The Organisation as an Organism 

If you take the view of an organisation as a living being, then people are its lifeblood. To survive, an organism needs to renew and refresh itself or it will stagnate and die. The same is true for organisations, especially large ones.

Talent Management - Stimulating the Blood Flow 

Attracting and retaining good people or 'talent' is an increasingly hot topic as Innovation climbs the ladder of management buzzwords. Every organisation wants the best people, and so they should, but not every organisation can attract or afford them - a particular problem for government organisations where rigid grades of pay scale rule supreme.

Productivity is the other major 'people' issue in government, according to the research discussed by Ian Davis, MD of McKinsey & Co in his recent podcast Government as a Business, of which more later.


In his book The Empty Raincoat: Making Sense of the Future. Charles Handy, the British management theorist, suggested that traditionally a person's career followed the classic Sigmoid Curve (the black S shaped curve illustrated in the figure opposite), but that in the emerging paradigm, a career must be a series of sigmoid curves, where a new Growth Phase is entered from the existing Maturation Phase, and so on and so on. From anecdotal evidence this seems to be increasingly common: people go back to college, change careers, and change their circumstances, all in the name of personal growth, or the 'self-actualisation' made famous by Maslow's Hierarchy of Needs.

People make your organisation work, they ensure its fitness, or they ensure its failure, as evidence by the collapse of so many British firms, particularly in the 70s - some of which (British Leyland for one) contained shop stewards who actively organised the workforce to sabotage the company's productivity.

Making the assumption that your staff are not actively working to disrupt your organisation's efforts, how do you ensure that your existing employees stay fresh, and that your new employees are of the right calibre? How do you ensure that the blood flows around your organisation effectively, and that your company antibodies can fight disease successfully?

In his autobiography, Jack Welch, CEO of General Electric from 1980 to 2000, addresses this issue: how to ensure that an enormous and bureaucratic organisation can re-invent itself to survive in a much more competitive world. Many people in the old GE thought as many in government organisations do now: 'I'm doing my job satisfactorily and that's enough'. But it wasn't, and isn't.

More than 100,000 people left GE in one way or another through the 1980s (a quarter of the workforce) and a similar but possibly less concerted revolution is headed government's - particularly local government's - way.

To understand why this should be the case, look at the design of local government in relation to the services it provides. If you were to set about designing the delivery of local government services from scratch, it is unlikely in the extreme that you would stipulate that around 150 local government organisations would all provide identical statutory and business support functions¹ (Human Resources, IT Production, Payroll, Revenue collection and Benefit payment, for example). This is the current reality however, and these duplicate services are managed with a huge variety of competence, as the Audit Commission's Comprehensive Performance Assessment (CPA) figures² indicate.

This is not a situation that can continue, especially when considering the macroeconomic picture. The forecasted slowdown will put increasing pressure on public purse strings, as will the increasingly worrying demographic situation - an increasing cost profile of the ageing population against a decreasing pool of taxpayers to fund it.

Leaving aside the demographic time bomb, and addressing the talent recruitment and retention issue, GE solved these issues with two sides of the same coin: Differentiation, and the Vitality Curve.

Differentiation - Survival of the Fittest 

Differentiation is something that did not come easily to GE, and the same is true now for local government organisations. Performance reviews were typically kind, vague, undemanding, and as a result effectively useless. When GE re-calibrated the measurements of performance, many employees who had been lulled into non-performant mediocrity were astonished to find that they were now below the plumb line of acceptable performance.

Welch commented that in his view kind reviews for poor performers were at the root of the considerable discontent this exercise generated, on the basis that if you don't know that you're not doing well, your motivation for improving your performance is minimal.

The problems engendered by falsely positive reviews for poor or mediocre performers are compounded by the fact that high achievers and hard workers quickly become frustrated and disillusioned when they see less conscientious and talented colleagues cause problems, yet still receive positive reviews. The other side of the management issue is equally problematic: how do you remove a poor performer if he can point to many years of positive reviews?

Research carried out by the McKinsey Global Institute has concluded what many have inherently maintained: pressure to improve performance / productivity without corporate support equals disillusionment, support without pressure equals complacency.

Differentiation is critical to attracting and retaining talent. If the consequences for doing well, averagely, or badly, are broadly the same, your stars will go elsewhere and those that are left will occupy jobs indefinitely, stifling promotion opportunities for future stars and affecting the health of the organisation. There is a key distinction here however: there are few problems in people occupying roles for a long period of time per se - doing so while not performing is the issue.

The opposing argument to this proactive approach to talent management is that local authorities exist to provide jobs. They do not. Local authorities exist to provide services; they create employment as a result of providing those services. As Ian Davis observes, it is unreasonable to expect that the public sector is somehow immune to the factors that have transformed private sector productivity, particularly when the source of local authority funding is taken into account.

Shareholders of publicly quoted firms can sell their shares if they are not happy with the company's performance or direction, and customers can move to another provider. Customers of councils cannot³.

Many of the customers of local authorities don't want to be customers: citizens have a legal obligation to pay their council tax, and use many council services only because they have no other option (either by law, or because of personal circumstance). Councils therefore have a greater responsibility than the private sector to ensure that their biggest cost - people - is being managed effectively.

The Vitality Curve  

GE's Vitality Curve (illustrated below) was hit upon as a simple, effective, and somewhat ruthless method of doing just this: every business area was required to rank their managers in order of performance across a defined set of criteria - the top 20 percent received promotion and / or pay rewards and recognition, the next 70 percent received no promotion and modest pay increases, the bottom 10 percent were re-trained, relocated, or removed.


The vitality curve may be a harsh and sometimes crude method, but together with a vast investment in management education, and stretch performance targets across all business areas, the vitality curve drove a fivefold increase in GE's earnings during the twenty years of Welch's tenure.

360 Evaluation  

It would be an understatement to say that the Vitality Curve method of performance management may not be the most appropriate for local government. One successful and more politically acceptable method of introducing an effective performance management process is '360 Evaluation' in which peers, customers, managers, and sub-ordinates contribute to performance assessments, based on a set of structured questions. This enables the review process to become more meaningful, in addition to dramatically increasing employee awareness of their own contribution to the organisation, leading to a balanced and thorough assessment of capabilities and performance, and enabling an organisation to take informed decisions on career progression.

One organisation that has taken the 360 evaluation to the end of the spectrum is WL Gore, inventor of Gore-Tex amongst thousands of other products. Gore is a highly successful global company, with revenues of $2 billion in 2006, and has been voted No. 1 in The Sunday Times' 100 Best Places to Work in the UKby its employees for the last four years.

Gore seems to have cracked the challenge of being productive, successful, and a great place to work. The company has done this by having a flat management structure, with little hierarchy and deference to seniority, in addition to giving every employee veto over the work that they do. No one employee, whether manger or otherwise, can insist that another performs a piece of work, and if you have a great idea and can convince other people of its merits, you have a project and can call on the company's resources.

As Gary Hamel observes in his book Managing Innovation and Change, this seems like a slacker's paradise, but is actually the opposite in practice. At the end of the year, or a project, a peer group reviews each employee's performance and asks the question 'what value did Cedric / Clara / Carlos add for Gore this year? In addition to value creation, they review the employee's behaviour towards other employees and their projects, and the number of times the employee said 'no' to invitations to engage with projects - if the proportion is over a certain threshold, the employee comes under pressure to improve, or move on.

The Role of Human Resources 

In some organisations, employees complain that the only function of their HR department is to protect the organisation from the actions of its employees, either directly, or through the courts. This is a sad state of affairs: HR departments have the opportunity to unleash the potential of an organisation's employees through the championing of training aligned to corporate objectives, personal development, and remuneration reflecting performance. Alternatively, they have the power to restrict it with inflexible and ineffective end of year reviews, strict pay grades, under-investment in training, and a decision framework that seeks to minimise risk, rather than maximise potential.

In Conclusion 

The level of democracy exhibited at Gore is probably a leap several orders of magnitude too great for managers in the rigid hierarchies of local government to countenance, but it does illustrate that if you predicate your performance as an organisation on harnessing the hearts and minds of your employees as well as their hands, set performance expectations that adapt to changing circumstances, reward high achievers, and penalise low performance, your organisation will be fit and healthy now, and into the future.

1 Clearly with the caveat that the services provided by County, District and Unitary Councils differ, but are nevertheless identical to their peers in the relevant services they provide. 
2 The Audit Commission's CPA rating - the primary measure of local government performance. 
3 Although theoretically citizens can move to another area to escape the ministrations of an ineffective council, the author would suggest that the service received would need to be catastrophically bad to provoke a citizen into going to the effort of moving home to another area for this reason. 
Anthony Lewis is Managing Consultant at end to end consulting, a project management firm specialising in managing and advising on technology-based projects across the private and public sectors.

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