Differentiation: Pragmatic or Cold-Hearted Management?

I recently uploaded some books on CD onto my iPod. In listening to Jack Welch’s Winning, he discusses the concept of differentiation where he advocates that organizations segment their people, business lines and products into three groups and that each should be treated differently:

• Top 20%: should be highly praised and showered with rewards for their fine accomplishments
• Middle 70%: are incredibly valuable to the organization and should be trained, kept engaged and motivated. The focus should be on moving potential high performers into the Top 20%
• Bottom 10%: should be removed from the organization

In essence, Jack Welch’s concept of differentiation promoted “cultivating the strong and culling the weak.”

The book reminded me the time I was invited to fly down to my client’s headquarters and give a presentation on KnowledgeStaff’s capabilities to their Learning Board. The board was comprised of the various learning leaders throughout their enterprise. The presentation was to be given during the lunch break of their Annual meeting however I was invited to sit in on the morning session.

After the introductions, the head of the Learning Board asked all members to write down the names of the bottom 15% of their organizations. These were individuals who had been involved in professional development conversations throughout the year but had just not risen above the 15% threshold. The names were compiled and it was clear that these employees would soon be seeking new employment.

I was struck by the businesslike tone of the meeting to this point which bordered on ruthlessness.

Each member of the Board was then asked to write down the names of the top 10% of their organizations. The names were gathered and the Board then reviewed all of the current openings throughout the enterprise to see if any of these individuals merited a promotion to one of these positions. In several cases names were matched with the open positions and conversations were scheduled with the employee.

The head of the Learning Board then asked each member to write down the name of any member of their organizations that the company could not afford to lose. Several names were listed and within a matter of about 30 minutes, four new positions were created.

Finally, a discussion began on the succession planning of members of the Board. The discussion included a conversation on the career advancement of several members and who within the organization could possibly fill their shoes. That portion of the meeting concluded and I began my song and dance during lunch which thankfully went very well.

On my flight home I played back the meeting over and over. It was very clear to me that this organization was not ruthless but instead firmly committed to excellence.

I highly recommend Winning. Jack Welch does a very good job of introducing the importance of implementing a solid performance management program where goals and expectation are clearly defined and where ongoing conversations are had to continually evaluate individual and organizational performance.

What do you think? Is differentiation pragmatic or cold-hearted management?