HR News & Trends, Weekly Wrap

Forced Ranking, or Grading on a Curve: It’s All About a Flawed System

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Don’t get me started on forced ranking – lovingly referred to as “rank-and-yank” — the much maligned performance management system that forces managers to evaluate employees on a bell curve and then boot those at the bottom.

I don’t like it and never have. As I said last year, “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.”

It’s on my radar this week because two big and notable companies — Microsoft and Yahoo — were in the news concerning their use of forced rankings.

Why Microsoft is ditching forced ranking …

At Microsoft, they got rid of it. According to The Wall Street Journal:

The Redmond, Wash., software company said it would no longer require managers to grade employees against one another and rank them on a scale of one to five. The system — often called “stack” or “forced” ranking — meant a small percentage of Microsoft’s 100,000 employees had to be designated as underperformers.

The rankings were a key factor in promotions and in allocating bonuses and equity awards under Chief Executive Steve Ballmer, who in August said he plans to retire within a year. But many current and former Microsoft employees complained the system resulted in capricious rankings, power struggles among managers, and unhealthy competition among colleagues.

Microsoft said Tuesday it is dumping the numerical rankings in favor of more frequent and qualitative employee evaluations. The change took effect immediately.”

… while Yahoo is embracing the practice

This is good news in my book, but just as Microsoft is ditching forced rankings, Yahoo is going the other way by embracing a similar system. As Bloomberg Businessweek reports in a story that is headlined Yahoo’s Latest HR Disaster: Ranking Workers on a Curve 

If Marissa Mayer is as good at identifying winning startups as she is at embracing contentious human resources practices, Yahoo is going to be just fine. Several months after the great work-at-home kerfuffle of 2013, Yahoo employees were up in arms about a new policy that forces managers to rank employees on a bell curve, then fire those at the low end. According to AllThingsD, Marissa Mayer reportedly told Yahoo workers that the rankings weren’t mandatory, but many people disagree. The company hasn’t responded to a request for comment … (but) with its embrace of rankings, Yahoo has waded into the “third rail of human resource management.”

Why is forced ranking, “rank-and-yank,” or grading on a curve such a contentious and hated people management practice? Businessweek probably put it best:

The problem is workers generally aren’t thrilled about having to play Game of Thrones at the office. David Auerbach, a former Microsoft employee, recently told Bloomberg Businessweek that the practice had employees feeling helpless and “encouraged people to backstab their co-workers.” …

Basically, many people have lost faith that ranking employees works, and some research suggests that employee performance doesn’t follow a bell curve at all. Instead, most people are slightly worse than average, with a few superstars. And while a bit of pressure can motivate people, constantly pitting employees against one another is terrible for morale.”

Only 5% of high performing companies use such a system

One thing that surprised me in all of this was a number that jumped out of the Businessweek story. It said that, “companies performing well were less likely to be using forced ranking systems than those that weren’t, (and) just over 5 percent of high-performing companies used a forced ranking system in 2011, down from almost 20 percent two years earlier.”dilbert performance appraisal

That means that Microsoft is following the larger workplace trend ditching forced ranking, while Yahoo is going against the flow in putting such a system in place. Make of that what you will, but I think that the comment imbedded in the Businessweek headline – Yahoo’s Latest HR Disaster — probably says it all

My friend (and former HR pro) Laurie Ruettimann has a different perspective, and she makes a compelling case for why forced ranking makes sense. It’s hard to have a discussion about the practice without revisiting her point of view that she expressed so memorably here at TLNT:

Steve Ballmer and Microsoft have their faults — but they also get a bum rap for a practice called stacked ranking. It’s like the Glengarry Glen Ross version of performance management. … But having worked with hundreds of companies, I know that all versions of performance management are variations of forced ranking and stacked ranking. This is why people hate HR. …

Step it up or get fired. That’s not an unreasonable request from your boss. Want to do it differently? Go start your own company. (Please. We need better companies out there. Do that.)

But don’t be fooled by people who talk about a crunchy-granola way of managing for peak performance. Stacked ranking and forced ranking may not outwardly happen at your company, but it happens.

The fact that you don’t know about it is why you are not in charge.”

More women getting jobs in technology

Of course, there’s more than forced ranking in the news this week. Here are some HR and workplace-related items you may have missed. This is TLNT’s weekly round-up of news, trends, and insights from the world of talent management. I do it so you don’t have to.

  • More women getting hired in technology. Good news from the tech world, as reported in the San Jose Mercury News, “More than half — 60 percent — of the jobs created in the U.S. tech industry through September of this year have gone to women, according to one report based on numbers from the Bureau of Labor Statistics. … The BLS definition of jobs in the tech industry include writing and testing software, planning and designing computer systems, managing and maintaining computer systems, and “other professional and technical computer-related advice and services.”
  • 10 workplace trends that affect the way we do work. My friend Cindy Krischer Goodman, the workplace blogger and columnist at the Miami Herald, has gotten started early on her look at the workplace trends of the year. Her top 10 list is worth a good read, and the ones that jumped out at me were “Work-life boundaries erode and get reset,” and “Companies embrace employee retention.”
  • The “untethered office” concept takes root. Getting workers out of personal office space is becoming more the norm these days, and as the Los Angeles Times notes, it’s even happening at the international real estate brokerage CBRE Group. “Corporations have experimented for years with office-sharing concepts such as “hoteling,” where workers such as accountants who travel frequently “check in” to a desk when they are in the office,” the newspaper reports. “After touring CBRE offices in Amsterdam, the company’s head of operations in Los Angeles and Orange counties, Lew Horne, decided to make what workplace consultants call a “free address” office in downtown L.A. That meant everyone, including senior workers and newly hired assistants, would have to give up their private turf.”
  • Tackling a turnaround. Organizational turnarounds happen all the time, and as this HBR blog post notes, “The Boston Red Sox 2013 World Series championship will long be remembered as proof that you can turn around nearly anything.” Here’s some insight into how it is done.
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.
  • http://rallyyourgoals.com/ r/ally

    At some point, we do somehow need to acknowledge that we judge and are judged each and every day for anything and everything that we do.

  • Philip Uglow

    Thank you for presenting the argument from different perspectives John.

    In my experience forced rankings never works. It puts a lot of responsibility on managers ability to rank correctly, and that is a scary thought.

    Better to set expectations and then let leaders and employees determine what needs to be done to get results and meet those expectations. This builds involvement and moral and makes you want to come to work in the morning. Forced ranking does not do that.

  • Alan

    Any decent manager will be working every day to improve their team and that includes moving people on if they don’t perform (though many rush to that too quickly, without seeing the potential for change).

    What they don’t need is some dumb arbitrary annual HR process screwing up their good work and driving them and their team insane. It is extremely demotivational and I hate it with a passion, both as a manager and as an employee.

    I don’t buy Laurie’s point of view – she is essentially arguing that you need a forced process in order to get managers to do their job properly. Maybe that’s true if your company is full of useless managers because all the decent ones left because of your dumb forced ranking process…