by Jack Welch
Well-managed companies fight that pull. In fact, they make sure managers spend at least 50 percent of their people time on their biggest constituency, evaluating and coaching them. Further, they don’t forget the middle 70 when it comes to rewards, recognition, and training.
One important note. In larger companies, the middle 70 can be a highly differentiated group. In a way, it has its own top 20, valuable middle, and bottom 10 percent. You need to recognize those performance variations—you can be sure the employees do. In fact, a common and damaging dynamic is the departure of the best performers in the middle 70. Some of these individuals are almost stars—their performance is that close. But when they get lumped with the middle 70 and are not managed attentively, they leave in frustration for a company where they will be more appreciated. That’s a real loss.
Future stars are very often hard at work—quietly—in the middle 70. A good company recognizes that and makes it clear that this ranking is just a snapshot in time. It encourages this group, using every tool in its people management kit.
The point is: The middle 70 matters a lot. It is the heart and soul—the central core—of any company.
If you’re going to manage people well, you simply cannot forget the majority of them.
* * *
PRACTICE 6. Design the org chart to be as flat as possible, with blindingly clear reporting relationships and responsibilities.
* * *
In 2004, Clayton, Dubilier & Rice purchased Culligan International, the water treatment and supply business with about $700 million in annual sales and about five thousand employees spread across thirteen countries. One of CD&R’s partners, George Tamke, the former co-CEO of Emerson Electric, was named chairman. George was well aware that Culligan had been through ten owners in the previous fifteen years, but he couldn’t believe the organizational disarray that hit him when he walked through the door. George found that many employees simply didn’t know where they fit in—whom they reported to, who reported to them, and what results each person was responsible for.
George had had the luxury of studying the business for ninety days prior to CD&R’s closing the deal, so he had a clear idea of how Culligan should be organized. Within thirty days, George and Culligan’s relatively new CEO, Mike Kachmer, had designed and implemented a new org chart that eliminated any confusion.*
It’s too early to talk about the impact of this change on Culligan’s bottom line, but based on my all-too-frequent GE experience clearing up confusing and otherwise ambiguous structures, it will be significant.
Culligan’s situation, unfortunately, is not unique to old, established multinationals. Just recently, I spoke with Dara Khosrowshahi, the new CEO at the online travel company Expedia. Dara also walked into an org chart quagmire when he arrived on the job at the end of 2004. Expedia, less than ten years old and highly entrepreneurial, had been growing so fast, no one had taken the time to clarify reporting roles and responsibilities. As his first priority, Dara set out to fix that.
My goal here is not to describe how to come up with the perfect org chart. Each company will do that differently, based on its size and the business it’s in. But some principles apply across the board. If you want to manage people effectively, help them by making sure the org chart leaves as little as possible to the imagination. It should paint a crystal-clear picture of reporting relationships and make it patently obvious who is responsible for what results.
Just as important, it should be flat.
Look, every layer in an organization puts spin on a new initiative or organizational event. It’s like that children’s whispering game, tele phone. Every time a piece of information travels through another person, it changes. Layers do that too, adding interpretation and buzz as information travels up and down the ladder. The trick, then, is to have fewer rungs.*
Layers have other vices. They add cost and complexity to everything. They slow things down because they increase the number of approvals and meetings required for anything to move forward. They have an odious way of burying new businesses, or small units in big companies, in honeycombs of bureaucracy. They tend to make little generals out of perfectly normal people who find themselves in hierarchies that respond only to rank.
The awfulness of layers is nothing new to anyone. And yet companies gravitate toward them. For some, layers feel like the only way to respond to growth. More sales—quick, add more district managers in the field. More employees—quick, add more staff at headquarters.
For others, the reasoning is even worse. Layers are a way to give people the feeling of growth when there is none. Layers allow you to give employees promotions instead of raises. That’s better than doing nothing, right? Wrong!
The inexorable pull toward layers is why I suggest you make your company 50 percent flatter than you’d normally feel comfortable with. Managers should have ten direct reports at the minimum and 30 to 50 percent more if they are experienced.
When you’ve got great players, you’ll get the most out of them if their reporting relationships and responsibilities are blindingly clear. Your org chart is not the only way to accomplish that, but it’s a necessary first step.
After you’ve hired great people, your job becomes managing them into a winning team.
Make HR matter, with a cadre of pastor-parent types at the helm. Ensure people really know how they’re doing, with evaluation systems that are honest and real. Motivate and retain wisely with money, recognition, and training. Face into charged relationships without flinching. Pay ample attention to your largest constituency, the middle 70 percent. And finally, get that org chart flattened and straightened out.
These six practices take time, that’s true. But companies are not buildings, machines, or technologies. They are people.
Besides managing them, what work matters more?
Parting Ways
* * *
LETTING GO IS HARD TO DO
NOW FOR THE HARD PART.
For the previous three chapters of this book, I’ve talked about the exciting, energizing stuff of work—leading, finding great players, and managing people into a winning team.
But we all know that work isn’t a perpetual paradise.
Work is more like the Garden of Eden. Sometimes people have to be let go.
That event—be it a firing for nonperformance or a layoff for economic reasons—is awful, both for the person doing the casting out and, obviously, for the person being asked to leave. Most good managers find the actual deed incredibly difficult—feeling guilt and anxiety before, during, and after. As for the person being let go, it can be the worst day of his or her career. For some, work has been their identity, central routine, or second family, and being forced to leave is a kind of public death. For others, work may mean less emotionally, but it is a financial necessity, and the prospect of unemployment is frightening.
This chapter is about how to manage a parting of ways with as little pain and damage as possible.
Importantly, not all partings are created equal.
First, there are firings for integrity violations—stealing, lying, cheating, or any other form of ethical or legal breach.
Then, there are layoffs due to economic downturns.
Finally, there are firings for nonperformance.
The last of these is the main focus of this chapter because those are the ones that usually turn into bitter messes.
It doesn’t have to be that way.
The antidote is actually very straightforward: managers need to accept that letting people go is not something to be avoided, delegated to HR, or done quickly with eyes closed. Instead, it is a process that they must fully own, guided by two principles: no surprise and minimal humiliation.
But before we look in more depth at how to achieve those goals, let’s talk about the first two forms of separation.
INTEGRITY VIOLATIONS
…are no-brainers. In such cases, you don’t need to hesitate for a moment before firing someone or fret about
it either. Just do it, and make sure the organization knows why, so that the consequences of breaking the rules are not lost on anyone.
LAYOFFS DUE TO THE ECONOMY
…are more complicated.*
Think of all the times you’ve turned on the evening news to see angry employees protesting outside the gates of a plant or the front door of an office building. Layoffs have just been announced, and people are in shock. They feel as though a bomb has dropped on them out of nowhere.
You can bet the top team doesn’t feel that way. They probably knew layoffs were in the offing for months.
The fact that everyone else didn’t is really unconscionable. Every employee, not just the senior people, should know how a company is doing.
Of course, financial information is not always that easy to get your hands on. If you are running a ten-person division of a conglomerate, for instance, you may have access to data about your business but know little about how other businesses are performing. On the other hand, if you are running a ten-person machine shop, there is no reason in the world why employees shouldn’t know about every vital sign of the business—the volume of orders, the size and trend line of profit margins, emerging low-cost competitors, and so forth.
For most managers, the availability of financial data lies somewhere between these extremes. Your job is to get as much as you can and get it to your people as clearly and frequently as possible. That way, if layoffs must occur, at least people will have some level of preparation.
The same principle holds for layoffs due to market changes. During the Internet boom, for example, lots of companies scrambled frantically to hire technical gurus by the truckload. As the reality of e-commerce settled in, it quickly became obvious that this hiring had been excessive and some of the techies would have to go. Most managers in this situation had help making their case, thanks to intensive media coverage of the industry’s collapse. But open communication should be the order of the day no matter what.
Last year at a Q & A session in Orlando, Florida, I was introduced to the audience by the owner and CEO of a New England–based consulting and training firm. Before the session, I asked her about her business. She told me it had taken a real hit after the Internet bubble burst. She’d had to lay off half of her thirty employees.
“How did it go?” I asked.
“Incredibly well,” she answered, to my surprise. “My husband and I practiced open-book management. Our employees knew everything about the state of our business. When the time came for the layoffs, people were sad but they understood.”
Today, the business is flourishing, and many of the CEO’s former employees have returned without bitterness.
Needless to say, this is an ideal situation—the firm was small and it too benefited from coverage of the Internet industry collapse. But even if your company is large and economic conditions are more vague, it always helps to have your cards on the table for employees to see in the event of a downturn.
FIRINGS FOR NONPERFORMANCE
Now for the most complex and delicate kind of firing, when an individual has to be let go because of poor performance.
Earlier I used “straightforward” to describe the no-surprise, minimal-humiliation approach to these situations. I didn’t mean to make it sound easy—it is not.
Unfortunately, you learn how to fire on the job, under the most stressful of circumstances. Nothing really prepares you. Managers don’t sit around talking about how to do it, comparing notes. I’m not aware of any business schools that actually teach the process, and while company training programs might talk a lot about evaluations, none that I know of offer a lot of help on how to actually let people go.*
Which leaves you to your instincts. Maybe some people are born to fire well. I know I wasn’t. I did it for years and never got used to it. I was particularly bad at it in my early years as a manager. One of my most painful memories from Pittsfield, where I ran Plastics, is of the day that a boy got on the school bus and punched my son John in the face. I had fired the boy’s dad the day before, and obviously, I had done it wrong. It didn’t make any difference that I thought I had handled the matter well. The boy’s family didn’t perceive it that way.
THE THREE BIG MISTAKES OF FIRING
Sometimes people screw up so royally they deserve to be fired without much ado.
I once had a manager in Plastics who had to be let go after ninety days because, while he had a résumé loaded with prestigious degrees and was as charming as could be in chitchat, he was completely ineffective at every single task. A friend of mine was fired from her job as a clothing store clerk in the first week because she forgot to ask half the customers to sign their creditcard slips. She says that if her boss hadn’t fired her, she would have fired herself.*
Usually, however, firings for nonperformance aren’t so black-and-white. There’s lots more gray about who did what and what went wrong to lead up to the finale.
Because of that, there are three main ways that managers get firing wrong—moving too fast, not using enough candor, and taking too long.
For an example of the first dynamic, take the case of a friend of mine who ran a sixty-person unit within a three-hundred-employee company. The company had been growing and things were generally going well. It was privately held and had a family-like culture, meaning mediocre performance was generally tolerated in the name of congeniality. It was not uncommon for employees to carpool on weekdays and socialize on weekends. As with many small companies, performance reviews were generally informal events with lots of generic pleasantries.
When my friend was promoted to head the unit, she soon realized that one of her chief lieutenants, the man in charge of distribution, whom I’ll call Richard, was not up to the demands of the growing business. To exacerbate matters, Richard was a true disrupter, as described in the last chapter. He never missed an opportunity to challenge the authority of the new boss or her boss; usually, his negative comments came in the form of sarcastic humor with peers in the hallways.
Richard’s performance wasn’t terrible, but it was pretty close. He regularly missed deadlines and seemed unable to handle increasingly complex logistics. My friend spoke to Richard several times about his shortcomings, to no avail. Finally, after a particularly tough period of Richard’s corridor sniping, an important customer called to complain that his shipment was a week late. My friend had had it—Richard had to go.
The official dismissal meeting could not have gone worse. To say Richard was surprised is an understatement. He blew up in anger, shouting, “You’ve got to be crazy. We don’t fire people at this company!” and “You’re going to pay for this.” He then stormed out, ran back to his office in another part of the building, and called an impromptu meeting with his own eight-person staff. Even though he cleaned out his desk and was gone within hours, a hate-management movement had been launched. Some of the unit’s employees—in particular, Richard’s circle of friends—felt that he had been fired without enough warning, and they complained they no longer trusted the boss or the organization. In the fraught weeks that followed, productivity dropped by an order of magnitude as people spent inordinate amounts of time gathering behind closed doors to talk about Richard’s departure, how it was handled, and who might be next.
It took my friend about three months to restore equilibrium and get her unit moving again.
The second firing mistake is a variation of Richard’s case, and it involves lack of candor and a misunderstanding about fairness.
Say you’ve got an employee named Gail. She can’t reach her sales quotas, and her coworkers really can’t count on her for one reason or another. She’s damaging the unit’s performance and morale. But Gail’s friendly to everyone, she tries hard, and she’s been with the company for years. Every time you attempt to tell her how badly she’s doing, she’s so cheerful and oblivious that the conversation gets muddled, and you end up hiding your negative feelings behind a forced smile and a mixed message about “working smar
ter.”*
Then the situation reaches a crisis stage. Gail really screws up, and in a burst of impulsive anger, you fire her. She’s shocked and starts to remind you of all the positive feedback you’ve given her over the years. You respond by coming up with a severance package that feels pretty rich to you, given how much she’s underperformed. She hates the package—it’s insulting, she says—and she gets angry. You get angry back because you can’t believe she’s angry. You feel she should be grateful you carried her for so long! The next thing you know, Gail’s gone from shocked to angry to bitter as she walks out the door.
This may not be the last you hear of her. Think about the last time you lost a promising hire or a potential customer. They might have been talking to Gail, who went out to become an “ambassador” for your company.
Every employee who leaves goes on to represent your company. For the next five, ten, or twenty years, they can bad-mouth or praise. In the most extreme cases, people fired take their anger public, and a few become so-called whistleblowers. I say “so-called” because I’ve seen too many companies “exposed”—wrongly—by people seeking nothing more than revenge for a firing conducted by a manager who should have and could have done it better.
And now for the third mistake. It occurs when a firing happens too slowly and you get a kind of Dead Man Walking effect. Everyone knows a person is about to be fired, including the person himself, but the boss waits a long time to pull the trigger. The result is enormous awkwardness in the office that can lead to a form of paralysis.*
