Join Todd Dewett for an in-depth discussion in this video Understanding rankings and comparisons, part of Performance Review Foundations.
Managers have to make a lot of decisions, such as who gets a raise or promotion, or who wins a particular award. To make these types of decisions, they often employ some form of ranking or comparison. When used correctly, these approaches can also be used for developmental purposes within the employee review process, because they allow employees to know where they stand in comparison to their peers. To make a decision about a promotion or an award, a simple comparison might work well. That is, instead of comparing people against defined standards, you're comparing them against each other, to make a judgment about who's the best.
However, for the purposes of employee appraisals, telling someone where they stand relative to others, is a topic that deserves to be treated with a little more care. Which, unfortunately, is not always case. You might recall one somewhat legendary use of rankings that attracted a lot of attention in the business press. I'm referring to the so called rank and yank practices at General Electric, several years ago, under fabled leader, Jack Welsh. Even though his approach was criticized by many, it's worth noting that, overall, GE performed very well under his watch.
Jack's approach was predicated on the belief that an organization is comprised of A players, B players, and C players. A small group are thought to be A players, who are far and away the best employees. A very large group in the middle were considered B players, who, though not superstars, were adequate and capable employees. Finally, another very small group were thought to be C players, folks who are relative underperformers. They used a version of what's called a forced distribution.
You assign a percentage to each category, A, B, or C. Then you tell leaders they must put no more than that percentage of employees into each category. You're forcing a distribution. Then you use this contrived distribution to dole out resources. Typically at GE, and other places, you'll see the top group receive raises, bonuses, promotions and other perks. The middle group received far less and those in the lowest groups, often are punished. Or in the case of Jack Welch at General Electric, the lowest group was fired.
Here's the problem with ranking systems of this type. First, they cause people to lose face. That is a source of unnecessary public embarrassment. Because no matter what people say, the rankings tend to become public, one way or another. Next, they provide an incentive to high performers, to not want to work with other high performers. To do so is to risk looking like a B player instead of an A player. These types of rankings also make it very difficult to compare employees across units within the organization.
This leads to many heated debates among managers. For example, imagine a company with three units and the CEO and CFO decide that this year there's enough profit to give all A players a bonus. And enough extra to give a few B players a bonus too, say only the top 5% of B players. Across those three units, you've just created a dogfight as managers try to take care of their own employees. Versions of this scenario play out all the time and do not promote teamwork. Finally, at the individual level, you're providing an incentive to beat others, to win in this internal competition.
This mentality stands in stark contrast to the emerging collaborative and partnership based philosophies used in most successful companies. We're not supposed to be focused on beating each other, we're supposed to be focused on beating the competition. Interestingly, studies suggest that today as many as 50% of companies still use some form of forced ranking, though they don't call it a forced ranking. They might refer to a talent assessment, or a relative performance indicator. To the average employee, it's still a forced ranking and it's still stigmatized as a way to rank and yank.
That's why most firms have figured out kinder and gentler ways to use this approach. For example, as a part of the evaluation process you might assign a summary label to each employee, say a 1, 2, or 3, with 1 being the highest rated group. However, you don't force a particular distribution or at least you give leaders a good bit of latitude. And most importantly, you don't use these categories for harsh rank and yank policies. You do use them to identify people who need attention in different ways.
But it's not about quickly getting rid of people. It's about a more elongated and thoughtful process of identifying people who need help and figuring out how to help them. Yes, there is a time and place to fire employees, but it probably shouldn't be a fast rank and yank process. Here's the truth, companies need data to support decision making. Your goal is to use good data that helps people, instead of hurts people. Rankings and comparisons do have some good, limited use if you follow the advice we just discussed.
However, don't ever forget that employees don't love being reduced to a number or a label. If you want to connect, help, and motivate your team, you'll move beyond simple things like ratings. And remember, that nothing trumps positive candor delivered by you, in person, to individuals in teams, when needed.
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- Understanding the performance cycle
- Setting performance goals
- Collecting performance data and feedback
- Writing the review
- Discussing performance with an employee
- Using a performance improvement plan (PIP)<br><br>
- The PMI Registered Education Provider logo is a registered mark of the Project Management Institute, Inc.