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 low- performers, 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% The Vital 70% Bottom 10%

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] Access date 5th February, 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.