Why “Rank-and-Yank” Rankles Jack Welch

Jack Welch wants to set the record straight.

Critics, he says, have it all wrong when they write about the management practice widely—and derisively—referred to as “rank-and-yank.”

That’s the term used to describe how companies supposedly identify their worst performers once a year and then, boom, fire them,” Welch, the former chairman and CEO of General Electric, asserted this week in The Wall Street Journal. “It makes me want to scream. And I know I’m not alone.” (Welch might even want to scream at us here at the Drucker Exchange, for we are among those who have explored this topic and, yes, called it “rank-and-yank.”)

In Welch’s view, everything we know about rank-and-yank is wrong, starting with the name. The real term is “differentiation,” and it isn’t about purges. “It’s about building great teams and great companies through consistency, transparency and candor,” Welch wrote. “It’s about aligning performance with the organization’s mission and values. It’s about making sure that all employees know where they stand.”

And what about the yanking of poor performers? “The bottom 10% is never surprised when the conversation sometimes turns, after a year of candid appraisals, to moving on,” Welch said. “No, they are not summarily shown the door. When differentiation is done right, their manager helps them find their next job with compassion and respect.”

None of that is demoralizing or inhumane, Welch maintained. What’s inhumane is failing to make your standards and values clear and transparent and letting people know where they stand. Welch noted that when he speaks to audiences, he asks how many of them know where they stand in their organization. “Typically, no more than 10% raise their hands,” Welch reported. “That’s criminal! As a manager, you owe candor to your people. They must not be guessing about what the organization thinks of them.”

Peter Drucker, an admirer of Welch, would have agreed. In his view, steady assessment was at the heart of good management. “Insistence on high goals and high performance requires that a man’s ability both to set goals and attain them be systematically appraised,” he wrote in The Practice of Management. “Day after day a manager makes decisions based on his appraisal of a man and his performance.”

The Weighing of the Heart

Like Welch, Drucker stressed the need for consistency and candor in such appraisals: “Judgment always requires a definite standard. To judge means to apply a set of values; and value judgments without clear, sharp and public standards are irrational and arbitrary.”

Drucker was also firm about gently showing poor performers the door, noting, in Management: Tasks, Responsibilities, Practices, “One does not do people a service by leaving them in a job they are not equal to.”

Finally, Drucker would have echoed Welch’s dismay over the low percentage of current workers with any sense of their organizational standing. “We know that most people want to know where they stand,” Drucker wrote in a 1969 essay that appears in Technology, Management and Society. “One of the most common complaints of employees in organizations is, indeed, that they are not being appraised and are not being told whether they do well or poorly.”

What’s your experience? Do companies do a good job conveying to employees where they stand?