Letting Go of Low Performers

Will firings help fire up survivors?

—Michele Marchetti

One of the most controversial tools for boosting performance is ranking employees and dismissing the laggards. Proponents argue that the practice stretches star employees. Critics label it unfair and potentially damaging to an organization's culture. What to believe? Two new pieces of research may make it easier for sales managers to answer that question.

A study described in a recent issue of scientific journal Personnel Psychology concludes that removing a predetermined percentage of the lowest performers and replacing them with top applicants could improve workforce potential. However, the research suggests that the improvement is not sustained over time. Furthermore, because the researchers never set out to determine whether a "rank-and-yank" system is good or bad for an organization, they suggest considering potential side effects before issuing a stack of pink slips.

If you take your cues from the nation's top-performing companies, then you might decide against rank-and-yank systems. When management expert Jason Jennings set out to write a book on exemplary firms, he started with the nation's 22,000 publicly traded companies and the 50,000 largest privately held firms. Of those 72,000, he found that just 20 increased revenues and profits organically by 10 percent or more per year for 10 years. He pared the list of 20 even further—tossing out a few because of nefarious legal problems and other reasons—and ended up with a list of 10 top performers, profiled in his recently released book Think Big, Act Small. Not one of those 10 had ever used the rank-and-yank practice. "They believe that the only thing that gives them a competitive advantage is people."

Vince Thompson, in sales management for various media companies and dot-coms for more than 15 years, has seen the fruits of that mentality firsthand. Once when Thompson was asked to let a salesperson go because of low rankings, he resisted, believing the rep's poor performance was the result of a tough territory. "She was beat up and uninspired," says Thompson, currently writing a book on middle management called Middle Shift. Thompson rearranged the salesperson's category, and she got an ego boost from a few quick wins. Within three months she landed an appointment with a coveted customer; today she's considered a top salesperson. The experience helped change Thompson's mind about the effectiveness of ranking and yanking. "People tend to use it as a wholesale solution to their problems," Thompson says, "rather than addressing their problems."