The practice of forced rankings was made popular by Jack Welch (GE) . For GE thi

Question

The practice of forced rankings was made popular by Jack Welch (GE) . For GE this had been a common practice for many years (resulting in firing the employess ranked in bottom 10% each year); more recently, other companies such as Microsoft and Yahoo tried the idea (without much success.. ).

Have a look at the following WSJ article discussing some of the issues associated with forced ranking systems

http://guides.wsj.com/management/recruiting-hiring-and-firing/should-i-rank-my-employees/

What are your thoughts on this practice? Are there contexts in which forced rankings can be a useful tool for increasing employee productivity?

Does it matter whether the employees subjected to the system are salespeople (versus any other admin, technical, etc) type of job?

Explanation / Answer

The higher rank one occupies, the harder it is to change for better/climbing higher. When you become # 1 — by whatever measurement — what’s next? This query is useful for individuals as well as organizations, but in this space, my focus will be on organizations – big, powerful, lumbering organizations.

I didn’t learn about the NUMMI case till a few months ago (from “This American Life”), but immediately recognized several management lessons. NUMMI stands for New United Motor Manufacturing Incorporated; it was a joint venture (JV) between GM and Toyota, back in the early 80s. NUMMI opened in 1984 and closed in 2010. It was a success story as well as a sad failure story. To cope with this degree of fluidity and uncertainty, the strategist needs to return to first principles. We cannot assume that traditional bases of competitive advantage will last. We cannot presume that hard-earned “excellence,” built within the current business model, is the right skill-set for the future. We do not know who our future competitors will be. Indeed the boundaries of the business and the industry cannot be taken for granted. We need to step back and rethink the connection between technology and business strategy. I believe that the general principle is as follows. Two large phenomena, both driven by information technology, are reshaping internal organization, business strategy and the structures of industries. The first is deconstruction of value chains: the break-up of vertically-integrated businesses, as standards and interoperability replace managed interfaces. And the second is polarization of the economies of mass, meaning that in some activities, economies of scale and experience are evaporating, while in others they are intensifying. “Negative” polarization, where economies of scale and experience have weakened, leads to the fragmentation of activities, often to the limiting case of individuals in communities replacing corporations as the principal actors. “Positive” polarization, where they have strengthened, leads to the concentration of activities, often to the limiting cases of utilities, co-ops or monopoly. The combined consequence of these trends is to substitute “horizontal” organization for “vertical,” both within the corporation and across industries. The transposition of the industrial matrix. This does not render the traditional corporation obsolete, but it does often mean that corporations need to redefine their role and reshape their business definitions. They need to establish collaborative relationships with communities, especially user communities, where individuals or small proprietorships are more flexible, better-informed about end-use, or can innovate more cheaply. Conversely they need to establish collaborative relations with other institutions, perhaps competitors, to achieve economies of scale and experience that would otherwise be inaccessible. On both sides, strategy becomes a matter of collaboration as well as competition. Internally corporations need to do much the same thing. Innovation and small-scale experimentation are best done in loose groups where individuals and small teams enjoy a high measure of autonomy. Conversely scale- and experience- sensitive functions need to be centralized across businesses, driving the overall organization to a more functional structure. The internal architecture of the corporation becomes a set of platforms, each supporting activities at smaller scale and with faster cycle times. One platform can be stacked on top of another. And the architecture of an “industry” can be exactly the same, some companies serving as platforms for others, some serving as platforms for end-user communities. The pattern is fractal. These trends are quite general, and account for numerous industry disruptions. But they apply in particular to Big Data. “Big Data” means much more than vastly larger data sets and exotic software. It requires treating data as infrastructure: centralized, secure, massively-scaled, built as a general resource not for any specific end-use. It also requires treating the processes of inference as “super-structure”: iterative, tactical, granular, modular, decentralized. Put the two together internally and you are replacing product- or market-based organization with a functional one. Put the two together externally and you have a fundamental challenge—a disruption—to many traditional business models.

The second strategy is decomposition: solving a large problem by breaking it into many small pieces that can be computed in parallel. This is a rapidly developing branch of statistics: finding new ways to solve in parallel problems that traditionally have been solved sequentially. Such solutions can be calculated, not with a supercomputer, but with racks of cheap, low-performance

Cons: No separation between work and life...and work usually wins out. Worked with the company for almost 2 decades with top level performance ratings for the bulk of my career and was then 'sold' to another company without any protection on long term employment or even current salary as part of a transaction involving over 30k worldwide employees. Company clearly sees its employees as numbers and not humans.

Advice to Senior Management: Care more about the people and less about protocols/hierarchy. Yes, I would recommend this company to a friend. I'm not optimistic about the outlook for this company.

Cons: This is the worst managed company I have ever worked for. None of the smart people I mentioned in "Pros" is in upper management. Although I see quite a few favorable reviews of IBM on GlassDoor, in my experience the only people who think this is a good place to work are those who have never worked anywhere else.

Advice to Senior Management: 1. Focus on creating real value for customers rather than just acquiring new revenue streams. 2. Drop the rah-rah stuff; we are not fooled. True greatness is inversely proportional to the amount of it that comes out of your mouth. 3. Grow up. No, I would not recommend this company to a friend. I'm optimistic about the outlook for this company.

Cons: Read the below for details, but in short, stay away, there are just so many other better companies to work for that will offer you better career opportunities, compensation and a humanizing work environment.

The benefits and compensation are truly average. Every year I have been here they have taken something away from the employees, for example: free coffee, water jugs, pay coffee (yes they took that away), subsidized cafeteria food, team social events, site social events, tennis courts (closed down due to disrepair), employee stock purchasing plan went from 15% deduction to 10%, 401k is not matched but once a year instead of per pay check which for those who don't get it means you can't earn money that you don't have until they pay out at year end...assuming they haven't fired you.

They have had consistent layoffs or selling of technology since 2009 reducing the local site almost 50%. I understand every company has had to adjust in the current economic climate, but match the above with IBM's record Earning Per Share numbers and astronomical revenues and it's a simple formula. Upper management is attempting to meet ludicrous goals at the expense of its employees.

Advice to Senior Management: Stop driving all your company decisions based on short sighted goals around earnings per share. It's an unsustainable model and it's going to kill the company. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.

Cons: IBM is not concerned with any of its contract employees. Workforce reductions and furloughs do little to improve overall morale. The culture at IBM is all about meeting IBM financials with little apparent regard to customer needs. Contract employees are told not to discuss workforce reductions with the customers they support. Why? Those customers would most likely get upset if they knew the level of support they should be getting has been reduced.

Advice to Senior Management: Instead of implementing contractor furloughs, simply rate all contractors and dismiss those contractors that rate the lowest. Eliminating excess management positions, hiring GOOD project managers and eliminating non-performers would improve performance, morale and ultimately improve the margins IBM is so desperate to make. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.

Cons: Salary increases are very slow. They make up for it in term of flex benefits, however if you stay here for long, you will lag the market in terms of pay. You may need to then jump a couple of jobs to get back at market pay. Yes, I would recommend this company to a friend. I'm optimistic about the outlook for this company.

Cons: Cheap, Cheap, Cheap when it comes to buying supplies, or software, or for department celebrations, to the point of folks kicking in their own money to make the event enjoyable. Very old culture. I worked in an area where the over 50 age group was the majority. No stability; they laid off departments in an area, and cut staff to the point of them almost not able to do their work, because they didn't hit the stock price they were looking for. I think folks that started 30 years ago got a good run, but even the old folks say it's not the same anymore. They offshore their internal support, so you have an issue with your local computer you get to call India, and then they dispatch someone locally to come look at it because 9 times out of 10 they don't know how to fix issue or can't because you physically need to fix problem.

Advice to Senior Management: Get back to investing in employees. Happy employees are much more productive and will get you to that stock price and keep the company there much better than cutting every corner on everything. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.

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