General Electric, once one of the most important companies in America started firing the bottom 10% of performers every yearwhen Jack Welch took over. Seems smart, right? Strangely, however, GE was driven into the ground by Welch. It made a lot of money, for a while, but it was burning down the house and now it’s a has been company. The routine firing wasn’t the only reason, but it was part of it.

Lately I’m seeing companies like Meta and Microsoft saying they’re doing large lay-offs of the lowest performers. Seems smart, eh?

Problem is that most performance reviews have nothing to do with performance. They ask other people to rate you, often the so-called 360 degree rating, but sometimes it’s just your boss. Problem is, people suck at rating.

what you find in statistical studies is that their ratings only correlate to their own personality. We don’t see other people, we see ourselves. Groups don’t make this better; increasing the number of people who are bad at rating others doesn’t, in aggregate, turn the ratings good. Everyone is wrong. (There’s a bunch of other statistical stuff here, but what it comes down to is everyone is that there is NO way to measure the performance of knowledge workers.

Generally the best thing to do, counter-intuitive as it is, is have people rate themselves.  When asking others, the questions are:

  1. Who do you plan to promote?
  2. Who do you go to get X done well?
  3. Who do you go to when you need extraordinary results.

This is still subjective information, but it is reliable.

The better question to ask during lay-offs is “does this job need to be done?” If it does, unless it’s clear the person isn’t doing his job (in which case they should have already been fired), then lay them off.

Lay-offs generally do more harm than good. There’s plenty of evidence of this. Companies don’t lay-off into greatness, it’s a sign something is wrong and muscle gets cut at least as often as fat.

But using performance reviews (which, as they exist, should be tossed anyway) is extra stupid even if it seems like “duh, of course” idea.

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