Performance Management:
Forced Ranking

By Charlotte A. Donaldson


Introduction
Forced ranking (FR) is a performance intervention, which can be defined as an evaluation method of forced distribution, where managers are required to distribute ratings for those being evaluated, into a pre-specified performance distribution ranking (Cooper & Argyris, 1998). Meisler defines it as follows:

"It's a workforce-management tool based on the premise that in order to develop and thrive, a corporation must identify its best and worst performers, then nurture the former and rehabilitate and/or discard the latter. It's an elixir that in these slow-growth times has proved irresistible to scores of desperate corporate chieftains - but indigestible to a good many employees" (2003, para 2).

In recent years, organizations have begun the admittedly tough-minded approach of ranking associates against each other. It can be argued this approach is dictated to force managers to make the performance evaluation process truly reflect how each team member is performing, relative to others, with the ultimate goal being more productive employees, who perform at levels to make service, revenue, and growth goals attainable. "Forced ranking flushes…laggards into the open" (Morrison and Keefe, 2003, para 3). The less difficult path of not using forced ranking, or some type of comparison of relative contribution, has been perceived as counterproductive to business success, because those staffers at the top are not commensurately rewarded, and therefore at risk for being retained. Conversely, those ranked at the bottom have not been identified, and therefore, have not been coached, nor improved, or terminated.

Analysis
Jack Welch, retired Chief Executive Officer of General Electric (GE), is most often associated with forced ranking, since GE used this performance management tool to eliminate the bottom ten percent of performers each year. Many other companies and organizations have become aware of FR's touted benefits. Development Dimensions International (DDI) group contends that one-third of organizations are now using forced ranking (T+D, 2003). One could logically ask why this practice has become so pervasive. Dick Grote, president of Grote Consulting and a performance appraisal expert, contends "Managers would rather have a tooth pulled than have a performance conversation with a subordinate….Dealing with poor performers is probably the most difficult job that anybody with supervisory responsibility has" (Levinson, 2003, para 13). It can be argued the general lenience with poor performers, which translates to an unfair and bigger burden for good performers, is the primary reason so many companies have turned to forced ranking as a performance intervention.

How does it work?
There are several ways to administer forced ranking, as long as associates' performances are essentially ranked against one another, as indicated in Table 1 below.

Table 1

What is interesting to note is the thought process that typically causes organizations to embrace performance intervention. Figure 1 illustrates that scenario.

Figure 1

What do opponents say?
Forced ranking has its detractors. This technique of forcing managers to delineate performance has been called brutal and Darwinian (Morrison & Keefe, 2003). One common criticism is that it pits associates against each other, instead of fostering a collaborative work environment. On those occasions when managers lead truly high-performing teams, someone still must be ranked low, despite meeting performance plan goals. To replace that person with an unknown is expensive. Ed Lawler, author or Treat People Right, contends forced ranking creates a dysfunctional and hyper-competitive workplace. Common, too, is the complaint of a demoralized staff and a mistrust of leadership. Discrimination lawsuits are another problem, where defensible, fair, and consistent performance appraisal methods and processes were not in existence.

What did a selected group of managers say?
This writer surveyed six managers experienced in FR (see Appendix - Forced Ranking Exploratory Survey). Most (83%) were in opposition to this intervention, citing mistrust, low morale, and unfairness as the principle reasons. One respondent also saw the practice as a poor substitute for more appropriate performance measurement. However, one executive deemed it a necessary tool to jolt managers out of complacency and discover both high and (pervasive and hidden) low performers, so appropriate reward and coaching activities could occur. "Needs of the business and the team change and with them, the expectations of the team members" (Respondent 1). One manager likened forced ranking to a lifeboat drill, to "determine how and who is not having impact" (Respondent 5).

Respondent 1 commented that as a pre-cursor to layoffs, he had experienced FR becoming corrosive to the organization. Respondent 1 also commented it helped him know which leaders were "looking at their teams with a critical eye with the goal of optimizing performance," and which ones were instead avoiding difficult performance issues. Respondent 2 complained this practice always assumes someone had to be a poor performer, with which she did not agree. Respondent 3 pointed out forced ranking adds value when determining incentive payments (she works in a Pay for Performance via Differentiation environment). Respondent 1 recognized FR's need to occur on a frequent basis, to heighten awareness about every associate's performance. He felt it created a forum of serious communication, where leaders could articulate performance appraisal conclusions. In other words, he contends performance management is not intended to be comfortable for leaders.

Conclusion
It can be argued the intent of implementing a forced ranking performance intervention is in fact admirable: to improve the organization's performance, to fairly reward top performers, and to help improve contributions of low performers - or, to remove them as the "dead wood," which drags down higher performers. To overcome the negative perception of forced ranking, this writer contends honest communication, thoughtful performance appraisals, and admittedly tough ranking seem to be key to the success of this performance intervention.

References

Cooper, C.L. & Argyris, C. (Eds.). (1998). The concise Blackwell encyclopedia of management. Malden, Massachusetts: Blackwell Business. Retrieved February 7, 2004from <http://vrl-web1.lssi.com/wcscgi/CDM.exe?SS_COMMAND=CUST_SUP&Category=UMUCPATRONI>(password required).

Levinson, M. (2003, November). One tough job: How to find, fix, or fire your poor performers. CIO Magazine, 41 paragraphs. Retrieved January 26, 2004 from the Lexis Nexis Academic database.

Meisler, A. (2003, July). Dead man's curve. Workface Management, 81(7), 44. Retrieved January 26, 2004 from Business & Company Resource Center database.

Morrison, R. W. & Keefe, M. M. (September 12, 2003). The Corporate Counsellor, 18(4), 3. Retrieved January 26, 2004 from the Lexis Nexis Academic database.

Survey says. (2003, October). T+D, 57(10), 6 paragraphs. Retrieved February 6, 2004 from the Lexis Nexis Academic database.

Other Works Consulted

Getting your performance management house in order. (2003, September). HR Focus, p. 6. Retrieved February 6, 2004, from the Lexis Nexis Academic database.

The author's Forced Ranking Exploratory Survey and data.

Author Note

Charlotte A. Donaldson, Performance Technologist, Bank of America.
Charlotte.A.Donaldson@bankofamerica.com.

 

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