Why “Rank-and-Yank” Rankles Jack Welch

Posted on Nov 15, 2013 | 3 Comments

Jack Welch wants to set the record straight.

Critics, he says, have it all wrong when they write about the management practice widely—and derisively—referred to as “rank-and-yank.”

That’s the term used to describe how companies supposedly identify their worst performers once a year and then, boom, fire them,” Welch, the former chairman and CEO of General Electric, asserted this week in The Wall Street Journal. “It makes me want to scream. And I know I’m not alone.” (Welch might even want to scream at us here at the Drucker Exchange, for we are among those who have explored this topic and, yes, called it “rank-and-yank.”)

In Welch’s view, everything we know about rank-and-yank is wrong, starting with the name. The real term is “differentiation,” and it isn’t about purges. “It’s about building great teams and great companies through consistency, transparency and candor,” Welch wrote. “It’s about aligning performance with the organization’s mission and values. It’s about making sure that all employees know where they stand.”

And what about the yanking of poor performers? “The bottom 10% is never surprised when the conversation sometimes turns, after a year of candid appraisals, to moving on,” Welch said. “No, they are not summarily shown the door. When differentiation is done right, their manager helps them find their next job with compassion and respect.”

None of that is demoralizing or inhumane, Welch maintained. What’s inhumane is failing to make your standards and values clear and transparent and letting people know where they stand. Welch noted that when he speaks to audiences, he asks how many of them know where they stand in their organization. “Typically, no more than 10% raise their hands,” Welch reported. “That’s criminal! As a manager, you owe candor to your people. They must not be guessing about what the organization thinks of them.”

Peter Drucker, an admirer of Welch, would have agreed. In his view, steady assessment was at the heart of good management. “Insistence on high goals and high performance requires that a man’s ability both to set goals and attain them be systematically appraised,” he wrote in The Practice of Management. “Day after day a manager makes decisions based on his appraisal of a man and his performance.”

Like Welch, Drucker stressed the need for consistency and candor in such appraisals: “Judgment always requires a definite standard. To judge means to apply a set of values; and value judgments without clear, sharp and public standards are irrational and arbitrary.”

Drucker was also firm about gently showing poor performers the door, noting, in Management: Tasks, Responsibilities, Practices, “One does not do people a service by leaving them in a job they are not equal to.”

Finally, Drucker would have echoed Welch’s dismay over the low percentage of current workers with any sense of their organizational standing. “We know that most people want to know where they stand,” Drucker wrote in a 1969 essay that appears in Technology, Management and Society. “One of the most common complaints of employees in organizations is, indeed, that they are not being appraised and are not being told whether they do well or poorly.”

What’s your experience? Do companies do a good job conveying to employees where they stand?

3 Comments

  1. Mike Grayson
    November 16, 2013

    Most companies do a poor job of ranking employees because they do a poor job of implementing Management by Objectives (MBO), an idea introduced by Drucker.

    The problem is that there is a significant difference between two systems of management, Management by Objectives (MBO – Drucker) and Total Quality Management (TQM – Deming). MBO sets standards for the individual, therefore making ranking possible. TQM focuses on collective effort, making individual ranking more difficult.

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  2. Dr. Richard B. Mann, PhD
    November 16, 2013

    The Welch/Drucker approach is the right way, in my opinion. I have hired and fired more than a few employees. Hiring is hard but firing is harder. It is seldom that the employee does not know the job is not for him or her. When they are called in for an evaluation they know what to expect. I ask what is the best and worst part of the tasks they do, and what they like most and least, and how can those things be made better. I review critical areas that were note when they were hired. I emphasize their best skills and where they might be a better fit. I help them decide where their potential is and how to find a job where they could use those skill to their best advantage. There is much more to how I do this and in each case it is very different. However, in the end they decide they need to find another job. I never have to say, “You are fired” (the Trump approach is the worst way to fire).

    If hiring is done right, there is less chance of having to fire someone. Some people are very good at selling themselves in an interview, but after being hired they are not up to the job. Resumes, past experience, and some psychological screening, are all helpful. References, not so much. For particular jobs the Decision Style Inventory (DSI), and my, Judging/Perception Word-Choice matching, along with an in-depth interview can be very helpful when made part of the entire hiring process (the DSI & J/P are available on my web site).

    Some people lie about their experiences, education, etc. It is more common today as cheating has become accepted in some fields such as education and politics. In business when we find out if someone lied, they are fired. In Politics it seems lying is how it is done, and no one gets fired, sometimes they are re-elected. Moreover, corruption is often overlooked. Some businesses are considered “Too Big to Fail.” When the Moral fiber of a country is weak and getting weaker, what can be expected in the future?

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  3. Daniel Szpiro
    December 3, 2013

    Even before I joined the Jack Welch Management Institute, I had read articles in the business press ascribing a process referred to as “rank and yank” to Jack. However, anyone who has actually read what Jack has written on the performance management system he calls “differentiation” will find that it bears little resemblance to the arbitrary, mechanical process the press has dubbed “rank and yank”. The principle of “differentiation” states that organizations should set clear and appropriate goals for its employees, provide candid feedback to employees who have not met these expectations, and provide an opportunity to turn things around. What’s wrong with that?

    In many articles, once the straw man of “rank and yank” is created by the author, the question is posed about the fate of the great employees who are exceeding expectations but simultaneously find themselves at the bottom end of the distribution of all employees’ performance. This should strike everyone as much more of a theoretical concern than a practical matter. Take a step back and look at what these authors are describing: an environment where virtually everybody exceeds expectations. I cannot imagine, nor have I observed, any organization that works hard to set appropriate stretch targets for its employees where the vast majority of these employees routinely exceed expectations.

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