In my last book, I wrote that no one who I ever asked to leave - and these were CEOs who went on to run other companies - no one I ever asked to leave ever was surprised. And so the journalists ran everywhere to find somebody who was surprised. And they didn't find anybody. Because there was a clear understanding between the two of us through many dialogues.
You embrace the top 20. You deal with the middle 70. And you face into the bottom 10 - you do what's right for them and for you.
On the 20-70-10, we think everyone - now as you grow up in the workplace, you're gonna become managers and leaders and other things - we think everyone has an obligation, once you have become a leader, to let everybody who works for you know where they stand. We think that is an absolute obligation. And so, I came up with this differentiation. It's not precise - it's the top 20, might be 25, 20, who knows, 23, and the middle 70, that important group that you gotta motivate everyday and then the bottom 10. And the bottom 10 are the people that aren't gonna make it in your place.
You gotta believe in business. Like you do in the Red Sox, or anything else, that the team that fields the best players wins. So you're always trying to field the best players. Now, if you tell the bottom 10 where they stand - and they are in the bottom 10 - and you put a system in place that they cannot get a raise and the computer won't give them a raise and they can't get stock options. So there's nothing - there's no false signals. Some companies will throw along 3 and 4% raises which is a false signal. And nobody wants to face it.
So in this case, you bring him in, you say: "Look, this isn't working. You're in the bottom 10. You're not gonna get any of my money here. It's time for you to look for something else. Let's, say over the next year, get you to move on." And that's considered cruel management. And when I say that to some groups, they say: I am too nice a manager to do that.
Well, let me tell you something. You'll work for a company someday. And you'll have a recession. And you'll have to get rid of 15% of the costs, or whatever it is, and you'll have to cut back. You are gonna go cut back on that bottom 10.
And you are going to call them into the office and you're going to say to them: "Look, you've got to go now. And now. No planning, no nothing. We gotta get our costs down. We're in trouble." And they're gonna say to you: "Why me?" And you're gonna say: "Well, look, you weren't very good." [And they'll reply:] "Now you tell me! I've been here 25 years!"
And now they're 53 years old and they don't have options to do things. That's cruel management. So anyone that tells you that they're a nice manager because they don't face into that - smack him one. It's just plain wrong! It's wrong.
- Jack Welch, A Conversation with Jack Welch
