Lessons: Employee "Forced Ranking" Employee "Forced Ranking": Self-Inflicted Poison for Companies

In the past five or ten years, many US companies have embraced and implemented "forced ranking" programs for employees, with claims that the new system will reduce unfairness in the compensation or "overall rewards" for Individual Contributors [ICs]. Companies like GE and CEOs like Jack Welch have touted their systems which force five or ten per cent of all employees into an "unacceptable" bottom ranking, with the policy of firing or laying them off on a yearly basis.

In reality, the result of a Forced Ranking policy is almost always the opposite, and inevitably operates to the detriment of their employees' morale, productivity and teamwork, and in the end, to the detriment of the company's long-term success.

The Lie:
Forced Ranking is not established in order to compare employees to each other; it is put in place to enable weak or lazy management to more easily quantify employees for the purpose of allocating limited resources such as salary, benefits, stock options, etc.
It is not implemented as a benefit to you, the ICs, but to management. Boards of Directors, you may want to make a note of this. [yeah, like BODs and CEOs surf the web ... riiiiight... Somebody pass this url on to them, ok?]

The teamwork detriment:
As soon as you realize that you're being compared to other ICs in terms of productivity, effectiveness in their jobs, etc., you behave just as anyone with half a brain would expect you to: you act in their own best interests.
However, "acting in your own best interest" [getting a better ranking] means to not help your teammates. If their relative ranking goes up, it leaves less room at the top for you ... or in the middle ...
Team or organization goals become replaced with the goal of maintaining your own ranking. Helping someone else means taking time away from your own job, and means making the other person potentially look better to management than you "at the next ranking time." Helping them hurts you.

Productivity is, thus lowered, teamwork suffers, and the workplace becomes a "win/lose" zero-sum game of making yourself look good "for ranking" while maintaining the outward image of team player, etc. The long-term effect to the company is negative.

Worse, final ranking of ICs often is the result of the negotiation skills or personal charisma [or popularity] of the manager during "ranking sessions," and a weak manager, one who can be bullied by other managers, will end up with some fine people getting low rankings. This is not only unfair to the ICs, it is counterproductive to business success. If you want your best people to move to other organizations or other companies ... or competitors ... inflict a rigid, unfair ranking system on them!

Letter to the Editor of Time, from me, June 8, 2001.

For many years, I worked at a company that uses a "forced ranking system" to position its workers.

I would like to raise a voice of concern and caution to any companies moving in this direction:
Please don't!

When you rank people against each other, they naturally conclude that if they assist anyone else on the job, they'll be improving the other's chances at a better ranking and diminishing their own chances.
Taking time to help others be successful detracts from time available to help one's self.

Ranking: a real teamwork-generator? .... NOT!

And if you truly want to demoralize your employees, tell them that some fixed percentage of them will be put into the lowest rank level, and "off'd" each year.

Absolutely "motivational": knowing that, even if your team or project is staffed with the cream of the crop in the company (after all, your management has told you that, rigtht?), and your team is absolutely essential to the future success of your operation or the company itself, 5% of you will be deemed "the weakest links", and fired out the door on a yearly basis?

Another key way to "inspire teamwork."?

Not in the slightest.

What were you thinking it would accomplish?!

A solution does exist:

Contrary to what the management teams who have "Drunk the Kool-Aid® of Forced Ranking," there are other ways of measuring employees so that you can allocate your scarce salary resources. The only problem, from your position of management, is that it will take more time and energy from you. On the other hand, the overall increase in productivity of your team might just balance this cost.

The Alternative Solution:

Rather than measure ICs against ICs, measure them against the requirements of the job position they're in. Take the time to establish reasonable and accurate descriptions of the jobs your employees do, then gauge each IC against how well they fulfill the requirements of the position:

  • Inadequate
  • Good
  • Very Good
  • Wonderful
  • Too Good

If one --- or all --- of your employees fall in any of the requirements levels,

  • Pay them accordingly
If they're all top performers, you may have the best team doing that job in the world.
  • Pay them accordingly
If they're all in the lowest group, i.e., don't meet the job requirements at all, well...
  • Go question the person who hired them into those positions in the first place.
The top performers might be candidates for new positions or more responsibility within the job description, but that requires a new job description with additional responsibilities and measurements to be compared to. But note: this is done without comparison to anyone else on the team or on any other team.

first rev. 12.11.2002