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“Forced Ranking”. “Stack Ranking”. “Rank and Yank“. 1
All of these terms essentially describe the performance management process of forcing all employees into distributions made up of high performers, average performers, and low performers (depending on the organization using the construct, the makeup of several components here may vary; including the number of performance grades and percentage distributions within them).
The idea here is essentially that every organization has employees that are exceeding expectations, meeting expectations, and not meeting them. The employees that are not meeting expectations need to either be put on performance improvement plans, counseled out of the firm 2, or outright fired.
You can read much more about the concept here. With that said, the purpose of this article today isn’t really to deep dive into the theory behind if forced ranking works or not. 3 There are companies that have ultimately used it effectively for many years (like GE), companies that probably kept it in place a little too long (Microsoft), and companies that should have stayed away altogether (like Enron).
Today I want to talk about what sorts of employees thrive in a forced ranking environment, the type of culture it produces, and – with both of these things in mind – how a senior leadership team can determine if the construct is good for its firm.
The bottom line:
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I don’t think stack ranking is in and of itself a “bad” idea. There are those that disagree, but at its best the tool can force managers to have difficult conversations with under-performing employees (that they might otherwise avoid), increase accountability in the workplace, and help to facilitate recognition and reward of high quality work from top performers.
…Forced ranking can also get people internally working against one another instead of with one another. When a team knows that someone is getting credit for the work produced by the group (and conversely that someone else is getting labeled as dead weight) regardless of everyone’s relative contributions, it has a polarizing effect on collaboration.
This isn’t going to necessarily create a cutthroat culture (although it can), but it is an environment that caters to Type A personalities. In a stack ranking system, the employees that really thrive are those that love competition, do well under stressful environments, and know how to self promote.
The challenge with using a forced ranking system across an enterprise is that there are perfectly capable (even high performing) employees that possess none of the above characteristics. An organization that stack ranks employees – particularly across the enterprise without accounting for divisional and departmental context – will lose quality people in these cases.
Still… if an organization has an entitlement culture, is struggling in its industry, and has a history of not holding employees accountable, implementing a “rank and yank” performance management process – at least for a few years – is one way to potentially right a capsizing ship.
Let me know if I have this right in the comments section below.
If you have questions about something you’ve read here (or simply want to connect) you can reach me at any of the following addresses:
SomethingDifferentHR@gmail.com OR email@example.com