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Thursday, January 5, 2012

Differentiation “Vitality Curve”


Jack Welch, the former CEO of GE, has this great idea called the Differentiation Vitality Curve. Basically, a company is made up of the top 20% who are A players. Then, there is a middle 70%, which are the B players. Finally, the bottom 10% is made up of your C players and they have to go. In his book, jack Straight from The Gut, Jack Welch admits that the first year it isn’t very difficult to find the bottom 10% and get rid of them. The second year is harder. By the third year, managers tell him that they have no C players on their staffs. Jack doesn’t seem to believe this is true.

The problem with all of this is that, once you remove the bottom 10%, some of your B players are now C players by comparison. So, no matter what you do, you will always have some people that rank at the bottom. On a professional football team everyone is supposedly very good at what they do. However, on any given team you will find some people who, compared to the others, would not be as good. They are still great players and any team would do well to have them on their team. Still, they would be the bottom 10%

Wouldn’t it be better if we forgot all about ranking people by A, B, and C? Instead, if an employee isn’t pulling their weight, they have to go. If it means firing all B and C level people, so be it. If it means firing everyone and starting over, then do it. But, if it means that everyone is pulling their own weight, then they should not have to be concerned that they will be fired just because they aren’t at the top of the heap.

In my opinion, this erodes team spirit since everyone is trying to step on one another to keep from being in that bottom 10%.

What is your opinion of this ranking system? Does Jack have a good idea?
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