Monday, 16 September 2013

The ABC’s of Forced Ranking

No matter where you go employees hate forced ranking – the system by which all employees are ranked as A Players (Top 20%), B Players (Middle 70%), and C Players (Bottom 10%). This is especially so when forced ranking is combined with “rank and yank”, meaning the automatic dismissal of the C Players. Is this just a case of employees being afraid of a cutthroat form of performance appraisal, or do they have a legitimate beef?

We can credit Jack Welch with popularizing the concept when he ran GE to such a great performance record. From his perspective, Forced Ranking is a humane system of performance management (Wall Street Journal in a January 2012). Approximately 60% of Fortune 500 companies still use the system, though some have expanded to five categories over three. Many also insist they do not establish quotas for each category.

And yet, managers being human beings (most of the time), it seems unlikely that the practice of forced ranking doesn’t force them to identify their A, B, and C Players pretty sharply. This forces us to consider a conundrum. If a manager is successful in getting his or her employees to meet or exceed their team objectives, is it legitimate to assess some of those employees as poor performers? Presumably, a manager who is achieving such success is holding people accountable, removing obstacles, coaching up performance, and doing everything necessary to produce desired results. What does it say when, at the end of the year, that manager must stand up and declare some employees to be crucial while others are expendable? What does that do to the group in question?

Call it what you will, forced distribution is still forced ranking. Right now, we’re working with a firm that claims to not be using such a system, and yet employees insist senior managers consistently ask for lists that grade performance A, B, or C.

It has come to light recently that Microsoft’s outgoing CEO, Steve Ballmer, was a huge champion of Forced Ranking. Employees at all levels are secretly complaining that this very system absolutely destroyed teamwork, collaboration, and the drive to innovate and perform. How? Everyone was afraid of being seen as a B or a C. Why help a teammate if, in doing so, you would be helping them perform? Since there are only so many A Players, you are cutting your chances down in the process. Similarly, the collaboration needed to get a joint project done was impeded. But the most insidious aspect of the system was the way it discouraged performance. An outstanding contributor would be ranked an A Player. You would think this would be a good thing. However, A Players would be promoted and grouped with other A Players – suddenly, an A Player in one setting was very likely to be a B or even a C Player in an elite grouping. By performing at a high level such a person would be setting themselves up for likely failure.

What corporation benefits from that form of competition? How can trust, respect, integrity, initiative, and teamwork be fostered in such an environment?

We all value competition and merit in determining rewards and recognition. But we need to be cognizant of the oldest cliché in the human resources manual: “What gets measured gets managed.” If we measure performance by A, B, C, or 1, 2, 3, or some nine-box distribution grid, we will manage to those measures.

What do we really want to manage? Performance (as demonstrated by behaviors and outcomes) in line with the organization’s values and culture. You want your people – all of your people – to be doing their work and achieving their results in the right way. Otherwise, you undermine your organization, your brand, your culture, and your long-term strategy.

Should we be surprised that Jack Welch understood this idea? Unlike many of those who followed his lead in other companies, Welch was adamant that under-performers get a chance to turn themselves around. By giving poor performers a year to turn themselves around, he gave them the lee way to demonstrate the right behaviors and achieve results. If they did not, then I agree there was no reason to keep such a person onboard. Yank away. Like the top performer who achieves their goals in a way that is detrimental to the organization, such a person is a Virus who should be removed.

Someone who is doing their job the right way, and contributing to the achievement of the organization’s objectives, is not an A, B, or C Player. He or she is a Keeper, and may very well be a Star.


  1. David, I particularly liked the last 3 paragraphs of your article! Few people are aware that poor preformers were given a year to turnaround their performance... which also means that their managers were made visible in their own performance in developing their staff. "In it together" to support development and accountable for performance.

  2. I am in full agreement, however I do have a quandary. Our BOD hold us accountable for distributing merit increases and bonus according to individual performance. How do we demonstrate to the BOD that we have followed their direction without having a profile of the merit increase or bonus payments against performance distribution.

    1. Scott you ask a great question. Perhaps the answer rest somewhere in the education of the Board as to what defines success is a combination of the results and the behaviours (not just hard number financial results) and redefining, with them, the definition of what is merit. I think that we allow Boards to do things without educating them as a result they either do what they have always done or do what is popular but not necessarily do what is right for the people in the business.

  3. I especially agree with your final graph -- and this paragraph:
    How can trust, respect, integrity, initiative, and teamwork be fostered in such an environment? As I say on my signature: "Loyalty, Judgment, Trust, Ethics, Integrity" = PR Counselor/Strategic Adviser/Synergist. Keep up the good work, Dave.

  4. Great points David. At a minimum, the employee labeling process creates a distraction, and incentivizes self-serving behaviors rather than group-serving behaviors. At worst, it creates a culture of "crabs in a barrel climbing over each other". Hardly a recipe for innovation.

    And, I think the practice is sometimes based on a fatalistic assumption that no matter how good the manager is or how good the performance is, there will still be some junkers.

    We know from sports teams -- if you pick the right people and create the right environment, you CAN positively impact performance and achieve times where there are legitimately no LOW performers on the team.

    So, forcing great managers to rank, after they have been effectively managing the team, undermines their good work. No matter how good your team has become, you still have to label some as junkers.

    We emphasize how demoralizing this is for employees. It actually is for managers as well.


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