Does 'Rank and yank' policy make sense for today's employers?
Meta is reportedly considering implementing a performance-driven workforce strategy reminiscent of Jack Welch’s controversial "Rank and yank" policy, which saw General Electric dismiss its bottom 10% of performers annually.
Welch's approach, often criticized for its harshness, redefined corporate dynamics in the 1980s, challenging the then-prevailing idea of lifetime employment. Now, Meta’s rumored move to dismiss the lowest-performing 5% of its workforce signals a modern iteration of this philosophy.
While Meta’s exact rationale remains unclear, the strategy aligns with a broader trend in the tech industry, where companies like Intuit, Microsoft, and Salesforce have recently restructured their workforces to refocus priorities, often citing the need to adapt to emerging technologies such as AI.
Revisiting performance-based layoffs
Historically, performance-based layoffs have sparked significant debate. Advocates argue that removing underperformers can create opportunities for higher achievers, leading to overall organizational improvement. However, critics point to the challenges of identifying true underperformance and the potential for such policies to disrupt team cohesion, foster fear, and undermine morale.
Edward Lawler, a management expert from USC, has long questioned the efficacy of forced ranking systems. He notes that identifying underperformers is fraught with complications—many employees perceive themselves as average or above average, and managers often hesitate to label subordinates as poor performers.
Moreover, forced ranking can lead to the misclassification of capable employees, especially in high-performing teams, potentially weakening organizational strength instead of enhancing it.
Meta’s strategy in context
If Meta proceeds with its plan, it would join a lineage of companies attempting to improve performance through selective layoffs. Like Intuit, which recently cut 10% of its workforce to make room for fresh talent focused on AI-driven initiatives, Meta may be seeking to sharpen its competitive edge in areas critical to its growth. Such strategies often aim not at reducing costs but at reconfiguring talent pools to better align with future priorities.
Intuit CEO Sasan Goodarzi, for instance, emphasized that layoffs were necessary to allocate resources more effectively toward AI innovation. The company plans to replace the dismissed employees with new hires possessing skills tailored to its evolving needs.
If Meta adopts a similar approach, the focus would likely be on restructuring for agility and innovation rather than mere cost-cutting.
Challenges and risks to performance-based layoffs
Meta’s potential policy raises several challenges. Forced rankings can disrupt organizational culture, foster unhealthy competition, and lead to costly turnover. Research shows that replacing employees can cost at least one year’s salary per individual, with no guarantee that new hires will perform better.
Moreover, in highly skilled industries like technology, finding suitable replacements can be time-intensive and expensive.
Additionally, forced ranking systems risk alienating employees, particularly if the criteria for underperformance are unclear or perceived as unfair. This can lead to legal challenges and damage to employer branding, as workers seek opportunities in organizations with more supportive cultures.
Balanced path forward
While Meta’s rumored plan to cut the lowest-performing 5% may aim to foster a culture of excellence, the potential pitfalls underscore the importance of a balanced approach. Strong leadership, clear communication, and investment in employee development are critical to achieving high performance without the downsides of forced ranking systems.
Rather than relying on rigid quotas, organizations like Meta could benefit from adopting nuanced talent management practices. These might include robust performance metrics, targeted training programs, and efforts to cultivate a supportive environment that encourages growth while addressing underperformance constructively.
As Meta navigates these decisions, it faces a pivotal question: Will its strategy drive innovation and growth, or will it echo the criticisms that have long haunted forced ranking systems? The outcome will likely shape not only Meta’s future but also the broader conversation about performance management in today’s evolving corporate landscape.
