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Time to evaluate your evaluation process – and ignore Jack Welch

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It's November. How is your annual employee appraisal process coming? Are you even happy with it? Better question: Are your employees satisfied?

Employee appraisal philosophies have been in the news.

In the Wall Street Journal Friday, former GE powerhouse Jack Welch indulged in a little revisionism when he penned a column defending the performance evaluation system he instituted at the company.

Known to most HR professionals as "forced ranking," the process compels managers to sort their reports into high, middle and low performers. The "forced" component comes into play because the distribution results are a predetermined ratio, such as 10/80/10. So no matter how good your employees are, only 10 percent in this example will be deemed high achievers, while 10 percent will leave the process fearing the ax.

Friday, though, Welch claimed "the media" distorted the process, dubbing it "rank-and-yank" (a term I'd never heard before). Welch prefers to call it "differentiation management" (also a term I'd never heard before).

In his view, the GE way was a favor to employees because it let them know exactly where they stood in the organization and led to "feedback and coaching."

I'll quote, for those of you who don't subscribe or have your log-in handy: "…the bottom 10% is never surprised when the conversation sometimes turns, after a year of candid appraisals, to moving on. No, they are not summarily shown the door. When differentiation is done right, their manager helps them find their next job with compassion and respect."

I'm here to tell you that's not how GE's employees saw it when Welch was at the helm. Because GE is a major employer in the Cincinnati area, I got to know many GE-ers when I lived there. My business classes at Xavier were heavy with people identified as top performers at GE, Procter & Gamble and a couple of major financial institutions who were preparing, with their company's blessing, to climb the corporate ladder. The GE folks were by far the most stressed and unhappy, because they had forced ranking looming over them.

At some point, if the boss keeps clearing out the "bottom," you find yourself there. Far from fostering teamwork, as Welch claims, the system created a me-first, survivor mentality.

Forced ranking was in the news last week for a couple of reasons. First, Microsoft announced it was doing away with "stacked ranking," its term for forced ranking. Microsoft has been beaten up for years by everyone from HR experts and business analysts to its own employees for using it.

The article, from Businessweek.com, likens the system to "having to play 'Game of Thrones' at the office," while this Forbes piece pretty much blames it for destroying the company's creativity.

Meanwhile, if you clicked on the former, did you notice that Yahoo decided to adopt forced ranking for its workforce? One wonders where CEO Marissa Mayer will be ranked for coming up with this at a time when the system has pretty much been debunked as an effective management tool.

Your employees deserve feedback, coaching and an honest evaluation of whether they have a future with your company. Are you relying on a mechanical, pseudo-data-driven process that demeans and demotivates your staff — or are you getting ready to engage in genuine discussion that can lead to long-term growth and results?

The week ahead

The road to successful product launch can be long and winding in the medical device industry; for some companies, it can stretch across continents. Reporter Heather Stauffer profiles one such York-based enterprise in the Nov. 22 issue.

November may be the season when many companies tackle reviews, strategic plans and budgets, but it's also the heaviest season for charitable giving. Our Inside Business section this week looks at corporate citizenship and how midstate business leaders are showing the way.

Looking for networking opportunities? Click here.

The rewind

I wonder if Bill Gates ever regrets investing in Apple. If you recall, back in 1997, Microsoft invested $150 million — which seems so tiny today — in Apple because, frankly, Microsoft was afraid of antitrust litigation and needed to keep a competitor on the scene. Today, of course, Apple is valued at roughly $472 billion and Microsoft at $316 billion.

Apple unveiled the plans last week for the $5 billion campus it's planning to build in Cupertino, Calif. It is stunning.

But if I were an investor (I wish), I'd be a little worried. America is dotted with the iconic buildings of companies that no longer exist — companies that seemed, pardon the expression, too established to fail. Here are two lucky ones that are getting new life: the TWA terminal at JFK and New Jersey's Bell Labs.

Hope Stephan

Hope Stephan

Hope Stephan is editor of the Central Penn Business Journal. A Pennsylvania native, she is a graduate of Penn State and Xavier University. Have a question or tip for her? Email her at hopes@cpbj.com. Follow her on Twitter, @hstephan. Circle Hope Stephan on .

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