Ann Bares recently wrote a predictive article here on TLNT about the potential end of merit pay (How Will We Pay With Open Salaries and No Performance Reviews?).
In her post, Ann argues that because “open salaries” and “blowing up performance appraisals” are becoming more popular, merit pay cannot be long for the world. She ends by asking:
What will we do instead? Strictly market-based wages with “hot skill” premiums as appropriate? More emphasis on variable pay plans designed to reward specific, pre-determined individual or group metrics? Will recognition and non-cash rewards step into the void to provide the necessary differentiation for key talent?” Read more…
The heated debate over how to assess employee performance was highlighted recently by two back to back articles on BusinessWeek.com.
One day, Yahoo’s adoption of a forced ranking system was a headline. The next day, Microsoft’s decision to end its forced ranking policy was featured. The Microsoft story was previously an article titled, How Microsoft Lost Its Mojo, in Vanity Fair.
Within days, former General Electric CEO Jack Welch added his 2 cents, defending the practice in a Wall Street Journal opinion column headlined, “Rank-and-Yank?” That’s Not How It’s Done. Read more…
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. Read more…
This one cannot be blamed on HR but on a current August 2012 Vanity Fair article – How Microsoft Lost Its Mojo – that argues that the performance appraisal practice known as “stack ranking” or forced distribution “effectively crippled Microsoft’s ability to innovate.”
According to the author, Kurt Eichenwald,
Every current and former Microsoft employee I interviewed — every one — cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees … It leads to employees focusing on competing with each other rather than competing with other companies.” Read more…
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: Read more…
If you like cash money but not necessarily being forced ranked to get it, there’s some good news for you in the latest i4cp report on performance pay practices.
The survey shows that the use of pay-for-performance in salary increases and annual bonuses has increased 17 points in the last two years to 90 percent among organizations.
The use of forced ranking and distribution models in performance management has gone the opposite way. Both have had their usage drop to under 10 percent of organizations.
Let’s take a closer look at these numbers and some of the other results from the survey.
Editor’s Note: Dr. John Sullivan has been a provocateur and strategist in the field of human resources and talent management for over 30 years. His specialty is HR strategy and designing world class HR systems and tools for Fortune 200 firms, and he’s never been shy about telling it like it is.
That’s why TLNT asked him to share his thinking in a video series titled “$#*!@ Dr. John Sullivan Says!” Look for these videos twice a week here at TLNT.
Today’s topic: Why Jack Welch matters
‘Who’s the best HR person you ever met?” Dr. John Sullivan wonders? His answer (and it’s likely to be controversial) — Jack Welch.
“(He) was the CEO of GE (General Electric) and he wasn’t an HR person,” Dr. John says. “That wasn’t his job. But if you look at what he did and how he did it, it’s the model we all ought to follow.” Read more…