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Aggh! When will we ever learn to stop accepting the solutions of bean-counters whose interests lie solely with managing the size of the spend rather than maximizing the talent purchase of the enterprise? You shouldn't imitate GE without Jack Welch... or even with him! He wasn't called "Neutron Jack" for nothing. Guess I'll have to re-assemble all my rants about the evils of forced performance distribution schemes and the totem pole churn debacles.

Supervisory training, better feedback systems, faster most effective reinforcement techniques and flex increase budgets are a few answers.

As Ann points out, Kurt Eichenwald’s article on Microsoft’s woes in the August 2012 issue of Vanity Fair spotlights once again the controversial management process of ranking employees. “Forced ranking” may be the most controversial topic in management, and the misunderstandings about forced ranking are pervasive.

Here’s the key point: ranking doesn’t involve identifying a certain percentage of employees as “poor performers.” All the people in the ranking group may indeed be at least fully satisfactory performers. The question a well-designed forced ranking process asks is, “Compared with all the people in the ranking pool, who are our A players? Who are our Bs? And who — compared with the others — are the C players on the team?

Forced ranking has been described as a Darwinian, dog-eat-dog corporate Survivor game. But forced ranking systems have a worthy goal: to identify, reward and retain top performers, while improving or removing those who—again, compared with the rest—contribute the least. Wisely designed, they allow the company to accurately identify where to place their long-term personnel bets. They clearly answer the question that everyone who works for an organization wants the answer to: Where do I stand?

But the misconceptions are many:

 Individuals who end up being ranked low are terminated. (Sometimes they are. But most of the time they’re given time to improve and the help to do it. “Rank-and-yank” is actually rare.)

 Lower ranked individuals are necessarily “poor performers.” (Not true — they may be good solid performers who happen to work on a team of stars.)

 Forced ranking creates a hyper-competitive environment and destroys teamwork. (It doesn’t. And if “teamwork” is used as one of the ranking criteria, this concern vanishes completely.)

 Forced ranking judgments are inherently subjective and thus biased and wrong. (Forced ranking forces decision-making out into the open where solid, data-based decisions can be made.)

 The payoff to forced ranking comes from identifying the bottom 10%. (While all the attention seems to be paid to the bottom 10%, the biggest payoff comes from identifying, grooming and retaining the organization’s A players and assuring the large majority of solid B players of their value to the organization.)

Forced ranking, used well, has the power to be the most beneficial management procedure an organization can adopt—for the company and its employees alike.

Dick Grote

A high performance management may lead to success of a business. Everything has a good effect once you had done a good planning.

I did find it interesting that neither of the articles (Forbes or Vanity Fair) referenced GE as the primary example of forced ranking/distribution. To Dick's point (and his books go into great detail), design and implementation are key. Right now I am studying the relationship between the values that a) support rater willingness to meaningfully differentiate employee performance, and b) dominate the organization's culture. There is some writing on company cultures that lend themselves to relative performance differentiation, yet I am working toward empirical evidence to that end (crossed fingers!). It sounds like there is more of a clash of cultures (Gates-led vs. Ballmer-led, founders vs. newbies) that is creating the environment in which relative performance differentiation is doomed, as opposed to solely being the mechanism's fault. Thus far, the Forbes article poll shows 39% believe the "stack and rank" is at the heart of Microsoft's problems, 5% do not believe it has bearing, and 55% say "partially, but there are definitely other factors". I voted for the latter, as I believe a relative performance management system can wreak extensive havoc when not designed and implemented thoughtfully and carefully, yet even just reading those two articles made it clear there are many other reasons for Microsoft's decline.

Jim:

Yes! The effectiveness of performance management cannot be separated from the overall talent system in which, and the leadership under which, it operates.

Dick:

So glad you were able to weigh in here to help create some perspective in which to read the Microsoft story - and to address some of the many misconceptions surrounding ranking. Readers looking for more on this topic, please consider Dick's book "Forced Ranking: Making Performance Management Work."

Mercedes:

I thought the lack of reference to GE was intriguing, too.

Agree that culture influences willingness to differentiate, and also that there are clearly other potent factors at work here beyond simply the presence and use of a ranking process.

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About The Author

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    Compensation consultant Ann Bares is the Managing Partner of Altura Consulting Group. Ann has more than 20 years of experience consulting with organizations in the areas of compensation and performance management.

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