Turn over... a necessary evil!

[Deleted]

Quite simple and it came from one of the executives at my job. I tell my wife all the time no ones job is guaranteed and anyone can be replaced but she always feel the opposite.

But as one of the executives at my job said today: we might not want to admit, we might not like it; but turn over is a necessary evil in our business.

- We get to hire new people at a lower rate (I've mentionned in the past one of our clerck being in the company for 18 years and making 20/hr compared to the new clerck we just hired making 11/hr)
- We remain competitive (less dead bodies. Something he said I will remember: some people in our business quit a long time ago, they just haven't told us yet)
- We get in new blood, new ideas.

True? Discuss?

[azphx1972]

Turnover is a necessary evil (you want to get rid of dead weight and attract new talent), but the correct amount of turnover is an inexact science. Recruiting and training new employees cost money, so too much turnover will become costly in terms of overhead. Keeping consistently poor performing employees will drag down productivity, so not getting rid of them is also a bad business decision.

I believe Microsoft has a retention model where they rank and cut the bottom 10% of employees each year. I'm not sure how effective that is, or how other highly successful businesses deal with turnover, but if I were a business owner I would study them and try to learn what works best.

[schildi]

It also depends on the business you are in.
In my job, it can take a long time for somebody to become productive and move beyond the "learning" phase. Sometimes a year or more, especially with recent grads. That's a lot of overhead, and hiring other experienced people in the business is not necessarily cheaper.

[Deleted]

To a certain extent, it's good. The creator of "Dilbert" has suggested that leavetakings be celebrated because they send the message that it's OK to look for better opportunities and jobs where you'll learn new things. And yes, it can permit the previous employer to maybe promote someone or re-think how they do things.

But you also need to do whatever you can to motivate good people to stay. Of the subset who decide they're unhappy, the movers and the shakers are the ones who will get interviews and offers. You'll be left with the unmarketable ones, plus the good ones who don't want to move. So, "turnover is good" is not an excuse to under-pay or over-work your staff.

[zibazinski]

I'm seeing this in DF's business. He has 3 overpaid employees who have, it seems, very little to do but fight with each other. I think he should tell the prima donnas that he is not interested in mediating their squabbles, and frankly, they seem to be dead weight. I mentioned to him how much business did they generate last year? Enough to justify their salaries and then some? He is looking into it. I hope that he replaces them with some workers, for a change. He is too nice and gets taken advantage of.

[thyme4change]

I believe Microsoft has a retention model where they rank and cut the bottom 10% of employees each year.

That is GE's model. I suspect they are so big and move people around so much, and inact so many changes each year that they loss of knowledge and cost of training is so small compared to the gain of new people, new energy and new ideas. Especially when you are cutting the bottom 10%. They probably bring very little to the table.

I worked at a large company. I know they say there is cost of training - but I don't know how much it really cost them to have one of my co-workers spend 2 hours showing me how to log on and where the bathroom was. After that, I was on my own.

[Deleted]

Mar 31, 2011 8:15:02 GMT -5 thyme4change said:

That is GE's model. I suspect they are so big and move people around so much, and enact so many changes each year that the loss of knowledge and cost of training is so small compared to the gain of new people, new energy and new ideas. Especially when you are cutting the bottom 10%.

Yes, it's informally called the "rank and yank" system! Really, I can't think of any good reason to keep someone who's ranked in the bottom 10%. Typically they're kept on out of some sort of misguided sense of compassion or because the manager doesn't have the guts to fire them. I'm not knocking compassion, but if you keep people who aren't producing, everyone else knows who they are and they frequently resent having to cover for them/take up the slack.

[Savoir Faire-Demogague in NJ]

Yes, it's informally called the "rank and yank" system!

Auto dealerships typically manage their sales staff this way.
IE: the bottom producer(s) get let go.

[Gardening Grandma]

The problem is that you really cannot calculate the cost of lost experience, lost training and years of wisdom on that job. Sorry but i have seen newbies full of youthful vigor come and try to reinvent the wheel. It is already done. Or, they have "great ideas" which have been tried and don't work or there are downsides to implementation. But, many workplaces don't want to hear it and instead want "rah, rah" cheerleaders to cheer on any and all ideas of management no matter how inane, foolish or fiscally stupid. So, if management has a lot of turnover, it may be an indication that they do not value their employees and that their own insecurities prompt them to want to hire new people all the time that they can have an edge over. Just my observations.

I'm with Snerdley here. And when the economy improves, the companies who treat their employees like paper towels will see their best ones go elsewhere.

[phil5185]

Jack Welch, CEO of GE started publicizing the 'bottom 10%' method many yrs ago - MSFT and many others implemented it. IMO, it works well for both the mgrs and the employees.

Each year we made a rank-ordering of our direct employees, then we went to a closed-door dept meeting and meshed the lists into a single list. That was carried forward to Division level where it was meshed again. The criteria was 'what if you had to manage w/o this person starting immediately? It was an interactive process (in many cases Div Mgrs don't know the workers 3 levels down so we had to meet and defend our 'keepers'.

The method worked well at several levels - we retained our corporate memory, retained our mentors/leaders, got rid of the deadwood/slackers, avoided technical inbreeding.

One noticeable factor was that eliminating a slacker had a big effect on the other 9 retained workers. Many places retain a slacker, other workers say 'he does nothing, gets the same pay as me, why should I work hard?' Getting rid of the slacker stops the 'why should I' feelings, workers start to feel better about doing a good job and being part of a sharp group. Retaining a poor worker (weak management?) is bad for the dept - but it is equally bad for the worker, there is probably a better fit for him/her where they would be interested and perform well.

[zibazinski]

POTD!!!!!

[The J]

Mar 31, 2011 11:48:43 GMT -5 phil5185 said:

Jack Welch, CEO of GE started publicizing the 'bottom 10%' method many yrs ago - MSFT and many others implemented it. IMO, it works well for both the mgrs and the employees.

Each year we made a rank-ordering of our direct employees, then we went to a closed-door dept meeting and meshed the lists into a single list. That was carried forward to Division level where it was meshed again. The criteria was 'what if you had to manage w/o this person starting immediately? It was an interactive process (in many cases Div Mgrs don't know the workers 3 levels down so we had to meet and defend our 'keepers'.

The method worked well at several levels - we retained our corporate memory, retained our mentors/leaders, got rid of the deadwood/slackers, avoided technical inbreeding.

One noticeable factor was that eliminating a slacker had a big effect on the other 9 retained workers. Many places retain a slacker, other workers say 'he does nothing, gets the same pay as me, why should I work hard?' Getting rid of the slacker stops the 'why should I' feelings, workers start to feel better about doing a good job and being part of a sharp group. Retaining a poor worker (weak management?) is bad for the dept - but it is equally bad for the worker, there is probably a better fit for him/her where they would be interested and perform well.

Seriously. Productivity here would probably skyrocket if they got rid of me

[Formerly SK]

I worked for a company that used rank and rate. I understand how it can be good, but my (anecdotal) experience was otherwise. The company had been in a hiring freeze for a couple years and every six months the bottom 10% were disciplined. Sure, there may initially be some bad apples, but after awhile the remaining people were all pretty much smart/producers. But because 10% were always going to score poorly on their reviews, there was A LOT of backstabbing and politics and your score was on your mind most every day. People worked 24/7 and took on more and more projects in order to outrank their co-worker...but much of it seemed like high profile busywork to me.

I think of rank and rate as similar to No Child Left Behind. Good in theory - bad in reality.

[azphx1972]

Thanks for the input, skinnykids. I dislike blanket rules because they're inflexible and can create discontent and unnecessary stress. Would I enjoy my job or be as productive if I had to constantly worry about being cut? Probably not. I like the fact that as long as I meet my goals and deliver on what I promise, I don't have to worry about having to look for work elsewhere.

I guess the bottom 10% works if you're more interested in getting people to grow, but for people who are content and have no desire or motivation to move up the corporate ladder (like myself), it can be kind of demotivating.

[strider]

Just like tenure it isn't fair when it's solely based on seniority for layoffs. I work harder than most people that have worked here for 5+ years. It looks like seniority will be a factor in layoffs. Last Hired-First Fired. Considering that I've taken on 400% work since I started it makes absolutely no sense. Good luck filling that work.

[strider]

I don't disagree with yanking the non performers by the way. Just that seniority is totally the wrong way to go about it. It alienates the eager and ready workers that are happy to work. That contribution in turn does way more than the slacker that's been there for 15 years.

[Deleted]

Mar 31, 2011 12:41:10 GMT -5 azphx1972 said:

I guess the bottom 10% works if you're more interested in getting people to grow, but for people who are content and have no desire or motivation to move up the corporate ladder (like myself), it can be kind of demotivating.

It's dangerous not to grow- the business, whatever business you're in- changes. If people reporting to you are capable of doing exactly what you do, why should a company keep you on? The work can be done cheaper by your staff. (I know. This happened to me. It was a harsh lesson.)

Don't let yourself get stagnant. You may not aspire to one of those jobs where you get home from business trips at 10 every Friday night and get out on another plane at noon on Sunday, and neither do I. You still need to make sure that the people who decide what you make know what you do and believe that you're worth it.

skinnykids, I agree that the rank and yank scheme can have its problems, especially when coupled with a hiring freeze. Fortunately, the GE sub where I worked never had both at the same time. It can get scary, though, if you work in a department with pretty much no deadwood and all medium-to-excellent performers. Mindless application of rules says you get rid of the medium performers, which doesn't always make sense.

[8 Bit WWBG]

My father (a CEO) told me a similar story this weekend. Sometimes it just plain comes down to head count. He's had to let people go who earned their keep 5x over with the leads they brought in. But when the board says "we need to lose 5 people" then you need to lose 5 people.

[cubefarmer]

In the book Fast Food Nation it talks about how fast food places have figured out high turnover is cheaper - no one ever gets a raise because no one is there long enough. They have automated so much of the process that not much training is needed so there isn't the argument of "we hate turnover because it costs money to train" - that's just not true anymore.

[Mardi Gras Audrey]

I hate the blanket rules like the "bottom 10% must go". Like Athena said, what happens when you are in a dept with all excellent workers? I had a similar experience when working in manufacturing. Our raises were based on our performance reviews (Scale of 1-5). Our company decided that you could only have 1 5 and 2 4s in a department of 10 because of a quota system (The 3, 4, and 5 got that percentage, respectively, as an annual raise. thios was when inflation was ~4% a year) . Everyone else had to be at a 3 or lower, 1s would get let go. It didn't matter that everyone at our plant was an excellent performer (I had worked at another plant... the differences between the two places were insane). The better one was always in the top 1 or 2 for quality, productivity, and customer satisfaction out of the roughly 50 plants in the country doing the same product. Yet, we were all average or lower (except for the three that could fit into the company's quota system). it was very disheartening to know that if you worked at another plant, your performance would be revered as if you walked on water but because you worked in a high functioning location, you would be average or below average. What made it worse was that our manager couldn't determine who was "better" so she would just "rotate" who got the 4 or 5 raises (She actually told me "It isn't your turn this year but it could be your turn next year"). Compounding this rotation was that her favorites were in the bottom of the performers in our dept yet she would reserve at least one spot for them, leaving the rest of us to fight for the crumbs. It certainly did a number on morale...

[txbo]

I wonder how much productivity would increase if everyone who reads and posts on this site from work had to stop and actually be productive.

[8 Bit WWBG]

Never be in the bottom 10%... It reminds me of that story with the ducks where the last duck on the boat gets beaten.

[phil5185]

Evil? Consider the end game - if the average age of the workforce in your company is 40, and management does nothing to renew the workforce, in 20 yrs the average age will be 60. And the 'new-guy' will now be 42. Seems like the technology of the group will be yrs behind, inbreeding of ideas will be large, etc. And the company will probably have failed by now.

If you want your company (and your job) to be there for you in 20 yrs, you need to embrace turnover - not consider it to be a social negative. And continually hire new college grads, mix them into your depts so that their new skills can be shared - and continually upgrade your own skills.

One of Pareto's laws is that 20% of the workers do 80% of the work - and if you look around in your group you can usually observe this. Unfortunately, if you need 100% of the work done (say on an assembly line) you need the other 80% of the workers. And, try as you may, you cannot hire only the top 20% of workers for your factory. Those top 20% have made themselves valuable where they are, and are not available as applicants in the general population.

They have automated so much of the process that not much training is needed so there isn't the argument of "we hate turnover because it costs money to train" - that's just not true anymore.

IMO that has always been mostly true - the definition of a minimum wage job is 'unskilled', you can pull someone in off the street and have them trained in an hour. And if they don't show up tomorrow, you can hire a new one.

[TD2K]

I've mentionned in the past one of our clerck being in the company for 18 years and making 20/hr compared to the new clerck we just hired making 11/hr

If you expect to be paid more for doing the same job as someone else simply because you've been there longer, you will find yourself out of a job. You need to do a better job, more complicated job, etc to justify a higher income.

[txengineer]

I work for a company that uses the forced ranking system. And the bottom 10% will not get any raises, they need to put together an "improvement plan", and they know that they'd be let go first if we need to cut people. The company has done really well consistently, and hadn't needed to cut people. However, I think if someone is in the bottom 10% and was told he'd be let go first, it would be very distractive to productivity as he would be constantly worried.

To be fair, since we "hire the best and brightest" and due to the flaws in the forced ranking system, a lot of people in the bottom 10% are not necessarily lowest in productivity... So far, I have not come across any managers who like the system, but it's jut the way it is. Also, the sheer size of the company meant that a lot of resources is devoted every year almost year-round just to rank and assign "numbers" to employees worldwide.