Business Lessons by The Master

I have just finished a book appropriately named Winning
by the redoubtable Jack Welch, the successful ex-CEO of General Electric.

Mr. Welch had somewhat of a reputation for being a ruthless and emotionless boss, savagely deploying his regime of "differentiation", culling his bottom 10% of staff each year.

When you actually understand the process though, it is an honest and sensible way to run a business and could be applied to anything.

This is how differentiation works

The process requires managers to assess their employees and separate them into 3 categories in terms of performance: top 20 percent, middle 70% and bottom 10%.

The top 20% should be rewarded, nurtured, given bonuses and generally afforded all they need to continually motivate them and keep them at the top.

The middle 70% are hugely important as the business cannot function without them. They need to be managed carefully and cultivated, ensuring complacency and stagnation doesn´t occur. Some of these employees will be top 20% material.

Here's the difficult one, the bottom 10% have to go. This is why this method is sometimes referred to as cruel and Darwinian.

The people who label it this way would probably think differently if it was their business and they had to consistently meet payroll for people who just aren´t performing.

There it is, its that simple.

This method was applied to GE businesses too, Mr. Welch would often say if we can´t be top or second in a business then we should not be operating in that sector.

Constantly evaluating what you have is important, whether its property, investments or your professional life.

Sometimes tough decisions need to made.