December 15, 2005

Stack Ranking to 20-70-10

Every so often, when I have time, I plug this site's URL into a variety of search engines to see who is linking here. When I did this today I found an entry from 9to5andOtherwise disagreeing with idea #2 from my recent Business Ideas for Right Now article. This is where I suggest to "Invest in Training Courses for Your Weakest Performers".

The net-net of the feedback was - "Investing in poor performers is like throwing good money after bad." Maybe, maybe not.

This feedback is a reflection of the practice of some business people who would rather fire their weakest performers than break into a sweat to coach them. Others ignore or choke off the supply of development to so called weak contributors to compel them to quit. This is taking me back to when I worked for a certain largest software company in the world. I was a true believer of stack ranking into a 20-70-10 model, which is really what people mean when they talk about A, B and C Performers.

General Electric is the point of origin of stack ranking and 20-70-10. Here's what it means: 20% of your people are top performers (A); 70% are average performers (B); and 10% are poor performers (C). On the surface this seems ok to most people. But the thing about stack ranking is that it's "forced". Everyone has to fit into an A, B or C in 20-70-10 proportions.

For example: suppose you lead a work group comprised of 80 amazing contributors that delivered above and beyond expectations. 8 of them must be force ranked as C Performers. These 8 often receive no raise, and no bonus despite their contributions. Mini Microsoft has a bunch of content on why stack ranking doesn't work . Click here to read Mini's best article on this topic.

For the record let me state:
  1. You need to identify A, B, and C Performers to lead the team and the individuals. Many managers don't even do this simple task:
  2. You've got to give the most difficult projects to the top performers to keep them challenged and busy. Frankly in a lot of companies most top performers are open to taking jobs outside the company. Here's a quote from the Career Journal on this: "Despite conventional wisdom to the contrary, "A" performers also keep an eye out for interesting, new employment opportunities. Indeed, according to HR Alliance, 89% of high performers are always looking for a new or better job, currently looking for such a position or willing to consider another more interesting opportunity. It’s not just the "C" performers who are in the job market."
  3. It is critically important to address and work on performance issues as they come up. Really this can be dealt with much earlier by setting expectations and monitoring. Not just at the annual review time;

Let's return to the topic of training the weakest performers. People don't show up to work every day to screw up. They don't arrive having planned the night before to be incompetent that day. In my experience, people honestly want to make a difference, learn, and add value. So who are the weakest performers?

  • In some companies they may be an average performer stuffed into a C rank at review time;
  • In most organizations the weakest performers are new hires on a learning curve;
  • They are people who are in jobs, thanks to downsizing, where they lack specific skills;
  • They are contributors from other parts of the business on an assignment to gain horizontal experience;
  • But mostly they report to a manager who lacks the skills or desire to assess and develop their people's potential. In a variation some managers bully and set unrealistic expectations for results.

Therefore it seems to me that setting up training courses for the weakest is a good thing. A solid investment towards improving results. It's no substitute for committed and engaged leadership. It's the forced ranking of employees that is dysfuncitonal and the primary cause for dissatisfaction across all levels.

Its time to de-cloak Stack Ranking for what it is...a program that is no longer effective in a world where organizations thrive by aligning with their customers, management, and stakeholders via their staff.

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