Talent Management

Forced Ranking: Good Management, or Just a Flawed and Arbitrary System?

Former GE CEO Jack Welch, a man who appreciated HR. From the HR blog at TLNT.

It’s not good to pull me into the debate over “forced ranking” performance appraisal system, known more commonly as “rank-and-yank.”

And here’s why: because it’s an arbitrary, formula-heavy performance system that’s obsessed with cutting people down instead of helping to build them up. Plus, it’s the brainchild of Jack Welch — and few executives today can execute it like Neutron Jack did.

The Wall Street Journal just published another article about the pros and cons of the system, and in case you don’t know exactly what forced ranking is, here’s how The Journal described it:

Forced ranking (is) the controversial practice of rating employees from best to worst. The method, sometimes called “rank and yank,” was pioneered by Jack Welch when he ran General Electric Co. from 1981 to 2001, and was rapidly adopted by other firms.

Today, an estimated 60% of Fortune 500 firms still use some form of the ranking, though they might use gentler-sounding names like “talent assessment system” or “performance procedure,” says Dick Grote, a Dallas-based performance management consultant who has written a book on the topic.

Still, a recent study by the Institute for Corporate Productivity found that 14% of all companies reported using a forced ranking last year, down dramatically from 42% in 2009.

That may be because “no one calls it forced ranking anymore,” says Mr. Grote, who has helped about 60 Fortune 500 firms implement the practice. “That term has become so pejorative.”

A pretty arbitrary system

Yes, forced ranking has become a pejorative term because it has some pretty big negatives associated with it.

For one, getting rid of the bottom 10 percent of the workforce assumes that the bottom 10 percent of your staff needs to be shown the door. Maybe that’s true, but maybe not. What if you only have 2 percent identified as low performers? Or, what if it’s 25 percent?

That’s one of my big problems with the rank-and-yank system: it’s pretty arbitrary when you get right down to it.

Plus, it takes a formulaic approach to talent management, and that’s never a good idea when you are dealing with real, live people who don’t necessarily fit neatly into some arbitrary management formula.

The father of forced ranking — former General Electric CEO Welch, a great leader and management thinker I admire — continues to defend the system. ”This is not some mean system,” he told The Journal. ”This is the kindest form of management. [Low performers] are given a chance to improve, and if they don’t in a year or so, you move them out. And that’s the way it goes.”

Yes, low performers should absolutely be coached and given a chance to improve, but to arbitrarily target a specific number of them to go leads you to a culture where hitting the numbers becomes more important than actually focusing on who actually can’t improve and needs to go. The drive to get rid of the bottom 10 percent, as forced ranking would have it, probably leads to getting rid of some employees who haven’t been coached, can improve, but just haven’t been given enough time and focus to get them there.

No one understands the system like Jack Welch

And there’s another big issue with “rank-and-yank,” and that’s the fact that in many companies, it’s not implemented properly.

I’ve heard Jack Welch talk about this at conferences a number of times, and when you hear him get into, forced ranking doesn’t sound quite so bad. That’s because there is a pretty intense process around the system that makes sure that not only are those bottom 10 percenters not surprised at what is going on, but that they also get plenty of time and opportunity to improve and get out of the bottom group.

For example, here’s what I wrote about Welch when I covered him speaking at a conference back in 2005:

“During a Q&A session in New York he was asked how he would handle two different types of workers: a high performer who delivered the numbers but didn’t buy into management’s philosophy for the company, and a low- to mid-level performer who struggled to deliver the numbers but enthusiastically bought into the corporate vision and embraced what top management was trying to do.

Jack’s answer? Get rid of the high performer who delivered the numbers and give the low- to mid-level person another chance — maybe two or three more chances — because they buy into what top management is trying to do. His philosophy is that you need people with “positive energy” and need to get rid of the people who inject the workforce with “negative energy” — even if they are high performers.”

Guess what company has dropped forced ranking?

Now, he was not speaking specifically about forced ranking here, but his notion that you should give more chances to low-to mid-level performers who are trying to get what management wants speaks volumes about how he believes a forced ranking system should be implemented.

And, one more thing: Despite all the companies and executives that have embraced forced ranking, Jack Welch’s old company, General Electric, has opted to move away from it and don’t utilize it any more. As the WSJ story pointed out:

GE has … dropped forced ranking, according to spokesman Andrew Williams. He says the company continues to “embrace differentiation,” though he declined to give details on the current process. The company phased out forced ranking during the mid-2000s.”

I’ve worked at a company that tried to implement a forced ranking system because the owner/president seemed to love to get rid of people. Unfortunately, he wanted it for the wrong reasons, was terribly impatient about how long it would take to see results, and probably most importantly, didn’t have the patience, temperament, or business savvy of Jack Welch. It turned into a disaster.

So, say what you will about forced ranking, or “rank-and-yank,” but in my experience, it takes a Jack Welch-like character at the top of an organization to really make the system work. Without that, it can turn into an arbitrary formula that demoralizes your talent and leaves the survivors wondering if they might be next.

Yes, it takes a Jack Welch to make forced ranking work. And, maybe that’s the bottom-line problem with it.

John Hollon is Vice President for Editorial of TLNT.com, and the former Editor of Workforce Management magazine and workforce.com. An award-winning journalist, John has written extensively about HR, talent management, leadership, and smart business practices. Contact him at john@tlnt.com, and follow him on Twitter at http://twitter.com/johnhollon.
  • Dustin Leszcynski

    “His philosophy is that you need people with “positive energy” and need to get rid of the people who inject the workforce with “negative energy” — even if they are high performers.”
     
    This was very similar guidance given by i4cp based on their research on HPOs and LPOs. Their research stressed that in HPOs, selection and promotion decisions are based on performance, but “passion” and “buy-in” were top differentiators.

  • Psbasile

    Like many tools, almost everything depends on how you use it.  Everyone does ranking – intuitively, personally, irrationally, whatever. Everyone makes judgments (we have to) and that’s fine. There is pejorative commentary on the topic, clearly, and that’s OK and interesting and helpful. But there is a good side – in fact, many good sides – to ranking. 

    For example, the real benefit of ranking is to cause us to assess – carefully, scientifically, objectively – whether a person is in the right job, NOT whether that person is somehow inherently good or bad.  Virtually all of us would be terrific in a small number of jobs and simply appalling in the vast majority of other jobs. So it is very, very much in the best interests of the employee, and the job candidate, to be ranked according to whether s/he will be in the right job.  We should all want that to happen. Get me out of this job, we might say, and into one where I will do well and be recognized (ranked) for it.  Don’t hide. Get the truth or as close as our knowledge and measurement systems can get to the truth (which is in fact very close) and learn to have the right people in the right job.  

    As a small point, the “forced” character of ranking that insists that 10% or whatever are always low performers is a bit silly.  On the other hand, if one doesn’t try to impose such arbitrariness a little (not slavishly) grade creep sets in and the system becomes useless.

  • SOart77

    What bothers me about traditional performance management and forced ranking is that it is a one way street. In order to perform well, most of us have to be experiencing a positive relationship. With the work itself, with the team and with management. A relationship is between two or more things or people. A relationship is a two way street.

    In forced ranking, as soon as the employee is ranked low, the relationship is strained and it takes a very intuitive manager who has strong interpersonal skills to be able to coach the employee and bring the situation back into the positive.

    Sadly there are many managers out there that lack team building vision, who aren’t able to train or coach well and have no interest in recognizing how their own personal management style (or lack of skills, or professional misgivings) may have contributed to poor performance in the first place.

    If you lose sight of the fact that human beings function as one half (or one part) of a relationship between people then you have bigger problems in your life to sort out. Maybe managing people is not your calling.

  • Anonymous

    Brilliant, John. I wrote about the same WSJ article sharing this story:

    What does forced ranking look like in reality? A
    member of my team related this story to me last week of her husband’s
    performance review (I’ll call him Jim). Jim filled out the self
    appraisal form, only to have his words returned to him verbatim in his
    manager’s “appraisal” of his performance. But that’s not the real story
    here. This Fortune 100 firm conducted several rounds of layoffs in the
    last year, resulting in Jim’s team being diminished by about half with
    only the true stars remaining.

    Jim was informed by his manager that, since the team was so much
    smaller now, there could only be 1 “exceeds expectations” employee on
    the team. All the rest would be marked “meets expectations” because
    senior management was also not allowing any “needs improvement” out of
    fear even more employees would walk out. Even worse, the lack of
    managerial skills on this team results in each employee simply keeping
    his or her same ranking designation year after year.

    So, despite the fact that every member of the remaining team is a
    true star in the organization, each pulling double the work after the
    rounds of layoffs, only one could be marked as exceeding expectations
    for the year. How is that an accurate assessment of performance, much
    less fair?

  • Cor7383

    Let’s get real. You can rank anyone, at any level, that makes sense for the department. I am aware of a Fortune 100 Company that uses forced ranking to force the “mature” worker out when it is their time. A decision is made by the manager whether to help or not help the incumbent. 

     I am another example. When money was required to promote someone, all of a sudden my ranking went from above standards to below standards. The reasons were without merit. I could not stand having that review on my record and submitted a rebuttal, but my manager did not want the an email “tit for tat”. I ended up getting a 1% increase because the other person wanted to be called a Director and the person was given a 5% increase for doing a ONE function job, while the rest of the department had to pick up the slack. The squeaky wheel, unfortunately, is the one who gets noticed and shut up instead of the the steady and quiet hard worker. The end of this story is that the person was let go soon after because the company did not need a one function person while the rest of the department had to pick up the slack and do the person’s computer work. Of course, it was up to me to make the next step. 

    Forced ranking is still subjective and management can come up with any reason they want to evaluate a person at the top or the bottom, especially if there is not training for the managers. There will always be favorites.