Vitality curve
From Wikipedia, the free encyclopedia
A vitality curve is a leadership construct, assigning credit with certain proportions of the production to proportions of a producing population.
For example, there is an often cited "20/80 rule" — the top 20% of criminals commit 80% of the crimes, the top 20% of academics produce 80% of useful results. In some cases, such "20/80" tendencies do emerge, and a curve is a fuller representation.
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[edit] Other names
The following are names given to the implementations of the vitality curve concept.
- forced ranking
- forced distribution
- rank and yank
[edit] Rank-based employment evaluation
The concept of a "vitality curve" has been used to justify the "rank-and-yank" system of performance management, whereby 10% of workers are fired at each evaluation. Jack Welch, former CEO of General Electric, used a "vitality curve" model in an attempt to justify his "rank-and-yank" practices.
Jack Welch's vitality model has been described as a "20-70-10" system. The "top 20" percent of the workforce is most productive, and 70% (the "vital 70") work adequately. The other 10% ("bottom 10") are nonproducers and should be fired. Rank-and-yank ideologues credit Welch's rank-and-yank system with a 28-fold increase in earnings (and a 5-fold increase in revenue) at GE between 1981 and 2001.
[edit] Straight from the Gut
In Straight from the Gut, Welch says that he asked "each of the GE's businesses to rank all of their top executives". Specifically (in accordance with the 20-70-10 model) the top executives were divided into "A", "B", and "C" players. Welch admitted that the judgments were "not always precise".
[edit] "A" players
"A" players, Welch claimed, are
- filled with passion
- committed to "making things happen"
- open to ideas from anywhere
- and blessed with lots of "runway" ahead of them,
- have charisma, the ability to energize themselves and others,
- can make business productive and enjoyable at the same time.
- and exhibit the "four E's" of leadership:
- very high Energy levels
- can Energize others around common goals
- the "Edge" to make difficult decisions,
- the ability to consistently Execute, or deliver on their promises
[edit] "B" players
The vital "B" players may not be visionary or the most driven, but are "vital" because they make up the majority of the group.
[edit] "C" players
"C" players are nonproducers. They are likely to "enervate" rather than "energize", according to Welch's model. Procrastination is a common trait of "C" players, as well as failure to deliver on promises.
These designations apply not only to workers at the bottom levels, but also managers. Managers unable to recognize "C" players will often perform as "C" players themselves.
[edit] Consequences
Welch advises firing "C" players, while encouraging "A" players with rewards such as promotions, bonuses, and stock options.
[edit] Criticisms of rank-and-yank
Critics believe that the 20-70-10 model fails to reflect actual human behavior. Among randomly selected people, assigned to a task, such a model may be accurate. However, at each iteration, they contend, the average quality of employees will increase, making for more "A" players and fewer "C" players. Eventually, the "C" players comprise (at general agreement) less than 10 % of the workforce; they may all be gone. At this point, managers will staunchly object to a mandate that they recommend 10% of their subordinates for termination.
Once rank-and-yank has expelled all the weak employees, further iterations may not improve average workforce quality, but instead result in office politics and lowered morale that will ultimately reduce productivity, damage communication and interoffice relations, and encourage cheating. Rank-based performance evaluations (in education and employment) are said to foster cutthroat and unethical behavior. Such behavior resulted when Enron implemented a rank-based system, and this is sometimes credited as a contribution to the downfall of the company.
A further alleged fallacy of the "rank and yank" ideology is that, applied to small groups, it fails. The law of small numbers dictates that on small teams, actual distributions may deviate from any "vitality curve" model.
As a managerial motivation tool, it is similar to the ancient Roman military practice of decimation as a means of punishment of conscripted troops, whereby the remaining 90% were motivated out of fear of becoming the next 10%.
Obviously, this is a tremendously competitive model of organisation. All criticisms of both the moral and (in)effectiveness of such a Dog Eat Dog method of social cohesion apply. Such extremely competitive business practices are often cited as proof towards the inevitable immorality of capitalism and suggests alternatives.
[edit] Companies utilizing this management philosophy
[edit] Enron
Enron traders also commonly were under the threat of being fired if they didn't produce the desired results. It has later come out that part of the downfall of Enron was employees inflating results in part to help protect their jobs. More about this can be seen in the movie Enron: The Smartest Guys in the Room.
[edit] GE
GE is by far the most famous company to utilize this form of corporate management.
[edit] Vanguard
The Vanguard Group uses a forced ranking / forced distribution appraisal system for all its employees. At the end of each year, the employees within each grade level are compared to each other and grouped as follows:
- 10% - excellent performers
- 20% - above average performers
- 60% - meets expectations
- 10% - needs improvement
The bottom 10% are put on probation, and they have a 60 day time period to improve themselves, or they will be moved along a disciplinary action track, eventually leading to termination.
