4th years it falls to 6%; by year 10 it falls to zero.

. It absolves management of responsibility as it is a mandated process.

. It helps in a culture where dealing with conflict is avoided

(sources: Jack Welch et al, 2001; Fiona Smith, 2006c; Fiona Smith, 2012a)


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