Yep… I said it. I love the idea of forced rankings. Made famous by Jack Welch at GE – forced rankings became all the rage a few years back. Everyone wanted to emulate GE – heck they were a powerhouse, and they were making money, taking names and kicking butt. Forced rankings seemed to be the answer. But, I know not everyone agrees with forced rankings. Many managers didn’t like the idea of taking their staff and submitting them to a “rule” rather than the keen insight of a highly trained manager. Not to mention that forced rankings institutionalizes turnover. If you have to get rid of 10% of your staff every year, you’re guaranteed to increase costs right? We all know that replacing an employee can cost upwards of 1.5 times their annual salary.
Every manager thinks they do a great job of hiring. You’re the manager – you don’t make those kinds of mistakes. Forced rankings assume the manager made a mistake and made a poor hire. There’s a lot of bad in forced rankings. But, I love forced rankings.
Forced Rankings Help
Now, before the rotten tomatoes fly – I’m only talking about the process of forced ranking – not the ultimate outcome, such as letting the bottom 10% go. I’m also not suggesting that any outcome, from a forced ranking scenario, be shared with your employees. I’m simply saying that following the process, of identifying your top performers, your middle performers and your lower performers, helps crystallize your decision making for the future. Forced rankings inject a constraint in the decision process – and constraints make you think different.
We all have constraints in business. Budgets are a constraint. The economy is a constraint. Competition is a constraint. All of these constraints make you think differently and change how you make decisions. Going through the process of ranking your employees makes you think about your staff differently and will allow you to look for ways to improve and change. It may very well result in someone leaving the team or the company. But, it may also result in a different training program, a transfer to another department or even highlight someone whom you didn’t realize had a huge impact on your business. You all know there is one person who quietly, behind the scenes, really does all the work but doesn’t get any credit or even seek the limelight.
I realize that forced rankings have their negatives – but I also think that forced rankings are a way to eliminate the biases we have when you have the “good ole” boy/gal that is always fun to be around, but really never get’s anything done.
To me, forced rankings are like going into battle – who do you want next to you, behind you, and who do you want on the enemy’s side? If you have someone you wish was fighting for the enemy – you’ve got real problems.
From a talent management effort, adding constraints to your decision process is a great way to turn the image and get another perspective of your staff. Don’t throw out the idea of forced ranking – or any other way to get you to think differently.
Constraints are good for your brain.
Paul,
I tend to agree with you. The reason we don’t like forced ranking is that it is hard. It requires you to know a lot about your organization and it requires you to make tough and honest decisions about them. Avoiding the exercise because it is hard seems a poor choice.
A thought provoking article Paul.
Though there can be some benefits of forced ranking, the problem I see with it is how it rewards or punishes manager’s hiring skills. If you have one manager who hires very well and ends up with a really solid high performing team, and another who is not very good at hiring and ends up with a lot of bad hires, who gets rewarded here? If you have each manager force-rank her direct reports, you may risk high performers on one team being labeled middle or low performers, while middle performers on another team end up tagged as high performers. It risks alienating both good performers in a good team, and managers who hire very well and build an excellent team.
The solution might be to force-rank employees as one big group in a management meeting for that purpose – but the potential for politics and CYA maneuvering seems high and I’m not sure you could get good value out of it. The whole thing is also predicated on an efficient and objective evaluation process, something I believe few organizations have in place. Has anyone seen this work well?
Sean – you are correct in that forced ranking will reward or punish managers based on how well they hired. That’s why I’m not a big fan of actually following through on the rankings – but using it as a filter/constraint when looking at performance.
The thing I like about it is that if forces you to make choices. When you don’t have the constraint of forced ranking in place people tend to soften the edges of performance so to speak.
360 reviews and pee reviews can sometimes shed light on poor hires – and that should have a place in the ranking process. The combination of a managers opinion of performance as well as team mates and other adjacent departments can provide a pretty good “score” to use as a ranking tool.
Again, I’m not suggesting you follow through and fire or share the output – but as a manager – use it as one more way to view your employees and help them “be all they can be.”
I’m hoping everyone realizes I have a typo in the third paragraph – not talking about drug testing – just peeR reviews. Sorry – just moving too fast today.
Paul,
Nice post on forced ranking.
I particularly appreciate your insight on “constraints.” And your recognition that a forced ranking process is just as likely to highlight someone who’s been overlooked as it is to finger someone who’s career would be better served working someplace else.
Employee ranking systems have a worthy goal: to recognize and retain top performers, while improving or removing bottom players. These often-unpopular systems compel reluctant managers to identify that small minority of staff who make a disproportionate contribution to the organization’s success, and to identify those whose departure would likely be beneficial. They guard against spineless managers who are afraid to jettison their laggards. They answer the question that everyone who works for an organization wants the answer to: Where do I stand?
Employee ranking requires tough decisions in an area where solid, quantitative, “objective” data simply don’t exist, particularly when one factor involves assessing the individual’s potential and promotability.
Managers make tough decisions based on limited data all the time: which projects to fund, which to shelve; when to react swiftly to a competitor’s move, when to let time take its course. Just because the decision isn’t based on countable units doesn’t mean that the decision isn’t objective. Such highly valuable skills as sensitivity to nuance, or the ability to transform adversaries into allies, or the willingness to go the extra mile for a customer, can’t be reduced to a quantitative, numerical scheme. Employee ranking is not the same as solving an algebra problem: it can’t be reduced to a mathematical algorithm.
With the economy now in a tank, the value of tough-minded talent assessment increases. Forced ranking is the right approach.
Dick Grote
Congratulations! I chose this post as one of the top five posts from the business blogs for this week on my Midweek Look at the Business Blogs. You can check out my comments on this and the other four posts at
http://blog.threestarleadership.com/2008/12/10/121008-a-midweek-look-at-the-business-blogs.aspx
Wally Bock
Paul, outstanding. I am totally a “force rank” fiend, for lots of different things. That doesn’t necessarily mean #10 out of 10 is bad…not if I have 10 rock stars. But #10 is still #10. We don’t just use it re: people – works great for union demands, among other things
Sean, excellent point – “the groupings matter”. Yep. You need to know what you’re doing when you use the tool, and you raise some good considerations.
Real life? We just went through the exercise (performance), and I can tell you it forced a “hard” conversation, but led to the “right” decision. And one that absolutely would not have been reached had we not ranked people…
Thanks, Paul!
You can also use the Dilbert forced rankings… do it by height – CEO’s are typically taller than average (at least in my old, old, company)
Paul, would you take the forced ranking to the extreme of actually tying the variable compensation to the position in the ranking? That is to say, yout 10th rock star would get a given amount of $ four being in the worst decil, not considering if he performed at 90% or 140% of his objectives…
To me it makes no sense, but this is how is working the compensation plan at my company…
Bes regards
I’m not a big fan of tying compensation to a “relative” measure – meaning my pay is linked to performance of others. In your scenario even if I blew out my numbers and did 200% of goal and someone did a bit better I’d be ranked lower and get less pay. So the short answer would be no – don’t link compensation to a relative scoring mechanism.
What I would do in this case is look for ways to reward that are non-compensation based. There is nothing wrong with rewarding those that are at the top of the ladder with something other than cash – maybe a trip or a gift or something else that communicates the achievement to the group.
The ranking mechanism or compensation should be pretty objective – it the system your company uses is subjective – and it sounds like it is (top tier ranking but below average performance) then it is a very poor set up.
Again, for the record… I’m not suggesting that anyone use forced rankings to make permanent decisions on staffing. What I’m saying is that applying the concept of forced rankings provides a different point of view or a different outcome that should be considered within a larger decision making context as it relates to talent.
Thanks for reading and commenting. Good luck!
I understand and appreciate the theory behind the forced ranking model. It does have value if the sampled population is large enough to support the desired performance variances. If I remember right, the transition to effectiveness starts at about 30.
Another take about the bottom dwellers is that they are culled during the recruitment and hiring process.
It is indeed rare to find people who appreciate the forced ranking system.
In intent, the forced ranking system (or the “20-70-10 system” and “rank-and-yank system” in Jack Welch/GE terminology) is an excellent method for rewarding top performers and setting specific deadlines for improvement for poor performance. Despite this appeal, the system has several drawbacks.
Most organisations that implement forced ranking systems tend to experience a lot of resentment to the system— especially about the requirement that 10% of the people be ‘purged’ or ‘yanked’ (poor choice of words) out of the organisation every year. The basic idea behind this 10% distribution is that the people here probably don’t fit in the context of the current endeavours of the organisation or have established a pattern of contributing little in the recent past. By forcing an employee into this 10% category, a manager is essentially doing him/her a favour by hinting that the person take up a job that fits better with his/her interests and capabilities, whether in another sub-organisation within the company or in a different company altogether. In practice, though, people in the 10% category are usually terminated automatically only if they have been in the 10% category in two consecutive ranking cycles.
Quite often, the forced ranking system is poorly implemented. Sometimes, the upper-level management simply ‘copy’ the system because they might simply adore Jack Welch and the transformation he brought about at General Electric. Successful implementation of forced ranking requires a thorough organisational culture and a framework of managerial practices. Three of these essential practices are: (1) a great recruiting, mentoring and retaining system that develops a great talent pool to diminish the efforts of losing 10% of the people every year, (2) an active system of performance feedback and recognition that the company’s leaders need to tirelessly advocate, and, (3) a management process that sets clear expectations for the performance of people and ‘measures’ them against these expectations. Without these initiatives in place, the forced ranking system boils down to a mere popularity contest.