Should You Decimate Your Own Company? John Tschohl Discusses Firing Your Employees
This article is a guest post by customer service and business expert John Tschohl. In it, he discusses the controversial idea that a Darwin-style “survival of the fittest” model applied to employees may benefit businesses and lead to increased successes. John Tschohl is a US-based, international business strategist and speaker.
Jack Welch, former chief executive officer at GE, once offered me this wisdom for improving the efficiency of a business: “fire the lowest-performing 10% of the company’s employees every year. The law of averages states that their replacements will be a net increase in quality for the company.” His policy, while in office, was to categorise his employees using a bell curve, splitting them into the top 20%, the 70% normal, unremarkable workers, and the 10% lowest achievers on his staff. Then, every year, that lowest 10% were let go. This may seem like an overly barbaric approach, but let’s look at it from the company’s point of view.
Just how dangerous is it to have a small number incompetent workers?
According to Jack? “You wouldn’t think it’s a big risk. It’s huge.” In my experience, it’s critically important that companies get incompetent or toxic people out of the running well before hiring them. If they manage to slip the net, they have to be reformed, or they have to go. It’s much more tempting to just focus on your corporate superstars – you know the ones, the high achievers, the deliverers of truly excellent results – and it’s more appealing to shine the light on the top performers, the enthusiastic, energetic ones, than it is to focus on winnowing out the low-achievers.
However, studies repeatedly show that a negative customer interaction is a far more powerful thing than a positive one. The reasoning, according to Roy Baumeister, is simply that “bad experiences psychologically outweigh good ones.” This is further backed by research on so-called “bad apples” on teamwork by Felps, Mitchell and Byington, which showed that having a team that contained “deadbeats” (employees who are lazy and don’t try), “downers” (employees who acted with pessimism, obvious insecurity and irritability), or “jerks” (employees who act disrespectfully) could bring the effectiveness of a group down by 30-40%, even if there was just one “bad apple” in the team!
The costs inherent to letting go of a poor employee must be weighed against the potential savings involved – severance pay, interviewing and training, time, productivity and stability. A solid example experienced in my career was the case of my old assistant bookkeeper. My original senior bookkeeper unfortunately died while working for us, after years of association, and she jumped on the newly-open position and told us that he’d trained her so she’d be ready take his place one day. We knew she was a “bad apple”, but we chose not to sacrifice stability, especially as it was a tough time for both the company and the customers.
The results of that mistake were… dramatic. Starting immediately, she spent two years embezzling for us, eventually taking $330,000 from the company that had employed her. She is currently in prison. If we’d let her go and hired someone of proven competency, that would all have been avoided.
Under Jack Welch, General Electric abandoned compulsary ranking more than 10 years ago, but he argues that there is still some corporate backing for the procedures. In an article in the Wall Street Journal he calls it “differentiation” and argues that his ranking system is nowhere near as harsh in practice as people believe it will be, particularly with good channels of communication. At the same time he approves of employee time punch.
In his own words; “yes, I’m well aware that some people call bell-curve differentiation ‘cruel’, and that has always seemed odd to me. Children get graded all the way through school, but when they become adults they suddenly can’t handle it?”
However, smaller businesses may find forced ranking to be too extreme to work for them. Industry leaders are perfectly able to implement it without losing too many staff, but small businesses have different needs and fear different dangers. Let me assure you, though; solid policies work regardless of the scale of the business, so long as you communicate them well.
- Every employee should get the chance to better themselves and work to your expectations
- Terminating unpleasant employees is the easiest thing in the world
- Letting an employee go for nothing more than underperformance is more difficult
- However, sometimes you have no other choice if you want to continue promoting success
- Keeping employees on the books who constantly fail is a disservice to them, yourself, and your customers
Today, General Electrics makes an annual investment of $1 billion in training programmes, educational efforts and development programmes.
“General Electrics has evolved to better relate to today’s economy, today’s employees, and today’s corporate culture – kudos from me for their ability to adapt and thrive” — John Tschohl
John Tschohl is described by the Times as a “custoemr service guru”. He is the founder of the Service Quality Institute and has dedicated his career to improving company customer service and providing great advice to businesses.