team trumps

Jack Welch's Straight From The Gut is the management bible for many business leaders. Welch talks in the book about his 20-70-10 rule: no matter the company, 20% of employees are stars, 70% are adequate, and 10% need to be fired.

GE and others rightly put a lot of energy into hiring - the selection process is long, painstaking, and rigorous - in the hopes of recruiting the best. A good HR person will tell you that a successful team needs many different skills and experiences and personalities, and that the team's achievement is rarely based on any one person, but on the group's ability to achieve. Sadly, they fall short in advising you about how to hire this great team; instead they push only for superstars.

If you're only hiring one kind of "best," how do you then sustain success if you can only reward 20% of these ultra-ambitious "best" appropriately?

Many have adopted Welch's model; one company I know assumes that two out of ten are stars, and one is a dud. They have about 90,000 employees, which means 9,000 need to go; and with a fully burdened cost of $250k/year/employee, the 10%ers theoretically cost them $2.25 billion last year.

But this is a successful company, run by smart and capable people - I cannot believe that these 9,000 are truly that much of a drag. When "team success" is disincented in favor of individual success, we have a failure in leadership, not in employee quality. If the manager did a good job of recruiting and hiring, every member should be valued, not just the top 20%, and if there really is a 10%er, that is a critique of the manager more than the employee.

This might surprise you, but Welch, like most senior executives has a rather large ego (yes - it's true!). They achieved what they achieved because they are good at what they do and competitive as hell. The 20-70-10 model appeals to them and their egos. But once you grow beyond a sole-proprietorship, the team becomes more important than any one contributor - you could be the best chef in the world, but if the buyer bought crappy ingredients, or the servers are slacking off, or the cleaners aren't cleaning, your success is at risk irrespective of your talent.

This why Michael Jordan didn't win his championships until he had a great team around him, and why despite his enormous talent, LeBron James couldn't win a championship in Cleveland.

Short term success is possible in a climate where teammates must compete with each other, but pretty soon all these "great" and "ambitious" people realize that it's not worth it to claw at each other and they slack off. They re-prioritize their lives (remember "work-life balance"??), become less obsessed with work, and focus on their own lives. Now the gym memberships, vacations, long lunches, etc. become more important than shipping a product.

While the employees are getting healthier, the company is getting fatter; when teams perform poorly, output per unit declines, and more people are needed to achieve less.

With the right management approach, it is possible that that 90,000 person company could achieve the same revenues with 30,000 people. 60,000 X $250K = $15 billion incremental profit -- hmmm...

Measure and reward everyone based on how the team does; in most start-ups this happens naturally - their salaries are a small piece of the pie compared to the value of their stock options. The focus is on making the stock price rise, not on looking better than their peer. In large companies where the stock price is not rising as quickly, salary and bonus matter more - unless you reward people based on the team's performance, your message is "for you to succeed, your peer must fail." That's just wrong.

Prioritizing team success over individual success creates sustained and more efficient achievement.

Is this a management failure? A manager's job is to execute the wishes of their leadership. The leader's job is to orchestrate sustained success for their organization. Once you get to a certain size, managers are forced to be insipid sycophants.

The real 10%ers are leaders who can't transcend their own egos to prioritize the team over the individual.