Strengths, weaknesses and assumptions in Jack Welch’s framework for differentiating employees
In his book “Winning”, Jack Welch (2005) provides a well-developed framework for managing people in an organization through employee differentiation. The ‘20/70/10 Differentiation’ framework is primarily a way of breaking down employees into three groups based on their performance (Welch, 2005).
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The purpose of the framework is to determine a good of way of rewarding and treating employees. The framework has a number of strengths, but it has some negative aspects because it is based on some assumptions.
Welch believes that every company has only three groups of employees. The first the 20/70/10 framework is effective because it provides managers with a simple but effective way of dealing with employees. It ensures that the company retains its best performers in the first 20% group, which allows it to reduce costs and enhance management (Welch, 2005).
In fact, this group is made up of top managers who have experience and positive attitude towards the company and their work. If not treated well, they are likely to leave the company or work below standards, thus affecting corporate performance. Secondly, this framework allows managers to increase performance by encouraging and motivating employees to rise to the top 20% group.
As employees strive to join the group, they improve their performance, thus improving the corporate performance. Thirdly, it ensures that managers reduce cost by eliminating majority of employees in the bottom 10% group.
Since most of these employees are the individuals with records of poor performance and negative attitudes, they are likely to reduce performance while increasing cost. They must leave the company. Using this framework, the company is able to reduce employee redundancy.
Welch’s framework assumes that all employees, regardless of the nature of a company, industry or economy, can fit into one of the three categories.
Secondly, it assumes that employee performance can only be increased by rewarding and motivation, leaving out other factors such as talents and personal interests. In addition, it assumes that forcing out poor performing employees from a company is the best way of dealing with poor performance.
Welch’s ideas seem to assume that employees in the top 20% group are perfect and must be maintained in the company. This is a bad assumption because this group could include employees who are interested in personal gains rather than corporate gains. Heavy rewards and recognitions given to these employees could create resentment among the lower groups, which could destroy employee-employee relationships.
In addition, it can affect employee-employee and employee-manager communication. In addition, the 10% group might feel threatened because they are not provided with enough time to rectify their mistakes and learn to perform.
Welch’s framework seems to be an effective way of differentiating employees. In fact, I would suggest that companies use employee performance as one of the main criteria for employee categorization.
For instance, companies should analyse employees based on individual performance within a given time such as one year. Employees who perform poorly and do not strive to improve should leave the company. Those who perform well or improve their performance need rewards and appraisal.
Mission, Vision and Values
Using Welch’s ideas, it is evident that missions define the future of a company. To develop mission, the company needs values. Values define the required or appropriate behaviours or set of behaviours that must be followed in order to reach the desired destination.
For instance, positive attitudes, teamwork, proper and effective communication and focus on goals are good examples of behaviours that employees and their leaders should consider (Becker, Huselid & Beaty, 2009).
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Decisions made by great people in the past and proved effective in enhancing performance and growth provides managers with options and models that they should follow to enhance performance. A career of any manager is based on such decisions.
For instance, a decision that improves corporate growth, regardless of its nature or impact, is conserved a noble idea and is likely to prove that the manager will remain relevant in managerial field for a long time.
Becker, B. E., Huselid, M. A., & Beaty, R. W. (2009). Identify strategic positions. Boston, MA: Harvard business press
Welch, J. (2005). Winning. Boston, MA: Harvard business press