Patrick Altman

I am the VP of Engineering at Eldarion, Co-Founder of Amino Software, and a Mentor at jumpstart foundry.

I am equally passionate about writing code as I am about building businesses.

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Posted On

July 26, 2006, 1:24 a.m.

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Ranking Employees

Pam comments on Fortune’s review of the Jack Welch rules, specifically ranking employees.  She agrees with Fortune and is against ranking due to the inefficiencies in corporate communication which leads to political pandering and popularity contests rather than doing great work.

I would have to disagree. 

I think that her analysis of ranking is wrong because most people don’t like it and/or of broken implementations of it is a bit short sighted. 

I mean this with all do respect.

Scale out for a minute and ask yourself what has made America the dominate economy that it is?  There are many reasons, but the primary one, the reason that stands above all others, is simple.  Capitalism.

At the core of capitalism is the notion of private ownership of capital and the free market.  The natural result of this is competition between individuals or groups of individuals for that capital.  By playing in a free market, we get a healthy exchange of ideas and innovation occurs because there is great reward for taking great risk.

I could go on but I believe this is mostly common sense.

The point is, this innovation would not happen if there were no incentive or reward for having one’s ideas and plans win.

Now, scale down to the individual enterprise, which in many ways is akin to a micro-economy.  The workers are there to make money.  Sure there are side benefits of enjoying the work, having social interaction, etc.  But people would just not work if they were not paid. 

No matter what some people will say, money is THE primary motivator.  For some people, other things might rank closely behind.  And of course, you have your exceptions with the super wealthy – I am sure it stopped being about money for Bill Gates long ago – and people that serve others (ministry, military, some politicians).  But for the vast majority of us out there in the private sector workforce we are primarily in it for the money.

Now that we have established the reason that most of us go to work and recognize that it is a primary motivator, let’s examine what would happen if we didn’t rank individuals and reward them according to rank.  If there were no ranking, there could be no differentiation in rewards, or for that matter salary, and then there would be no reason for your employees to innovate, to take risks, to put in extra effort.  Since there is zero upside to doing above and beyond one’s job description, the person will choose to maximize the pursuits they have outside the company, whether it be leisure time or a side project.

Just because many places have failed implementation due to poor grading systems, systems that are more subjective that quantifiable and qualitatively objective, doesn’t mean we should throw the baby out with the bathwater. 

The only thing a system that doesn’t reward extra effort and pays everyone the same no matter if there are out performers does is create a company full of underachievers.  You end up with an entire company of “C” level people because all your “A” and “B” people left long ago to work for the companies that reward their hard work and innovations.

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