The Welch way? Or the Berry way?

John Berry

OPM Director John Berry gave an interesting speech this afternoon to the Human Capital Management Federal conference in Vienna, Va., part of which focused on performance accountability. Berry said he’s starting to look at what “sticking points” are keeping the government from disciplining and firing poor performers. But while Berry made it clear slackers must be held to account, he also said he doesn’t want the government to go overboard:

I am not an advocate of the GE model where you’ve got to fire 10 percent of the workforce a year. I wouldn’t want to work in a company like that, and I sure as heck wouldn’t want to lead it.

Berry was referring to former General Electric CEO Jack Welch, who explained his philosophy on his website, The Welch Way, under the headline “Cruel and Darwinian? Try fair and effective.”

Look, companies win when their managers make a clear and meaningful distinction between top and bottom performing businesses and people, when they cultivate the strong and cull out the weak. Companies suffer when every business and person is treated equally and bets are sprinkled all around like rain on the ocean. […]

Now let’s talk about the more controversial topic, differentiation among people. It’s a process that requires managers to assess their employees and separate them into three categories in terms of performance: top 20 percent, middle 70, and bottom 10. Then – and this is key – it requires managers to act on that distinction. I emphasize the word “act” because all managers naturally differentiate – in their heads. But very few make it real.

When people differentiation is real, the top 20 percent of employees are showered with bonuses, stock options, praise, love, training, and a variety of rewards to their pocketbooks and souls. There can be no mistaking the “stars” at a company that differentiates. They are the best and are treated that way.

The middle 70 percent are managed differently. This group of people is enormously valuable to any company; you simply cannot function without their skills, energy, and commitment. After all, they are the majority of your employees. And that’s the major challenge, and risk, in 20-70-10 – keeping the “middle 70” engaged and motivated. […]

As for the bottom 10 percent in differentiation, there is no sugarcoating this – they have to go. That’s more easily said than done, of course. It’s awful to “fire” people – I even hate that word. But if you have a candid organization with clear performance expectations and a performance evaluation process – a big IF, obviously, but that should be everyone’s goal – then people in the bottom 10 percent generally know who they are. When you tell them, they usually leave before you ask them to. No one wants to be in an organization where they aren’t wanted. One of the best things about differentiation is that people in the bottom 10 percent of organizations very often go on to successful careers at companies and in pursuits where they truly belong and where they can excel.

That’s two very different philosophies on display. What do you think? Would Welch’s approach work in your office? Or would it just create a dog-eat-dog environment, where one employee sandbags another to stay out of that bottom 10 percent and save his own job? Or are the people who can’t hack it so untouchable that it’ll take such drastic measures to get results? Sound off below.