I just completed the audio book Winning by Jack Welch with Suzi Welch. From reading the book it is very easy to see how Mr. Welch invigorated General Electric to become a great company. This book answers a myriad of business questions including HR, management and employee issues.
One of the ideas that really hit home was employee evaluations. Mr. Welch strongly suggests being honest and perhaps brutally honest. He had a 20-70-10 rule for employees. The top 20% should be richly compensated. The middle 70% is the heart of the business and should be cared for and the bottom 10% needs to be replaced. For the bottom 10%, he suggested letting them know they are not making the grade and should look for a better fit, before they need to be fired.
Welch also dislikes the stories about the 30-year employee that always gets good reviews, but when there is a downturn in the economy, is the person to be terminated. By giving employees an honest evaluation of their performance, everyone should know where they stand, so it is not a surprise when headcount must be reduced and someone needs to be terminated.
Another good idea is how to deal with an employee that is doing great on paper, but is a “cancer” to your organization. Maybe no one likes the person, but he or she produces good numbers. That is not enough for a great company. Good results are no excuse for poor behavior.
The last idea I want to highlight is the budgeting process. At G.E. it took many years to change the process. The old method was for managers to argue for the least growth, so they could easily meet their targets and receive their bonuses and managements desire to promote rapid growth. Normally there is a compromise and everyone is happy, but this really limits how a company can grow.
I had a personal experience about bonus systems. Several years ago, one of my clients, a large company, had a bonus system for each department. My company wrote the software to track progress toward each person’s bonus.
One day I was asked to rewrite the bonus system with all new rules. I told them I could do it two ways. The first way was to allow for the old method and new method to be computed and we could report both ways, to show the differences in the system. The second and less expensive way, was to only calculate the new method and not capture the data required to show the old method. The client chose to go the less expensive route.
One year later, management asked if I would re-do the bonus system to allow for the old and new method to both be reported. The previous year, everyone made their bonus, but the company did not improve. That taught me (and them) that a company’s objectives, must be in line with each individuals’ objectives. If not, the individuals’ objectives will win out at the expense of the company.
Winning has many more great ideas that I believe would be beneficial to people new to the business world as well as people that are part of senior management team.
If there is anything I can do to make your company work more efficiently and better, please contact me.