Business is not Baseball

Jack Welch says the key to success in business is setting clear goals and differentiating among the divisions of a company and its employees on the basis of performance in relation to the goals.  On this view, a well functioning company works like a servo mechanism that adjusts clockwise or counter clockwise based on feedback that determines its position in relation to center.  When Jack Welch was CEO of General Electric, he determined that being number 1 or number 2 in its field would define the framework for success for every division of the company.  Each had to achieve the goal, or be fixed. Otherwise it was eliminated.  When you start reading Jack's magnum opus, Winning, you assume Jack is pretty soon going to tell you what he means by number 1 or number 2, but a few pages later he says he "has always disliked financial measurements".  If number 1 or 2 is not defined by a financial metric, what does it mean to be number 1 or number 2?  So far in the book, I've found no explanation.  I suppose he means market share.

But, having defined differentiation among business divisions as being number 1 or number 2, Jack moves on to differentiation among employees.  Lavishly rewarding the top 20%, encouraging and training the middle 70%, and eliminating the lowest 10%, he says are not cruel or Darwinian in business but, rather, fair and effective.  Jack is unequivocal on the metrics of the review process that determines the winners and losers in this methodology.  He learned how differentiation operates when he was kid playing baseball: the kids were lined up and the best players were chosen first, the mediocre players next, and last, if at all, the poor players, who were left to sit on the bench or find something they were better suited to do.  On this he seems to be quite right. Many of those poor ball players spent their time studying math or biology, eventually becoming engineers and doctors. 

Baseball is a game in which the score is a clear measure of a team's success.  Business, in any rational analysis, depends on a financial measure of profitability and on intelligent management of employees with the diverse skills required to compete in an advanced technical economy.  It doesn't take much intelligence to understand that those skills are more diverse and technical than the skills required by baseball players.  Jack appears to be saying that performance reviews in business amount to the same thing as children choosing players for their teams on the ball field.  He uses a similar analogy from pro baseball early in his book.  Somewhere in this decisive managerial perspective there seems to be an explanation for the cynicism among engineering and pre-med students that the business school is for people who don't have the grit to study math, physics, or biology.