ABCs of Forced Ranking
There is a long-standing belief in the business world that people performance follows a basic bell curve; a few are ‘outstanding’ and some are just ‘deadwood, but the majority are simply average.
At one point, approximately 60% of the Fortune 500 were reportedly using some form of ‘rank and yank’.
No matter where you go, employees hate forced ranking. This is especially true when ranking is combined with “yank”, meaning automatic dismissal of the C Players. Is this just a case of employees being afraid of a cutthroat but legitimate form of performance appraisal? Or do they have a legitimate beef?
We can credit Jack Welch with popularizing the concept when he ran GE to such a great performance record. From his perspective, Forced Ranking is a humane system of performance management (Wall Street Journal in a January 2012 article).
The process has not withstood the test of time. Today, Welch himself has second thoughts on the concept. Companies such as GE, Amazon, Microsoft, Facebook, Apple, and many others have dropped the concept after once running with it.
But managers are also just human beings (most of the time), and it seems unlikely that the practice of forced ranking doesn’t force them to silo their A, B, and C Players pretty sharply. This forces us to consider a potential problem - if a manager is successful in getting his or her employees to meet or exceed their team objectives, is it legitimate to assess some of those employees as poor performers? Presumably, a manager who is achieving such success is holding people accountable, removing obstacles, coaching desired performance, and doing everything necessary to produce desired results. What does it say when, at the end of the year, that manager must stand up and declare some employees to be crucial while others are expendable? What does that do to the morale of the group in question?
Call it what you will, forced distribution is still forced ranking. At a recent conference on the future of performance management, a number of organizations that claim to have dropped the practice and have moved to ending the formal annual review (and all rating scales) claim that employees still feel strongly that senior managers consistently list rank performance. It has become commonly known as the ‘shadow rating system’.
"JULY 24, 2012, Vanity Fair: “Every current and former Microsoft employee … cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees.”"
It has come to light recently that Microsoft’s outgoing CEO, Steve Ballmer, was a huge champion of Forced Ranking. Employees at all levels are secretly complaining that this very system absolutely destroyed teamwork, collaboration, and the drive to innovate and perform. How? Everyone was afraid of being seen as a B or a C. Why help a teammate if, in doing so, you would be helping them perform? Since there can be only so many A Players, you are cutting your chances down in the process. Similarly, the collaboration needed to get a joint project done was impeded. But the most insidious aspect of the system was the way it discouraged performance. An outstanding contributor would be ranked an A Player. You would think this would be a good thing. However, A Players would be promoted and grouped with other A Players – suddenly, an A Player in one setting was very likely to be a B or even a C Player in an elite grouping. By performing at a high level such a person would be setting themselves up for likely future failure. It also didn’t recognize or appreciate the synergies created by grouping complementary teammates together.
What corporation benefits from that form of competition? How can trust, respect, initiative, and teamwork be fostered in such an environment?
We all value competition and merit in determining rewards and recognition. But we need to be cognizant of the oldest cliché in the human resources manual: “You can only expect that which you inspect”. If we measure performance by A, B, C, or 1, 2, 3, or some nine-box distribution grid, we will manage to those measures.
What do we really want to manage? Performance (as demonstrated by behaviors and outcomes) in line with the organization’s values and culture. You want your people – all of your people – to be doing their work and achieving their results in the right way. Otherwise, you undermine your organization, your brand, your culture, and your long-term strategy.
Should we be surprised that Jack Welch understood this idea? Unlike many of those who followed his lead in other companies, Welch was adamant that under-performers get a chance to turn themselves around. By giving poor performers time (often less than a year) to turn themselves around, he afforded them the leeway to demonstrate the right behaviors and achieve the best results. If they did not, then it does follow that there was no reason to keep such a person onboard. Yank away.
Someone who is doing their job the right way and contributing to the achievement of the organization’s objectives is not an A, B, or C Player. He or she is a Keeper, and may very well be or become a Star.
So what are the negative consequences of forced ranking?
It creates competition between employees on the same team
It limits innovation and creativity
It creates competition between employees on the same team
It causes retention issues with good employees
Top employees leave out of fear of not being among those recognized as great contributors
It impedes teamwork (causes hoarding of information)
The stigma for the ‘losers’ who are cut from the ‘herd’
Being ‘average’ is acceptable and affords employees the right to keep your job
Incentives to develop and grow are reduced
Compensation is inefficiently distributed
Mid-level performers are not highly motivated to improve
Managers who improve team members’ performance feel they are often stuck between a rock and a hard place
Is forced ranking the best and only mean of improving the average quality of the workforce?
What performance management often reveals is that the people who were hired should never have been hired in the first place. The very process of performance management itself offers insight into the flaws in the hiring and retention process. Trying to fix the issues of performance by working with those who should have not been selected may actually be the bigger issue at hand.
Perhaps the solution is not all the current wave of modifications to the performance management process, but rather a much more structured and rigorous selection process. A selection process that focuses on those skills, knowledge behaviors, education, and experiences that will identify a person who authentically fits and will actually be successful on the job (and need only direction not (micro)management). Perhaps more should be invested in selection and less will have to be invested in one of the most ubiquitous activities in business.