Monday, November 18, 2013

Forced Ranking Performance Appraisal Method– Is it really required?

The recent media update about Yahoo’s Marissa Mayer’s plan to introduce Forced Ranking method of appraising employee performance has raised quite a brow. While there has been a lot of criticism from some corners, there definitely will be some in silent acceptance. Before I make my case, let me give you some insights into forced ranking performance appraisal method. 

Forced ranking (FR) is a performance intervention, which can be defined as an evaluation method of forced distribution, where managers are required to distribute ratings for those being evaluated, into a pre-specified performance distribution ranking (Cooper & Argyris, 1998). In theory, each ranking will improve the quality of the workforce. Managers rank workers into three categories: The top 20 percent are the "A" players, the people who will lead the future of the company. They're given raises, stock options, and training. The middle 70 percent are the "B" players, steady-eddies who are given smaller raises and encouraged to improve. The bottom 10 percent are the "C" players, who contribute the least and may be meeting expectations but are simply "good" on a team of "greats." They're given no raises or bonuses and are either offered training, asked if they'd be happier elsewhere, or fired. As many as one-third of Fortune 500 companies use such systems, says Dick Grote, author of "Forced Ranking: Making Performance Management Work." Forced ranking first gained attention at General Electric in the 1980s. This is amongst the oldest methods and was aimed at –
·         End manager tyranny on ranking employees equal thus being unfair to the high performers or deserving members.
·         It was in vogue in those days when Talent Acquisition was still Recruitment and HR as Personnel Management.

While we have successfully made a transition from Personnel Management to HR Management to SHRM and have the best of the breed information systems, social medial tools and techniques, forced ranking still finds its presence. Many from the classical school of thought would contest that we need to go the Jack Welch way and differentiate amongst high and low performers and chuck out the non-performers.

I have always observed – “How did the non-performers or low performers find a way into the system?” or “If they were fine at the time of entry, have we investigated the reasons for deteriorating performance?” This calls for a tightly integrated HR function where Talent Acquisition is coupled with Performance management & Talent Management/Engagement. This is where we actually create & deliver value for our organizations as Strategic Business Partners. The late Steve Jobs at Apple Computers built a team of A-Class players as he would believe that only A-class members can appreciate the work of other A-class players.

Coming back to Forced Ranking method, it ‘may’ work in a highly structured or process oriented organization such as GE while may not at Apple or Google or Pixar or at our organization – May-I Consultants. This is seen to have detrimental effect on risk taking and thereby innovations as members tend to play safe. Moreover, why do you even need such a setup when your focus is on building an A-class team right from your strategists to hiring managers?

So what to do?
·         Instead have your performance managers define role-specific strategic KRAs and aligned KPIs integrated with the organization’s business strategy.
·         Set the motivations right.
·         Appraise your members on the set KRAs and drive your achievement goals.
·        Don’t shy away from giving instant feedback and associated corrective action.
·         Plan appropriate Action Learning Programs before taking the exit route.
·         You don’t need Forced Ranking Method.

I rest my case.

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1 comment:

  1. Jack Welch and others support this too, suggesting nurturing leaders from the top 10, treating the middle 70 like your heart and soul and weeding out the bottom 10.

    But there you need a sharply focused organisation supported by a powerful HR system including one for performance planning, on-job coaching beside training and THEN a transparent and fair performance evaluation process.