Differentiation - Survival of the Fittest

Differentiation is something that did not come easily to GE, and the same is true now for local government organisations. Performance reviews were typically kind, vague, undemanding, and as a result effectively useless. When GE re-calibrated the measurements of performance, many employees who had been lulled into non-performant mediocrity were astonished to find that they were now below the plumb line of acceptable performance.

Welch commented that in his view kind reviews for poor performers were at the root of the considerable discontent this exercise generated, on the basis that if you don't know that you're not doing well, your motivation for improving your performance is minimal.

The problems engendered by falsely positive reviews for poor or mediocre performers are compounded by the fact that high achievers and hard workers quickly become frustrated and disillusioned when they see less conscientious and talented colleagues cause problems, yet still receive positive reviews. The other side of the management issue is equally problematic: how do you remove a poor performer if he can point to many years of positive reviews?

Research carried out by the McKinsey Global Institute has concluded what many have inherently maintained: pressure to improve performance / productivity without corporate support equals disillusionment, support without pressure equals complacency.

Differentiation is critical to attracting and retaining talent. If the consequences for doing well, averagely, or badly, are broadly the same, your stars will go elsewhere and those that are left will occupy jobs indefinitely, stifling promotion opportunities for future stars and affecting the health of the organisation. There is a key distinction here however: there are few problems in people occupying roles for a long period of time per se - doing so while not performing is the issue.

The opposing argument to this proactive approach to talent management is that local authorities exist to provide jobs. They do not. Local authorities exist to provide services; they create employment as a result of providing those services. As Ian Davis observes, it is unreasonable to expect that the public sector is somehow immune to the factors that have transformed private sector productivity, particularly when the source of local authority funding is taken into account.

Shareholders of publicly quoted firms can sell their shares if they are not happy with the company's performance or direction, and customers can move to another provider. Customers of councils cannot[49].

Many of the customers of local authorities don't want to be customers: citizens have a legal obligation to pay their council tax, and use many council services only because they have no other option (either by law, or because of personal circumstance). Councils therefore have a greater responsibility than the private sector to ensure that their biggest cost - people - is being managed effectively.

The Vitality Curve

GE's Vitality Curve (illustrated below) was hit upon as a simple, effective, and somewhat ruthless method of doing just this: every business area was required to rank their managers in order of performance across a defined set of criteria - the top 20 percent received promotion and / or pay rewards and recognition, the next 70 percent received no promotion and modest pay increases, the bottom 10 percent were re-trained, relocated, or removed.

The vitality curve may be a harsh and sometimes crude method, but together with a vast investment in management education, and stretch performance targets across all business areas, the vitality curve drove a fivefold increase in GE's earnings during the twenty years of Welch's tenure.

Evaluation

It would be an understatement to say that the Vitality Curve method of performance management may not be the most appropriate for local government. One successful and more politically acceptable method of introducing an effective performance management process is '360 Evaluation' in which peers, customers, managers, and sub-ordinates contribute to performance assessments, based on a set of structured questions. This enables the review process to become more meaningful, in addition to dramatically increasing employee awareness of their own contribution to the organisation, leading to a balanced and thorough assessment of capabilities and performance, and enabling an organisation to take informed decisions on career progression.
One organisation that has taken the 360 evaluation to the end of the spectrum is WL Gore, inventor of Gore-Tex amongst thousands of other products. Gore is a highly successful global company, with revenues of $2 billion in 2006, and has been voted No. 1 in The Sunday Times' 100 Best Places to Work in the UKby its employees for the last four years.

Gore seems to have cracked the challenge of being productive, successful, and a great place to work. The company has done this by having a flat management structure, with little hierarchy and deference to seniority, in addition to giving every employee veto over the work that they do. No one employee, whether manger or otherwise, can insist that another performs a piece of work, and if you have a great idea and can convince other people of its merits, you have a project and can call on the company's resources.

As Gary Hamel observes in his book Managing Innovation and Change, this seems like a slacker's paradise, but is actually the opposite in practice. At the end of the year, or a project, a peer group reviews each employee's performance and asks the question 'what value did Cedric / Clara / Carlos add for Gore this year? In addition to value creation, they review the employee's behaviour towards other employees and their projects, and the number of times the employee said 'no' to invitations to engage with projects - if the proportion is over a certain threshold, the employee comes under pressure to improve, or move on.

Date: 2016-03-03; view: 883