It's Official: Forced Ranking is Dead
Feb 11, 2015 - Judy Romano, MBA - Strategically and Operationally Focused Senior Finance and Accounting Executive | Coach &
The age-old question of “what methodology to use to manage performance effectively” continues to be one of the most commonly discussed questions. In the 1980s Jack Welsh implemented the Forced ranking system at GE, which was highly controversial amongst management and also employees. Many high-profile companies (like GE or Microsoft) have abandoned this system of evaluation but using the Bell Curve as an evaluation tool continues to be used in most places.
According to the “Forced Ranking is Dead” article published by The Wall Street Journal (Feb 10, 2015 US edition) “forced ranking crushed morale, stifled innovation, and let to unscrupulous competition among workers”.
Forced Ranking requires managers to divide staff into under/over/average performers, which during restructuring might be a useful tool but under “business-as-usual” circumstances puts too much pressure on managers and employees. Companies need a good mix of people in the average and over performer buckets while the under performers need to be provided the opportunity to make improvements or else… Forced Ranking creates competition amongst staff and would put stress on employees when trying to “turn off” work and have a personal life.
A NEW MODEL FOR PERFORMANCE MANAGEMENT - Experts at Deloitte recommend the creation of a Performance Management system that allows for regular feedback, coaching and development. This approach should help the company build the capabilities the business requires in order to achieve strategic goals.
“The goal of the feedback-and-development approach is to reward high performers accordingly while encouraging the large swathe of average employees to improve. “With resources like feedback, training, and on-the-job aids targeted at improving performance, average workers can increase their level of achievement,” says Sherman Garr, vice president of Talent Management Research for Bersin by Deloitte, Deloitte Consulting LLP. This approach is highly desirable in areas where more agility is required from employees and new skills need to be learned frequently – IT organisations.
The shift from Annual Performance Evaluations using the Bell curve to a continuous feedback and development type of an environment will not happen overnight. Managers will be required to embrace a coaching and mentoring approach rather than an approach where the manager is in charge of the ultimate rating of the employee. Managers also need to realize that companies need a balance between average and over performers. “They’ll have to find ways to make average workers see themselves as valued contributors to organizational success, and they’ll need to learn to conduct more informal conversations about performance that lead to improvement rather than drive employees away,” says Andy Liakopoulos, Deloitte Consulting LLP’s Talent Strategies leader.
The article also recommends to separate conversations about performance and compensation. “Rather than linking salary increases and bonuses only to ratings, companies may opt to include other factors in compensation decisions, such as the critical nature of an employee’s skills, the cost of replacing the employee, the employee’s value to customers, and the external labor market,” says Garr.
ACT NOW - “Organizations that have dropped annual performance ratings in favor of regular feedback and development have seen improvements in employee engagement and performance,” says Lisa Barry, the global Talent, Performance, and Rewards leader for Deloitte Touche Tohmatsu Ltd (DTTL). “Given that business is in a constant state of flux—with goals shifting, strategies evolving, and employees moving among different projects with different leaders—regular performance feedback seems to make much more sense.”