Insights
The 20-60-20 Rule:
Simple Concept, Practical Applications, Profitable Results
Written for Whattheythink.com June 5, 2009
Throughout the current economic downturn, our articles have demonstrated the necessity of keeping a watchful eye on your staff count and the advantages of continually adjusting your human capital to meet the changing needs of your business. We also recognize, however, that continuous strategic deployment of staff isn’t such an easy project when you’ve also got a printing business to run. Therefore, this article sets out a theory called "The 20-60-20 Rule" — a simple, practical system of categorizing staff that we believe can streamline your ongoing assessment of your company’s human-resources requirements beautifully.
Champions of the 20-60-20 Rule include small-business expert Ray Silverstein and the self-styled “Pitbull of Personal Development”, Larry Winget. PrintLink believes both their analyses and recommendations for applying the Rule are not only astute but are also well suited to the printing industry. We further believe that applying the Rule effectively can help printing companies work through their current economic challenges to achieve many positive outcomes. For example, as the following article explains, the Rule can help you streamline such important tasks as delegation and strategic succession planning.
Explanation of the Rule
A review of the performance of practically any group of employees will divide the group into three categories:
- The Top 20% comprised of strong performers
- The Middle 60% comprised of average performers
- The Bottom 20% comprised of weak performers
- do their jobs well, understand what results are required of them & have the skills to deliver them
- have integrity, are honest
- respect coworkers & customers
- work whether you are around or not
As far as retention is concerned, find ways to promote and challenge them as they desire, or else be prepared for the likelihood that these high achievers will leave you for bigger and better opportunities.
Your bottom 20% - the weak performers:
- aren’t productive
- come in late & waste time or perhaps don’t come in at all
- need constant supervision
Your middle 60% - the average performers:
- are pretty good at their jobs
- do most of what they are supposed to do
- are nice people who are basically good employees
Helping the Cream Rise to the Top
Recently PrintLink witnessed a wonderfully encouraging example of these dynamics: a hiring manager of a facilities-management company came to us seeking someone for a key management role at one of their important branch sites. As with most companies who rely on our services, the client asked us to locate candidates who already held a number of years’ experience performing exactly the same function they required their new hire to do.
But during our search, we identified a job candidate who had the appropriate background and some of the required experience—but not the identical direct facility-management exposure required for the job we were asked to fill. In subsequent conversations with this promising candidate, however, we recognized that she had the foundation, as well as the critical desire and interest, to move from the middle 60% to the top 20%. In fact, she confided to us that this type of promotion was the precise career goal for which she was planning. So we introduced her to our client for consideration anyway—and ultimately the company not only hired her, but after only a few short months, they formally recognized her for achieving success in their operations. The greatest thing about the middle 60% is that the cream does indeed rise to the top, and the above example is just one such illustration.
This story also demonstrates why, even though many companies must currently undertake various degrees of downsizing in response to soft market conditions, we caution business managers against letting their middle-60% group go wholesale. Although flattening an organization may seem like a viable quick fix for cutting costs, making the mistake of eliminating your middle 60% rather that the bottom 20% may also eliminate your company’s future.
Letting the bottom 20% go
We further recognize that the prospect of evaluating, disciplining, and firing staff makes some managers squeamish. But regardless you must eliminate the individuals in your bottom 20%. Face facts: these non-contributors will never be more efficient nor embrace the expeditious technology of the future. At best, the bottom 20% are below average—and as PrintLink, Ray Silverstein and Larry Winget all agree – even average doesn’t cut it anymore--not in today’s challenging economy and definitely not in the quickly evolving world of print. If in the current challenging economy, your company needs to downsize anyway, so much the better: your bottom 20% gives you an obvious place to start that won’t hurt your operation in the slightest.
Even in the best of times, management of strong organizations typically eliminates the lowest producers. One major U.S. corporation, for instance, gained notoriety for insisting that every department manager rank his or her personnel annually and eliminate the bottom 10% of workers. A likeminded president of a dynamic Canadian company built his organization by terminating the lowest-volume sales representative every quarter. While these practices may seem radical, the theory behind them is entirely sound: define and rank performance expectations, then take action based on the results.
However, always perform due diligence before axing someone. You don’t want to brand an employee unfairly or falsely when in fact appropriate mentoring or training could move them into the middle-60% group or even the top-producing 20%. So first follow standardized personnel-management practices geared to identifying and correcting poorly performing employees. (Some of our previous articles for WTT outline several such measures.)
Start by creating job descriptions and performance standards for every one of your staff. Job descriptions are incredibly useful tools. They tell employees what’s expected of them and give you a standard for measuring each employee’s performance.
If your measurement indicates that someone isn’t performing well, invest the further time and thought required to figure out why. Is lack of training the problem? If so, make training available. Is the poor performer a good worker, but poorly suited to his job? Then see if a more appropriate role can be found for him elsewhere in the company. Especially for higher-level or complex job functions, personal profile testing can be a useful tool to assist with this type of assessment.
But in the end, if you determine that, no matter what you do, you will not be able to assist the poor performer to become a genuine contributor, then it is time to take decisive action and fire him or her, following an appropriate protocol for the prevailing employment laws in your area.
Finally, don’t deny your responsibility for constructive firing by keeping poor performers around in case you won’t be able to compensate for the pending mass retirement of Baby Boomers. Indeed, until recently, many employers were concerned that there wouldn’t be enough people to replace them. But lately a combination of countervailing factors has offset the projected shortage of workers, including the high levels of productivity enabled by technology and leaner management practices to generate more profit-building efficiencies. Declining business volumes have also (at least for now) necessitated a decline in staff head counts.
Similarly, we’ve noticed that the staff of most printing companies consists largely of people near or past retirement age or else young people who are relatively new to the workforce. The “middle-aged” group is noticeably missing from our workplace. PrintLink’s explanation is that, during the last economic turndown, people who found themselves out of work set up their own temporary enterprises; and when the economy recovered, many of these people elected to stay with their own businesses and didn’t return to the employable workforce. Formerly these circumstances raised concerns over succession planning. Now, however, the rocky economy and weakened business cycle have led to a decline in the number of people needed to replace those who will soon retire; so likely the numbers will tend to take care of themselves.
The above circumstances leave managers with even less justification than formerly for retaining the bottom 20% of their staff.
Targeting Profitable, Sustainable Results
PrintLink views our industry’s current evolution to be among the most pivotal in its history and firmly believes that strategic personnel management will be one of the keys for companies to make a successful transition into a new era of sustainable profitability. The fact that for over 16 years our company has been North America’s leading source of human capital for all positions in the printing industry gives us the insight to recommend the 20-60-20 rule to the industry we serve. In particular, we suggest that managers take advantage of the Rule’s practical benefits for continually assessing their human resources, delegating effectively, and implementing strategic succession planning.
PrintLink’s articles explain the nuts and bolts of maximizing your human capital resources. Should you wish to receive a PDF file of this article, please contact vgaitskell@printlink.com.
