AIG: It Just Got Worse


American International Group, Inc.

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Here we go, ignorant has graduated to stupid.  AIG has a solution for their compensation system . . . let’s rank employees.  Are you kidding?

I just wrote about why this is a bad idea back in October for IQPC in Better Thinking: The Case Against Targets, Rewards, Incentives, Performance Appraisals and Ranking Workers.  It was W. Edwards Deming that woke me to the ills of ranking employees.  Forced distribution of employees ranking them on a scale of 1 to 4 is the dumbest idea since Jack Welch did it at GE and many other companies before him.

It is not just the fact that the “1″ employees can be only 10% of the workforce, “2″ employees are 20%, “3″ employees are 50% and “4″ employees are 20%, the problem is that cooperation just flew out the window.  Workers fighting against each other to achieve “1″ status in an organization that needs to fix a broken system you need more cooperation . . . not less.

To optimize a system we really have to get this part right.  Remember The 95/5 Rule?  That 95% of the performance of any organization is attributable to the system and not the individual.  The system made up of work design, structure, measures, management, technology, etc. makes pay-for-performance the wrong thing to do.

Robert Benmosche (the CEO) is suboptimizing an obviously broken system that played an important role one of the largest financial meltdowns in history.  Ranking workers will encourage more dysfunctional behavior to achieve “1″ status.   My advice to Mr. Benmossche is to fix the system, the people are fine.

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