take a stance for or against forced ranking. Support your response with examples of two pros and two cons that you must consider in your stance.
- Specify two legal considerations to which an organization may be susceptible if it were to implement forced ranking performance evaluation systems unfairly and inaccurately. Suggest the key corrective actions that an organization could take in order to rectify issues that arise from said unfair and inaccurate implementation.
chapter notes below:
Welcome to Performance Management. In this lesson, we will be discussing forced rankings: Pros, cons, and practices.
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2
Objectives
Upon completion of this lesson, you will be able to:
Evaluate the concept of a forced ranking performance evaluation system.
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3
Supporting Topics
Specifically, we will discuss the following topics:
Pros and cons of a forced rating system;
Legal considerations of a forced rating system; and,
Implementing a forced rating system
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4
Definitions
It appears forced ranking usage is infrequent among organizations, according to a 2005 survey conducted by the Society for Human Resource Management. Of the 330 respondents, only 43 indicated their organization used a force ranking system, and only two indicated that their organization’s forced ranking approach resulted in terminations.
So, what are we talking about when we say forced ranking systems? A forced ranking system, also known as a relative rating, specifies a percentage of employees being evaluated must receive the highest and lowest ratings. Jack Welch, the former CEO to General Electric, is well known for his forced ranking system known as the Vitality Model. His model specified that all managers are to rank their employees based on a twenty-seventy-ten percentage scale, whereas the bottom ten percent are classified as nonperformers and are typically terminated from their position.
The absolute ranking system is based on the same principle, but has a different flavor. Absolute systems involve making judgments about people in relation to descriptions of job-related behaviors or traits, or both. Under these systems, all individual are independently assessed against the same standards, instead of against one another. Examples of absolute systems include behaviorally anchored rating scales and weighted checklists.
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Fairness and Accuracy
Are forced rating systems fair? This is a question of value. Let’s look at the pros and cons of forced ranking systems. After our discussion, you can decide if they appear fair to you.
Advocates for forced ranking systems argue that the process combats the problem of artificially inflated ratings. Before Ford Motor Company piloted a forced ranking system, 98 percent of all managers in the company were evaluated at the top of the scale. By forcing a distribution, it is more likely to ensure a fairer distribution of pay for merit raises.
Advocates also feel this approach is fairer to poor performers because it gives a definite ranking of where an employee stands, which gives the employee the opportunity to make changes.
On the other hand, opponents claim that the forced system alienates top performers. If a manager is forced to give a top performance ranking to only two employees in her department, yet she feels there are five top performers in her department, the forced ranking system alienates three top performers who were forced to be ranked as mediocre. This is tied to the belief that any predetermined performance distribution can never be fair.
Additionally, opponents find that statistically forced rankings are impossible to conduct fairly if a firm ranks less than 100 people. Most companies using the forced ranking system use the methods on thousands of their employees.
All evaluations are typically based on a subjective criteria and it is in the case for forced ratings. Critics say that too often rankings are based on subjective judgments tied to standards that are interpreted inconsistently.
Lastly, opponents feel that forced systems can still lead to favoritism, or even manipulation and organizational politics. For example, a manager knowing that he has to rank someone in his department as unfavorable may keep a poor performer on the payroll in order to identify the bottom percentage of the ranking system more efficiently.
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Performance Improvement
Our next question is whether or not a forced ranking system improves individual or group performance. Proponents believe it distinguishes between talent levels better than any performance appraisal system. The organization then more effectively allocates resources for this higher talent pool.
Other business outcomes stemming from having a forced ranking system include clarity on organizational values that helps focus employee efforts and reinforcement of a merit-based culture, which more likely will attract individuals who value achievement and performance.
On the other side of the coin, opponents point out that a policy of replacing the bottom 10 percent every year is not sustainable. At some point an organization is going to start terminating capable employees.
Ed Lawler, author of “The folly of forced ranking,” criticizes the forced ranking system by saying, “it hardly makes sense for managers to invest in developing individuals who are marginal performers when they believe that in a very short time they will have to eliminate the employees whom they develop.”
Lastly, another critic sees that a forced ranking system undermines collaboration and other contextual behaviors because the nature of forced rankings creates a “dog-eat-dog” environment.
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Employee Morale
Does a force ranking system lift or damper employee morale? Critics of forced rankings state that low ranking employees may actually be meeting their goals and objectives, and thus being rated poorly produces negative morale among capable employees. Additionally, putting people into brackets, such as low, middle, and high performance categories, can become a self-fulfilling prophecy for an individual to carry out the label given to her. Forced rankings can also create a culture in which managers are not held responsible for developing employees.
Advocates for forced ranking system point out that other appraisal tools can lead to the same negative effects on employee morale. Additionally, evidence in a few studies points to overall employee satisfaction is on the decline. One study cited the inability to remove poor performers quickly as being a determent to employee morale. The forced ranking system efficiently identifies these low performers and forces action to be made, regardless of whether the action is termination.
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Legal Considerations
Is forced ranking legal? Yes, to one extent, forced ranking systems do hold up in a court of law. However, the legality issues involving forced rankings stem from an individual or group of individuals feeling that the forced ranking system discriminated against them. For example, a disproportionate number of older workers receive lower rankings. This has been the grounds for legal action based on the Age Discrimination in Employment Act.
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Implementation
Many of the controversies surrounding forced ranking systems stem from the way in which the system was implemented in the workplace.
There are two areas to consider when implementing a forced ranking system. The first is the system’s design. Determining whether the ranking is an independent measure of performance or a complementary measure is important in setting up the rest of the system. Organizations will also want to determine the consequences associated with the ranking results, such as performance improvement plans, termination, or promotions. Also, the organization must ensure that the ranking criteria are job related and must decide how to communicate the design to employees.
The next step is to implement the design. It is imperative that all managers be trained on how to interpret the rating criteria, on how to make accurate behavioral observations, and on the mechanics of participating in ranking discussions. These ranking sessions must be well coordinated and designed so that the discussions themselves are structured around the criteria and not subjective topics. Also, providing guidelines for managers on how to have the conversation with employees about their ranking is a useful tool.
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Check Your Understanding
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Summary
We have now reached the end of this lesson. Let’s take a look at what we covered.
We started by defining relative or forced ranking systems. They “specify that a percentage of employees being evaluated must receive the highest and lowest ratings.” Absolute rating systems “involve making judgments about people in relation to descriptions of job-related behaviors or traits, or both.”
We looked at what forced ranking’s advocates and opponents say about fairness and accuracy, performance improvement, and employee morale. Each discussion highlighted these items in order for you to make an informed opinion whether or not you feel forced ranking systems are an appropriate organizational tool.
We then discussed that forced ranking systems are indeed legal, but that lawsuits about age discrimination have surfaced as a result of the design or implementation or both of forced ranking systems.
Lastly, we gave suggestions on how to implement a forced ranking system.
In the area of designing the system, the recommendations include:
First, decide how you are going to use ranking;
Second, determine the consequences you want associated with the results;
Third, ensure ranking criteria is job related; and,
Fourth, decide how to best communicate the design to employees.
Then, when implementing the design make sure to:
Train raters to use the system;
Coordinate and design the ranking sessions among several individuals; and,
Lastly, provide guidelines for managers to have conversations with employees about the ranking results
This completes this lesson.
