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B4 Presentation
Welch’s PA System
Contents
• Background of Welch’s PA System
• Overview of Deming’s SoPK
• Analysis of Welch’s PA in light of Deming's
SoPK
• Conclusion
Welch’s Personnel Appraisal Method
• Based on the concept of the “Vitality Curve”
• A differentiation tool used to assess
employees performance and promotability
• Requires the ranking of employees in three
groups, the high performers, the lowperformers, and the middle level performers
Appraisal Method contd.
• The top excellent performers (usually in the
region of 10-20%) are promoted
• The Middle Performers (Vital Backbones) are
retained at the same position
• The Low performers, (bottom feeders) around 10% of the workforce are relieved of
their jobs
VITALITY CURVE
Top 20%
10%
The Vital 70%
Bottom
Overview of SoPK
• Introduced by E. Deming in a 1989 paper
‘Foundation for Western Management’
• A theory of management that emphasizes
having understanding of a system
• Sees enterprises as a collection of interlinking
processes working together collectively for a
common purpose
Definition of a System
• “A network of interdependent components
that work together to try to accomplish the
aim of the system. A system, must have an
aim. Without an aim, there is no system. The
aim of the system must be clear to everyone
in the system. The aim must include plans for
the future. The aim is a value judgment.”
Deming, 1993
Elements of SoPK
The SoPK is divided into four (4) interdependent
parts:
• Appreciation of a system,
• Theory of variation,
• Theory of knowledge, and
• Psychology
Analysis of Welch’s PA in light of
Deming's SoPK
PSYCHOLOGY
Involves interaction with the people to understand them so as to
motivate them to work towards the betterment of the system as a
whole.
• However, Jack Welch’s policy undermines the idea of motivation for
the system as people start to work for individual recognition and
not because they are motivated to contribute positively towards
the system
• This can have a negative impact on their behavior towards their job
and colleagues, in addition, it does not encourage co-operation
amongst team members.
• So, in essence, it draws them away from the idea of working
towards the betterment of the system as a whole and shift their
focus towards individual perfection.
APPRECIATION OF A SYSTEM
Involves understanding how the different components of a system fit
together and specifies that components should not compete with one
another
• Jack Welch’s policy results in the opposite-people feel pressured to
behave in a competitive manner to be at top or just to avoid the
sack
• So, this policy really does not allow the people to get a holistic view
of the system and appreciate that each component should
collaborate and not be in competition against the other.
• It is illogical as the very thing this policy was employed was to get
the best results out of people for the organization, however, it may
maximize individual’s productivity but not necessarily the
organization’s
THEORY OF VARIATION
This suggests that it is important to identify the causes of
variation- whether it is common cause or a special cause.
• Jack Welch’s policy suggests sacking the bottom 10% of
employees in terms of productivity.
• However, it fails to consider the effect of variation on
organizational output/performance.
• It may be the case that these employees have been the
victims of common cause variations in the production
process, and they did not work less or give less of an
effort towards the organization.
• This can also affect the other employees negatively
Deming's 14 Principles
• The management philosophy of W.E. Deming’s is
summarized in 14 main points
• A number of these points also serve to address the issue of
the Vitality/Bell Curve performance appraisal system
• They include the following:
-Drive Out Fear
-Remove Barriers that Deny People Pride of
Workmanship
- Adopt and institute leadership
- Eliminate numerical quotas for the workforce and
numerical goals for management
Drive out fear
One of Deming’s 14 points for management suggests that it is
important to drive out fear from the employees in order to get
the maximum out from them from an organization’s
perspective.
• Jack Welch’s policy would work to instill fear amongst the
employees. They would be afraid to take risks and
experiment, thus, preventing potential breakthrough
opportunities for the organization.
• Fear of losing their jobs would be always at the top of their
mind, thus, possibly leading them to hide their mistakes.
This may turn prove fatal in the long term if their mistakes
are not recognized or dealt with earlier.
Remove Barriers that Deny People
Pride of Workmanship
It suggest that it is important for the people to have pride of workmanship if
you really want them to give their 100% for the company
• Jack Welch’s policy does not allow people to derive that pride of
workmanship from their jobs.
• The policy always provides a constant threat to their jobs, thus, an
employee will find it difficult to consider themselves as a valued asset to
the organization
• Such a policy will not encourage employees to go above the compliance
level of the organization. They are a lot less likely to take pride in their
work and desire to go the extra mile
• This policy suggests that the management is not concerned about the
problems of the workers or seeking to understand their needs. When
employees feel this way, it affects their ability to take pride in their jobs.
Adopt and institute leadership
This suggests that managers should lead and not
supervise. Focus on the outcomes should be abolished.
• Jack Welch’s policy contrary to this, focuses on the
outcomes rather than motivating people or removing
any barriers to their pride of workmanship.
• There is little emphasis on building relationships based
on trust between leaders and employees
• This will likely lead to a high power-distance
relationship between employees and management,
and reduce the exchange of ideas between them
Eliminate numerical quotas for the workforce
and numerical goals for management:
•
Having numerical goals can have negative effects on the overall output for the
organization
•
Jack Welch’s policy demands that workers efficiency/output levels be measured on
an annual basis. This is likely to encourage a system of numerical quotas for
employees, as this makes it easier to measure individual performance.
•
Quotas have several disadvantages in that they are often an unfair system of
performance appraisal, as well as a track record of failing to inspire dedication
among employees if they have exceeded their quotas for the set time period.
•
Similarly, if an employee is sure that he has already performed poorly this term, he
may not work or be motivated to increase any productivity for the organization as
he believes that he is already at bottom and cannot avoid being laid off. This may
lead to organization losing some good input or effort from this employee.
Conclusions
• Jack Welch’s policy may initially lead to very good individual
productivity in the short term.
• However, it fails in a number of ways
-To a large extent, It works against the theories behind the
System of profound knowledge
-It fails to consider the importance of psychology, variation in
business processes and does not encourage appreciation of
the system
Thus, in this regard, it is unlikely to have a positive effect on an
organizations performance in the long term and even if we
consider short term, maximum individual productivity does
not necessarily translate into maximum organizational
productivity.
REFERENCES
• Shaping the Bell Right. [Online].
http://www.slideshare.net/wsalahz/bell-curve213. Access date 5th February, 2012.
• Neave, H.R. (1990). The Deming Dimension.
Tennessee: SPC Press, Inc.
• Scherkenbach, W.W. (2001). Deming Route to
Quality. Chalford: Management Books 2000 Ltd.
• Deming, W.E. (1986). Out of Crisis. Cambridge:
MIT, Centre for Advanced Educational Services.