Free Winning: The Answers: Confronting 74 of the Toughest Questions in Business Today by Jack Welch, Suzy Welch Page A
Authors: Jack Welch, Suzy Welch
“old folks” might object at first, but the good ones have been waiting longer than you think for straight talk to arrive.
THE CASE FOR DIFFERENTIATION…EVEN IN SWEDEN
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You have long advocated a management approach called “differentiation”—promoting the top 20 percent of performers in a company, developing the middle 70, and letting go of the bottom 10. But how can your method be applied in Sweden, where it is not really possible to fire someone who is underachieving?
— GÖTEBORG, SWEDEN
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Y ou ask about Sweden, but we’ve heard this question in dozens of countries, from Germany to Japan to Mexico. We’ve even heard it in the United States, with its relatively flexible labor laws. There, people ask the variation, “How can I apply differentiation in my company? We never fire anyone—we can’t.”
It’s just not true. Differentiation can be applied anywhere—if it’s done right. Yes, there are always people who claim at the outset that the system won’t work in their culture, but over time, they come to see how differentiation not only helps employees improve their lives, it changes the competitive game. And they come to understand how differentiation isn’t at odds with any particular national character or set of labor laws. In fact, quite the contrary.
Look, differentiation raises hackles, as you mention, because of its firing component. The irony is, once the system is in place, it hardly ever ends up with managers terminating anyone. That’s because differentiation forces companies to implement regular, candid performance appraisals so that a 20-70-10 curve can be established. When people are told during these appraisals that they are in the bottom 10 percent, they usually move along of their own accord, more often than not finding jobs that fit them better. Almost no one wants to stay where they are at the bottom of the barrel.
Meanwhile, the rest of differentiation does its powerful work. Great performers get rewarded in their souls and pocketbooks, usually increasing their zest to achieve even more, and middling performers get the development and training they need to deliver better results and increase their opportunities for growth. It really is a system where individuals win and the company does too.
That said, it is true that differentiation is an easier sell in some countries than others. You mention legal issues with firing in Sweden, a prospect that immediately sends most managers running for cover. And when we were in Stockholm recently, we heard a lot about the cultural value placed on egalitarianism, not exactly a 20-70-10 kind of concept.
Even in such situations, where differentiation appears to be a challenging cultural fit, managers shouldn’t balk. You may have to go more slowly, put more effort into it, and pay more to people with whom you part ways. But the benefits far outweigh these costs. Start by introducing honest appraisals, making sure they are conducted at least twice a year. Let people know where they stand—with no sugar coating or double-talk. Make candor a real organizational value. Talk relentlessly about why the rigorous personnel evaluations at the core of differentiation matter so darned much. After all, they field the best players, and everyone knows that the team with the best players wins.
And who doesn’t want that—even in Sweden?
STRATEGY FOR BIG AND SMALL ALIKE
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What do you see as the essentials of strategy for companies employing less than one hundred people? Recommendations from academics and consultants apply almost exclusively to large corporations, drowning us in a sea of advice that just feels irrelevant for small organizations with constrained resources.
— PITTSBURG, KANSAS
----
W e might have bad news for you. Strategy is strategy, whether the company is large or small. It’s that killer idea—a “big aha” as we call it—that gives you a sustainable competitive advantage. Put another
THE CASE FOR DIFFERENTIATION…EVEN IN SWEDEN
----
You have long advocated a management approach called “differentiation”—promoting the top 20 percent of performers in a company, developing the middle 70, and letting go of the bottom 10. But how can your method be applied in Sweden, where it is not really possible to fire someone who is underachieving?
— GÖTEBORG, SWEDEN
----
Y ou ask about Sweden, but we’ve heard this question in dozens of countries, from Germany to Japan to Mexico. We’ve even heard it in the United States, with its relatively flexible labor laws. There, people ask the variation, “How can I apply differentiation in my company? We never fire anyone—we can’t.”
It’s just not true. Differentiation can be applied anywhere—if it’s done right. Yes, there are always people who claim at the outset that the system won’t work in their culture, but over time, they come to see how differentiation not only helps employees improve their lives, it changes the competitive game. And they come to understand how differentiation isn’t at odds with any particular national character or set of labor laws. In fact, quite the contrary.
Look, differentiation raises hackles, as you mention, because of its firing component. The irony is, once the system is in place, it hardly ever ends up with managers terminating anyone. That’s because differentiation forces companies to implement regular, candid performance appraisals so that a 20-70-10 curve can be established. When people are told during these appraisals that they are in the bottom 10 percent, they usually move along of their own accord, more often than not finding jobs that fit them better. Almost no one wants to stay where they are at the bottom of the barrel.
Meanwhile, the rest of differentiation does its powerful work. Great performers get rewarded in their souls and pocketbooks, usually increasing their zest to achieve even more, and middling performers get the development and training they need to deliver better results and increase their opportunities for growth. It really is a system where individuals win and the company does too.
That said, it is true that differentiation is an easier sell in some countries than others. You mention legal issues with firing in Sweden, a prospect that immediately sends most managers running for cover. And when we were in Stockholm recently, we heard a lot about the cultural value placed on egalitarianism, not exactly a 20-70-10 kind of concept.
Even in such situations, where differentiation appears to be a challenging cultural fit, managers shouldn’t balk. You may have to go more slowly, put more effort into it, and pay more to people with whom you part ways. But the benefits far outweigh these costs. Start by introducing honest appraisals, making sure they are conducted at least twice a year. Let people know where they stand—with no sugar coating or double-talk. Make candor a real organizational value. Talk relentlessly about why the rigorous personnel evaluations at the core of differentiation matter so darned much. After all, they field the best players, and everyone knows that the team with the best players wins.
And who doesn’t want that—even in Sweden?
STRATEGY FOR BIG AND SMALL ALIKE
----
What do you see as the essentials of strategy for companies employing less than one hundred people? Recommendations from academics and consultants apply almost exclusively to large corporations, drowning us in a sea of advice that just feels irrelevant for small organizations with constrained resources.
— PITTSBURG, KANSAS
----
W e might have bad news for you. Strategy is strategy, whether the company is large or small. It’s that killer idea—a “big aha” as we call it—that gives you a sustainable competitive advantage. Put another
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