This is a performance management technique, made famous by Jack Welch, the former General Electric chief executive officer. The technique puts the employees of a company in ranking against each other, then based on the ranking, the company rewards high performers and removes poor performers.
What differentiates forced ranking from traditional performance management techniques is the fact that it ranks employees against each other, not according to preset performance indicators. While in traditional performance appraisals, theoretically, all employees can score "excellent" on their performance appraisal. That is an impossibility with forced ranking. Employees are grouped into three groups; the top performers, or A players, the OK performers, or called the vital players, and the poor performers, who are called the C players.
Only the top twenty percent of the workforce are ranked in the A category. This means that even if more than ten percent of the employees were seen as "excellent" by their managers, a manager can only choose the top twenty percent of the workforce in the A category. These top performers are lavishly rewarded by their organization which gives them bonuses, salary increases, and extra perks. On the opposite side of the spectrum are the poor performers in the bottom ten percent of the ranking. These either move out on their own out of the organization or are fired by their management.
The forced ranking technique is controversial to say the least. It has brought about lots of debates on its pros and cons. Those opposed to the technique find forced ranking very brutal as it creates a negative environment among employees and results in other unfavourable conditions in the organization. The system's proponents, however, consider it a practical and effective way to "weed out" poor performers and reward and nurture the star performers into organizational leadership positions.
Those who favour this technique cite the phenomenal successes General Electric achieved and they believe forced ranking contributed to these successes.
Those who oppose the technique also have their own examples to cite. These include Enron, where the technique was applied there for years before their collapse. Some attribute their failure, at least in part, to the forced ranking system, which according to some, pressured some employees to inflate their performance results to make it to the top performers category.
It should be noted that even the proponents of forced ranking agree that the ranking is not very precise and sometimes may result in incorrect ranking. Those who are sceptical about the technique believe that it discourages those who need guidance from seeking it from their managers as they may be labelled as incompetent and, accordingly, poor performers. Also, it discourages employees from admitting mistakes and pressures them into playing political games, instead of doing what is right.
The jury is still out on forced ranking. While it did seem to fall out of favour for a while, some see it making a come back in recent years, especially as the hunt for top talent is heating up in many regions of the world. Companies are also eager to know who these top talents are in order to reward them and avoid losing them to competitors.
This technique does not work in smaller organizations as small numbers of employees cannot fit into a typical curve like the one assumed in forced ranking.
Other names for forced ranking include the vitality curve, forced distribution, top grading, and, the not so politically correct, "rank and yank." There are also variations to the curve used by General Electric. For example, some companies use a system of moving "up or out," which gives employees a certain amount of time to get promoted, or else move out of the company. Some other versions modify the percentages on the curve.
Some of the companies that have tried this technique include Yahoo, Motorola, 3M, and Ford Motor Company. The latter decided against using it in early 2000 after a lawsuit of alleged discrimination was filed against the company because of this technique.
By Ammar W. Mango
© Jordan Times 2007
