Reasons to Hate Differentiation
We could days explaining all the reasons to love differentiation, but instead we’re going to list the most common criticisms the concept receives. Some have truth in them, but more often than not, they don’t. Consider the following:
► Differentiation is unfair because it’s always corrupted by company politics – “20-70-10” is just a way of separating the people who kiss the boss’s ass from those who don’t.
It is true, without question, that at some companies, differentiation is corrupted by cronyism and favoritism. The top 20 percent are the boss’s yes-men and buddies, and the bottom 10 percent are the outspoken types who ask difficult questions and challenge the status quo. The middle 70 are just ducking and getting by. That happens and it stinks, and it is a function of a leadership team lacking in brains or integrity, or both.
The only good thing we can say about a merit-free system like this is that eventually it destroys itself. It collapses from its own weight or has to change. The results just won’t be good enough to sustain the enterprise.
Luckily, cases of “differentiation abuse” can generally be prevented by a candid, clear-cut performance system, with defined expectations and goals and timelines, and a program of consistent appraisals. In fact, differentiation can only be implemented after such a system is in place.
► Differentiation is mean and bullying. It’s like the playground in the worst possible way – weak kids are made into fools, outcasts, and objects of ridicule.
Man, have we heard this one a hundred times and it drives us crazy because one of the major advantages of differentiation is that is fair – to everyone!
When differentiation is working, people know where they stand. You know if you have a strong shot at a big promotion or if you need to be looking for other opportunities, inside or outside the company. Maybe some information is hard to swallow at first, and yes, “bad” news often hurts, but soon enough, like all knowledge, it’s power – in fact, it’s liberating. When you know where you stand, you can control your own destiny, and what is more fair than that?
► Corollary: I’m just too nice to implement 20-70-10.
Usually, people with this complaint about differentiation assert that differentiation, as a managerial system, does not value people who add intangible things to a business – like a “feeling of family” or “humanity” or “a sense of history.” And we all know of organizations that continue to employ under-performers for a long time mainly because they are really nice individuals.
We fully understand not wanting to manage out somebody nice. But the facts are, “protecting” under-performers always backfires. First of all, by not carrying their weight, they make the pie smaller for everyone. That can cause resentment. It’s also not what you could call fair, and an unfair culture never helps a company win; it undermines trust and candor too much.
The worst thing, though, is how “protecting” people who don’t perform hurts the people themselves. For years, they are carried along with everyone looking the other way. At appraisals, they are vaguely told they are “great” or “doing just fine.” They are thanked for their contributions.
Then a downturn occurs, and layoffs are necessary. The “nice” under-performers are almost always the first to go, and always the most surprised, because no one has ever told them the truth about their results, or lack thereof. The awful thing is that this often happens when the under-performers are in their late 40s or 50s; they’ve been carried along for most of their careers. Then suddenly, at an age when starting over can be very tough, they are out of a job with no preparation or planning and a kick in the stomach they may never get over. They feel betrayed, and they should.
As harsh as it may seem at first, differentiation prevents that tragedy because it is based on performance measures that really count. That’s why we believe you are never “too nice” to implement 20-70-10, only too cowardly.
► Differentiation pits people against each other and undermines teamwork.
Actually, differentiation rewards those members of the team who deserve it. That fact only seems to annoy the under-performers. To everyone else, it seems fair. And a fair environment promotes teamwork. Better yet, it motivates people to give their all, and that’s what you want.
► Differentiation is only possible in the United States. I wish we could implement it, but because of their cultural values, the people in my country simply won’t accept it.
We hear this critique of differentiation in every country we visit. And yet we know from experience that it isn’t true. When GE adopted differentiation, it did so worldwide, first, because the company believed it its effectiveness, and second because it knew that only having differentiation in the United States would have been unfair and confusing, especially for the businesses with both U.S. and global divisions.
Right off the bat, an amazing thing happened. Once GE managers made the case for differentiation and we linked it to a candid performance appraisal system, it worked as well in Japan as it did in Ohio. In fact, people who at first thought it could never work in their country came to support it strongly for its honesty, fairness, and clarity.
So don’t assume resistance to differentiation. Move slowly if you must, but go for it anyway. Differentiation, once in practice for a while, makes its own case in any language.
► Differentiation is fine for the top 20 percent and the bottom 10 because they know where they are going. But it is enormously demotivating to the middle 70 percent who end up living in an awful kind of limbo.
Again, an element of truth in this complaint. The middle 70 percent is the hardest category to manage in differentiation. The biggest problem comes with the individuals in the top tier of the 70 percent because they know they are not a whole lot different from the top 20 performers, and often a whole lot better than the bottom tier of their own “guard.” And yes, that can be enervating, and sometimes talented middle-70 people leave because of it.
The silver lining to this difficult situation is that the existence of a “middle 70” forces companies to manage themselves better. It forces leaders to scrutinize people more closely than they would ordinarily and to provide more consistent, candid feedback.
Another piece of silver lining is that while being in the middle 70 percent can be demotivating to some people, it actually revs the engines of many others. For the people in the top 20, for instance, the very existence of a “middle 70” gives them yet another reason to pull out all the stops every day. They have to keep getting better to keep their high standing – what a rush that can be! After all, most people want to improve and grow every day.
For a lot of people in the middle-70, getting better is energizing too. Getting into the top 20 gives them a tangible goal, and having that goal makes them work harder, think more creatively, share more ideas, and overall, fight the good fight every day. It makes work more of a challenge, and a lot more fun.
► Differentiation favors people who are energetic and extroverted and undervalues people who are shy and introverted, even if they are talented.
We don’t know if it is good or bad, but the world generally favors people who are energetic and extroverted. That’s also something you learn young, and it’s reinforced in school, at church, at camp, in clubs, and usually at home too.
By the time you get to work, if you are still shy and introverted and somewhat low in energy, there are professions and jobs where those characteristics are advantageous. If you know yourself, you will find them. This criticism of differentiation, which we hear now and then, is not really about differentiation, but about society’s values.
We might add that in business, energetic and extroverted people generally do better, but results speak for themselves, loud and clear. Differentiation hears them.
So there you have it: the most common criticisms of differentiation and our responses. If you want to field the best team, you need the best players. And we don’t know of any people management system that does that better – with more transparency, fairness, and speed. It isn’t perfect. Capitalism isn’t perfect. But differentiation, like candor, clarifies business and makes it run better in every way.
This text is based on material from Winning
Copyright © 2005 HarperCollins
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