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A vitality curve is a leadership construct whereby certain proportions of a producing population are credited with certain proportions of the production. For example, there is an often cited "20/80 rule" — the top 20 percent of criminals commit 80 percent of the crimes, the top 20 percent of academics produce 80 percent of useful results. In some cases, such "20/80" tendencies do emerge.
Rank-based employment evaluation
The concept of a "vitality curve" has been used to justify the "rank-and-yank" system of management, whereby 10 percent of workers are fired at each evaluation. Jack Welch, former CEO of General Electric, used a "vitality curve" model in an attempt to justify his "rank-and-yank" practices.
Jack Welch's vitality model has been described as a "20-70-10" system. The "top 20" percent of the work force is most productive, and 70% (the "vital 70") work adequately. The other 10 percent ("bottom 10") are nonproducers and should be fired. Rank-and-yank ideologues credit Welch's rank-and-yank system with a 28-fold increase in earnings (and a 5-fold increase in revenue) at GE between 1981 and 2001.
Straight from the Gut
In Straight from the Gut , Welch says that he asked "each of the GE's businesses to rank all of their top executives". Specifically (in accordance with the 20-70-10 model) the top executives were divided into "A", "B", and "C" players. Welch admitted that the judgments were "not always precise".
"A" players, Welch claimed, are
- filled with passion
- committed to "making things happen"
- open to ideas from anywhere
- and blessed with lots of "runway" ahead of them,
- have charisma, the ability to energize themselves and others,
- can make business productive and enjoyable at the same time.
- and exhibit the "four E's" of leadership:
- very high Energy levels
- can energize others around common goals
- the "edge" to make difficult decisions,
- the ability to consistently execute, or deliver on their promises
The vital "B" players may not be visionary or the most driven, but are "vital" because they make up the majority of the group.
"C" players are nonproducers. They are likely to "enervate" rather than "energize", according to Welch's model. Procrastination is a common trait of "C" players, as well as failure to deliver on promises.
These designations apply not only to workers at the bottom levels, but also managers. Managers unable to recognize "C" players will often perform as "C" players themselves.
Welch advises firing "C" players, while encouraging "A" players with rewards such as promotions, bonuses, and stock options.
Why "rank and yank" fails
The inherent flaw in the 20-70-10 model is that it fails to reflect actual human behavior. Among randomly selected people, assigned to a task, such a model may be accurate. However, at each iteration, the average quality of employees will increase, making for more "A" players and fewer "C" players. Eventually, the "C" players comprise (at general agreement) less than 10 percent of the workforce; they may all be gone. At this point, managers will staunchly object to a mandate that they recommend 10% of their subordinates for termination.
Once rank-and-yank expels all the weak employees, further iterations will not improve average workforce quality, but instead result in office politics that will ultimately reduce productivity, damage communication and interoffice relations, and encourage cheating. Rank-based performance evaluations (in education and employment) invariantly foster cutthroat and unethical behavior. Such behavior resulted when Enron implemented a rank-based system, and this brought the company to its downfall.
A further fallacy of the "rank and yank" ideology is that, applied to small groups, it fails. The law of small numbers dictates that on small teams, actual distributions will deviate from any "vitality curve" model.
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