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Ask HN: Why what worked for GE didnt work for Microsoft

3 points by tech6 ↗ HN
The HR principle of proactively identifying and removing the bottom 10 percent of workforce is cited as one of the great innovations under Jack Welch and as one of the factors in the great progress of GE under his leadership. However a similar method is cited as the reason for Microsoft's lost decade where really smart ppl left the company due to politics introduced by this HR policy and it resulted in affecting team morale.Why did two companies have such dramatically different results with a similar method. Was it an issue of implementation or does the principle only work for manufacturing and not knowledge industries

8 comments

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gvb
a) We don't actually know that it worked for GE. There were a lot of changes under Welch, so there were a lot of simultaneously changing variables. I would contend that the "10%" policy had smaller potential than lot of the other changes. Note that one of the changes was changing from a company that was primarily an "old guard" manufacturing business to one whose net income is nearly 50% from its financial subsidiary (http://en.wikipedia.org/wiki/GE_Capital) - before the recession, it was substantially more than 50%. That is a huge change.

b) GE under Welch was an old, established, stagnant company. My personal theory (pure speculation) is that GE had built up a lot of inefficient processes: whenever something bad happens, regardless of the probability of it recurring, the natural response of (especially large) corporations is to write another procedure to prevent it from recurring. GE also likely accreated lots of ineffective employees over the years (to write and follow the ineffective processes ;-).

As a result, GE under Welch was able to cut a lot of costs out of their manufacturing processes by re-evaluating the cost vs. effectiveness vs. benefits of them. All those cut costs would flow to their bottom line, at least for a while.

Note that GE's stock has been pretty flat (struggling, even) for the last several years. According to my speculation above, this would be because they squeezed all the excess costs out of their manufacturing and their financial division took it on the chin with the downturn, leaving them sucking wind. So...

c) Jack Welch's changes happened in a different era and were in response to a different situation. A solution that works for a totally different company than Microsoft in a totally different era isn't likely to be effective when applied blindly to e.g. Microsoft.

pootch
Anytime a company goes from being a company into essentially being a bank you can smell the failure. GM did it too and we all ended up paying off that bad debt. Turning into a bank is not a success in business, its showing the world that you have no other options but to profit from carried interest.
davismwfl
I worked for GE in the late 90's (as a Software Architect/Mgr) and dealt with the reviews of my team and had visibility to other teams practices. I can tell you getting rid of the bottom 10% was generally a good thing. But it is how you treat these people and how you "get rid of" them that matters. I am not personally aware of how Microsoft handles it, but I know in my group (and division) we helped the C players find other projects or divisions where their skills would be a better fit; or in the case where that wasn't possible we helped ease their transition out of GE.

We also never said they were bad people, just bad fits for the project/team -- and I know my management dictated that respect for them was not optional. I think a lot was made and overblown about that process because really it was a healthy organization doing what it should. And in the end the remaining employees were more motivated because we didn't make them hang with C players, and I saw a number of people that felt it was handled properly and with respect to those leaving, so they felt they would be treated with respect to. Many times we would let people job hunt, print resumes onsite etc just to help them with that transition.

Also, I am sure some groups in GE that handled things better than others, so I am have no doubts other GE people would call GE's policy horrible and badly implemented. But from my experience it was healthy overall. My management also made it very clear to me that if any of those bottom 10% felt shocked to be there than I failed as a leader and I would be held accountable. If you are in that bottom 10% you should know it for 6 months or longer before you are let go, otherwise it is unfair to you and there is no way to recover.

I also would agree with the comment that GE had a lot of inefficiencies that it needed to deal with, and I would say a lot of bloat of C players that had invaded and camped out for years. So I believe it was a good process for a limited time, and once you get back to being lean it isn't necessary, and could hurt morale pretty easy because you are letting go of people that are still performing with really no valid reason. And at least from what I saw at GE, we never took it this way. I never once was told there was a mandate to terminate 10% of my staff or team, and I was trained at the famed Crotonville facility.

As for how Microsoft handles it, there are a million ways to blow it and cause people to feel unappreciated and demoralized. Who know's what they are doing.

The comment on who knows if it worked for GE, I think has some validity, but in reality I think it did the organization a huge amount of good. If for nothing else to remove the bloat and get a bit leaner. Of course, I would argue a company with 300k people is never really lean, but that is a different discussion.

codeonfire
That's interesting. So at GE how often were software architects/managers or higher actually "managed out" rather than simply threatened? From my vantage point bottom grading looks like a political ploy in which people at the bottom are simply churned to protect the bureaucracy and not upset the power structure. This is a valid alternate viewpoint on what you call 'bad fit.' In other words the sole criteria that you mention is respect for management and not objective productivity or profitability. At GE did you ever attempt to put a dollar amount on contributions?
davismwfl
Actually, I would say that at least in the division I was in we took 360 reviews very seriously.

So for example if a mgr had bad peer and subordinate reviews but a positive manager review HR would step in and force a resolution. If none of (or only a minority of) your peers or subordinates trust you it didn't matter what your manager thought. Now that said training was always the first thing to try, which in fairness we did with any knowledge worker.

As for contributions and measuring impact yes, the entire team had bonuses based on performance and results. In fact we tracked milestones to expected costs and if a team beat it they were rewarded. Not just a team lead but the whole team. I so hated filling out WBS cards.

While I was there we had three changes in various leadership positions because of team dynamics. Honestly, at least in my group my complaint was sometimes to high a sensitivity to team grumbling.

But I know there were places in the organization where protecting management was done, which is complete BS in my book.

I also totally disagreed with some arbitrary numbers we had to meet, like having a certain percentage of our project developed offshore. That was asinine and made no logical sense but to supposedly save a few dollars, and my bet it cost us more than it ever saved us.

johnrgrace
The problem is if HR is slack or you give a few political managers toeholds, the whole system goes sideways. I've worked in a place and seen this happen with a change of about 20% of the divisions management in 18 months and the entire forced ranking system became a political circus.
davismwfl
Yikes, that would suck. But I totally agree with what you said. If people drop the ball (or poison gets in the system in quantity) it is always an issue, and when that becomes systemic I see a lot of the talented people vote with their feet and move on. Which when you are an employee is really your only option, assuming you feel you can't effect change.

A good employer will recognize this and look for a root cause after one or especially more A player(s) leave, a bad employer will just look at how to blame the employee(s) that left for the problem(s).

davismwfl
One other note. A bad fit was someone who was not a team player, wouldn't follow the basic rules(like show up to work), couldn't meet realistic deadlines or who overall failed at their job.

And at least in my team these people repeatedly failed. I never saw someone moved out that hadn't been warned, talked to and had some training.

So I get why people are skeptical but I really believe more teams worked like mine than the others. I was exposed to a lot of divisions in a short period and we knew there were horrible teams. unfortunately the bad teams always seem to get more attention and play.

But without having all the facts I can't say which really was the most common, except to say I think it worked well for our team overall. Not to say there wasn't plenty of BS pandering and crap we did otherwise. Hence why I left and sought out different environments.