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V o l u m e.. 6
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July 2 0 0 6
Forced Ranking
Undoubtedly you have heard of the concept of “forced ranking” in performance evaluation.
I have never been a big fan of forced ranking. I have always viewed it as an approach with insurmountable employee relations problems (not to mention legal challenges) and one that always seemed to be more trouble than it was worth.
However, over the last several years my views have been changing. As I listen to friends and colleagues talk about the current state of performance evaluation, it is very clear to me that many organizations continue to tolerate a climate where employee performance problems are glossed over, and where performance ratings are inflated almost beyond comprehension. Such an approach, in my view, cannot be good for an organization. But more importantly, I am becoming convinced that the real victims of this approach are the employees themselves.
So I read Dick Grote’s book “Forced Ranking: Making Performance Management Work,” (Boston: Harvard Business School Press), 2005. It is a very good book: thorough, clear, and balanced. Mr. Grote makes a number of excellent points that help to clear up some misconceptions about forced ranking.
For example, forced ranking is not forced distribution. Forced ranking is the practice where, in addition to the company’s regular performance evaluation process, employees are evaluated and assigned into a small number of groups based on their performance and potential. For example, a common approach is to divide employees into three groups: the top 20%, the middle 70% and the bottom 10%. Forced distribution, on the other hand according to Grote, is “a procedure that involves tweaking the rules of the performance appraisal system to either request or require a certain distribution of performance appraisal ratings” (p. 139).
In a forced ranking system, it is possible for the results of the annual performance appraisal and the forced ranking to produce vastly different results for the same individual. This is because most performance evaluation systems use absolute standards: how well a person did achieving his/her goals, for example. A forced ranking system uses relative standards: how well Person A stacks up to Person B in terms of overall performance and potential, for example. Person A might have achieved all of his/her goals, but compared to others in the organization, he or she may still be at the low end of overall performance and potential.
Grote does a good job pointing out the weaknesses and potential problems with forced ranking. Perhaps the most obvious one is the shock and resistance that can easily arise in the organization. Another concern is that a forced ranking system may influence managers to concentrate only on developing their stars. Potential legal challenges can also be a drawback, although Grote does a good job showing how many of these challenges can be successfully met.
On the positive side, forced ranking can be a strong antidote to inflated ratings. The process also does cause a vast amount of important information about employee performance into the open, and may actually significantly help employee development efforts.
So the debate goes on. I am not a convert to forced ranking (yet). I think even the most zealous believer would have to admit that forced ranking is certainly not for everyone.
But let me ask you this: If successful talent management is important to your organization, then which type of performance evaluation system gives you a better chance of achieving it? One that allows managers to overlook staff performance problems in the spirit of “being positive” with the employee, or one that forces an organization to carefully assess each employee’s development needs and express those in a clear and honest fashion?
I vote for the latter.
Til next time.
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